Section 2(11) of the Code defines Debt – “means a liability or obligation in respect of

a claim which is due from any person and includes a financial debt and operational
debt”. Here again due to the use of word Means in the definition only a liability or
obligation in respect of claim which is due is Debt and none else.

In the case of Pioneer Urban Land And … vs Union Of India on 9 August, 2019, the
Supreme Court held as follows: Thus, in order to be a “debt”, there ought to be a
liability or obligation in respect of a “claim” which is due from any person. “Claim”
then means either a right to payment or a right to payment arising out of breach of
contract, and this claim can be made whether or not such right to payment is
reduced to judgment. Then comes “default”, which in turn refers to non-payment of
debt when whole or any part of the debt has become due and payable and is not
paid by the corporate debtor.

Section 5(7) of the Code defines FINANCIAL CREDITOR – means any person to whom
financial debt is owed and includes a person to whom such debt has been legally
assigned or transferred to

Section 5(8) of the Code defines Financial Debt as means a debt along with interest,
if any, which is disbursed against the consideration for the time value of money and
includes–

(a) money borrowed against the payment of interest;

(b) any amount raised by acceptance under any acceptance credit facility or its de-
materialised equivalent;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds,
notes, debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract
which is deemed as a finance or capital lease under the Indian Accounting Standards
or such other accounting standards as may be prescribed;

(e) receivables sold or discounted other than any receivables sold on non-recourse
basis;

(f) any amount raised under any other transaction, including any forward sale or
purchase agreement, having the commercial effect of a borrowing; Explanation. –For
the purposes of this sub-clause, –

(i) any amount raised from an allottee under a real estate project shall be deemed to
be an amount having the commercial effect of a borrowing; and (ii) the expressions,
“allottee” and “real estate project” shall have the meanings respectively assigned to
them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and
Development) Act, 2016 (16 of 2016);

(g) any derivative transaction entered into in connection with protection against or
benefit from fluctuation in any rate or price and for calculating the value of any
derivative transaction, only the market value of such transaction shall be taken into
account;

(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond,

(i) the amount of any liability in respect of any of the guarantee or indemnity for any
of the items referred to in sub-clause (a) to

Section 7: Initiation of corporate insolvency resolution process by financial creditor.

7. (1) A financial creditor either by itself or jointly with [other financial creditors, or any other person on behalf of the financial creditor, as may
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be notified by the Central Government] may file an application for initiating corporate insolvency resolution process against a
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corporate debtor before the Adjudicating Authority when a default has occurred.
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[Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 21, an application for initiating corporate
insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or
not less than ten per cent. of the total number of such creditors in the same class, whichever is less:
Provided further that for financial creditors who are allottees under a real estate project , an application for initiating corporate insolvency resolution
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process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not
less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less:
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Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a
financial creditor referred to in the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of
the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or
second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its
admission.]

Explanation.—For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial
creditor but to any other financial creditor of the corporate debtor .(2) The financial creditor shall make an application under sub-section (1) in such
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form and manner and accompanied with such fee as may be prescribed.

(3) The financial creditor shall, along with the application furnish—

(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified;
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(b) the name of the resolution professional proposed to act as an interim resolution professional; and

(c) any other information as may be specified by the Board.

(4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default
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from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3).

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[Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time,
it shall record its reasons in writing for the same.]

(5) Where the Adjudicating Authority is satisfied that — J7

(a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the5

proposed resolution professional, it may , by order, admit such application; or

(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed
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resolution professional, it may, by order, reject such application:

rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.
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(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).

(7) The Adjudicating Authority shall communicate—

(a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor;

(b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case
may be.