Statutory dues as operational debt under insolvency law, with Government authorities treated as operational creditors.

Statutory dues such as income tax, value added tax and similar liabilities are treated as operational debt under the Insolvency and Bankruptcy Code because the definition extends to debts arising under law and payable to the Central Government, State Government or local authorities. The disjunctive use of "or" in the definition was given effect, and the dues were linked to the corporate debtor's operations as a going concern. Once those dues qualify as operational debt, the corresponding Government or local authority is an operational creditor. First-charge provisions under tax laws do not change that character. The appeals challenging approval of the resolution plans therefore failed.

---

---

Issues: (i) Whether income tax, value added tax and other statutory dues fall within the meaning of operational debt under the Insolvency and Bankruptcy Code, 2016; (ii) Whether the Central Government, State Government and local authorities entitled to such statutory dues fall within the meaning of operational creditors.

Issue (i): Whether income tax, value added tax and other statutory dues fall within the meaning of operational debt under the Insolvency and Bankruptcy Code, 2016.

Analysis: The definition of operational debt includes a claim in respect of the provision of goods or services, including employment, or a debt in respect of dues arising under any law and payable to the Central Government, any State Government or any local authority. The use of the word "or" is disjunctive and there is no warrant to read it as "and". Statutory dues arise when the corporate debtor is operating as a going concern and therefore have a direct nexus with its operations. On that basis, income tax, value added tax and similar statutory dues are covered by the definition.

Conclusion: Yes. Income tax, value added tax and other statutory dues are operational debt.

Issue (ii): Whether the Central Government, State Government and local authorities entitled to such statutory dues fall within the meaning of operational creditors.

Analysis: A person to whom an operational debt is owed is an operational creditor. Once statutory dues are held to be operational debt, the authorities to whom such dues are payable necessarily fall within the statutory definition. The existence of first-charge provisions under tax laws does not alter the character of the claim for the purpose of the Code.

Conclusion: Yes. The Central Government, State Government and local authorities entitled to statutory dues are operational creditors.

Final Conclusion: The appeals challenging approval of the resolution plans failed, and the impugned orders approving the plans were left undisturbed.

Ratio Decidendi: Statutory dues payable to the Government or local authorities, including income tax and value added tax, are operational debt under Section 5(21) of the Insolvency and Bankruptcy Code, 2016, and the concerned public authorities are operational creditors under Section 5(20) of the Code.

---