Supreme Court Upholds Priority of Unsecured Financial Creditors Over Operational Creditors in Liquidation Process.

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....Section 53(1) of the Insolvency and Bankruptcy Code (IBC) provides for the order of priority in the distribution of liquidation assets. Financial debts owed to unsecured creditors rank higher at clause (d) than operational debts which fall under clause (f). The appellant, an operational creditor, cannot claim priority over the respondent, an unsecured financial creditor, even if the respondent is a related party. The definition of 'financial debt' u/s 5(8) does not exclude debts from related parties. While related parties may face restrictions u/ss 21 and 29A, their financial debts retain priority over operational debts in liquidation distribution as per Section 53(1). The Supreme Court's judgment upheld the intelligible differentia between.........