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Operational Creditor can initiate Corporate Insolvency Resolution Process for debts arising out of advance payment for supply of goods

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A Full bench of the Hon’ble Supreme Court of India (SC), comprising of Hon’ble Dr. Justice D.Y. Chandrachud, Hon’ble Mr. Justice Surya Kant and Hon’ble Mr. Justice Vikram Nath, in their order dated 04.02.2022 in M/s Consolidated Construction Consortium Limited v. M/s Hitro Energy Solutions Private Limited (Civil Appeal No. 2839 of 2020), held that a debt arising out of advance payment made to a corporate debtor, for supply of goods or services, would be considered as an operational debt, as such debt is arising from a contract in relation to the supply of goods or services from the corporate debtor. The SC further, relying on its earlier ruling in B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, held that the period of limitation commences from the date of default, and not from the date when debt becomes due.

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