In the previous column, we had covered how the position of law was inconsistent with respect to a decree as a foundation for a financial debt. The same is now finally put to rest by the ruling of the Supreme Court in Dena Bank <\/em>v. C. Shivakumar Reddy<\/em>[1]<\/a>.<\/p>\n <\/p>\n While a decree can now be the basis of a financial debt, we will proceed with the position of law with respect to an arbitral award or a decree forming the basis for an operational debt.<\/p>\n <\/p>\n The position here seems aligned with what the Supreme Court had held in the above-discussed ruling in Dena Bank<\/em>[2]<\/a>. In Usha Holdings LLC <\/em>v. Francorp Advisors (P) Ltd.<\/em>[3]<\/sup><\/a>, an issue arose if a debt is based on a decree which was passed by a foreign court. In such circumstances, while it was held that an adjudicating authority cannot decide the legality and viability of such a decree, the NCLAT further held that the same does not mean that the need for establishing a relation between operational creditor and the corporate debtor is waived off. The NCLAT required that such decree must pertain to or relate to supply of goods or services, and the failure to establish such link led to the rejection of the application under Section 9, IB Code.[4]<\/sup><\/a><\/p>\n <\/p>\n The NCLAT then presented even a clearer picture on this issue in Ashok Agarwal <\/em>v. Amitex Polymers (P) Ltd.<\/em>,[5]<\/a> when the issue of whether a consent decree falls under the definition of operational debt was raised. The NCLAT herein relied upon the definition of a creditor as stated in Section 3(10) to conclude that a \u201cdecree-holder\u201d cannot be excluded from the definition of an \u201coperational creditor\u201d under Section 5(20) of the IB Code. Resultantly, the order of the adjudicating authority was set aside and the claim of the appellant \u2014 operational creditor based on the consent decree was found to be an operational debt.<\/p>\n <\/p>\n By doing so, the NCLAT ended up distinguishing its own ruling in Digamber Bhondwe <\/em>v. JM Financial Asset Reconstruction Co. Ltd.<\/em> [6]<\/a>, wherein in a case under Section 7, it was held that a decree-holder does not fall under the definition of a financial creditor. The NCLAT in Digamber Bhondwe <\/em>case[7]<\/a> had held:<\/p>\n <\/p>\n The opinion in Ashok Agarwal<\/em>[8]<\/a> seems to be supported by Form V of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, which expressly directs, under the heading “particulars of operational debt (documents, records and evidence of default)”, the operational creditor to disclose before the adjudicating authority the particulars of an order of a court, tribunal or arbitral panel adjudicating on the default, if any.<\/p>\n <\/p>\n Part-V<\/strong><\/p>\n Particulars of Operational Debt (Documents, Records and Evidence of Default)<\/strong><\/p>\n\n