How Operational Creditors Assign Claims During CIRP

Vikrant D. Shetty

Aug 26

8 min read

How Operational Creditors Assign Claims During CIRP

An operational creditor can assign its claim to a third party at any point during the Corporate Insolvency Resolution Process under Regulation 28 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, made under the Insolvency and Bankruptcy Code, 2016, by notifying the Resolution Professional in writing. The assignee steps into the original creditor's exact position, including any defences the corporate debtor could raise and the exclusion from Committee of Creditors voting that Section 21 imposes on operational creditors. No National Company Law Tribunal approval is required. This post covers who can assign, the effect on Committee of Creditors composition, and the practical risks involved.

Statutory Framework: Sections 5(20) and 5(21) of the IBC Read with Regulation 28 of the CIRP Regulations

The IBC defines "operational creditor" under Section 5(20) as a person to whom an operational debt is owed. "Operational debt" under Section 5(21) covers claims arising from the supply of goods or services, employment, or dues under any law to the Central or State Government. Neither definition draws a line between original creditors and assignees. An assignee who takes on an operational debt steps into the shoes of the original creditor and qualifies as an operational creditor in full for every purpose under the Code.

Regulation 28 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) is the operative provision. It allows a creditor to assign or transfer its debt or claim to any other person during CIRP. On assignment, the assignee must notify the Resolution Professional (RP) in writing and provide supporting documents; the RP then updates the creditor list and, where necessary, reconstitutes the Committee of Creditors (CoC).

Who Can Assign an Operational Creditor's Claim During CIRP?

Assignment by operational creditors is not restricted to commercial entities. Government departments and statutory authorities holding operational claims, including tax dues treated as operational debts, can assign them too. The NCLAT addressed this directly in Ellison Oil Field Services Pvt. Ltd. v. CITOC Ventures Pvt. Ltd. (2025), upholding an assignment of GST department dues and rejecting the argument that sovereign tax debts are inherently non-assignable. The Tribunal found that the GST department, as an operational creditor, was entitled to assign its debt and that the GST Act contained no prohibition on such an assignment in the insolvency context.

Private equity funds, asset reconstruction companies, and distressed debt investors have taken increasing interest in operational creditor claims, particularly where the corporate debtor has a credible resolution plan on the horizon and the claim size is large enough to matter in the distribution waterfall.

Effect on CoC Composition and the Operational Creditor Exclusion from Voting

Under Section 21, operational creditors have no right to CoC membership unless their aggregate dues reach at least ten percent of total debt. And even at that threshold, they attend meetings as observers only, with no voting rights. An assignee of an operational claim takes on this same structural position. Acquiring the claim does not convert the debt from operational to financial; the assignee cannot claim financial creditor status or a vote simply by virtue of the assignment.

This matters practically. An investor acquiring a sizeable operational claim cannot use that position to shape the resolution plan through CoC deliberations. The assignee's protection lies in Section 30(2)(b), which requires that operational creditors receive at least the liquidation value of their claims under any resolution plan the CoC approves.

Practical Risks in Assignment Transactions

The risks in operational claim assignments are specific and worth examining one by one.

Timing is the first problem. If the original creditor's claim has not yet been admitted by the RP when the assignment is executed, the assignee bears the risk of rejection or a reduced admission figure. The assignment agreement needs to address this clearly, including how partial admissions are handled.

The Section 14 moratorium does not touch the assignment itself. The transfer between the creditor and the assignee is a private bilateral transaction; it is not a suit or enforcement action against the corporate debtor. That said, the assignee takes no better position against the debtor than the original creditor had. The moratorium protection the debtor enjoys continues unchanged.

Post-plan assignment carries a different risk. Where the CoC has already approved a resolution plan when the assignment occurs, the Section 31 binding effect applies to the assignee. The approved plan extinguishes all claims not provided for within it. An assignee acquiring claims at this stage must check whether the plan recognises the claim and, where necessary, secure appropriate novation.

Disputed claims travel with the assignment. Any set-off arguments or defences the corporate debtor had against the original creditor remain available against the assignee. Stepping into an ongoing dispute is not the same as starting fresh.

Can an Operational Claim Be Partially Assigned?

Regulation 28 does not bar partial assignment. A creditor can assign part of its admitted claim, keep the balance, and the RP would then recognise two separate operational creditors from what began as a single claim. This structure lets different investors acquire tranches of the same debt at different price points. The legal consequences of partial assignment, particularly for priority and set-off in distribution, have not been fully worked out in Indian courts, and RPs may push back on the structure in practice.

Once the RP receives notice of an assignment, it must update the creditor records and inform the CoC. The RP's role there is administrative, not evaluative: there is no requirement to scrutinise or approve the commercial terms. The IBBI has not set a floor price or required regulatory sign-off on claim assignments. That freedom to negotiate creates a gap. Related-party assignments at below-market values may raise conflict-of-interest concerns, but they do not fall within the avoidance provisions of Chapter III of the IBC, which are directed at transactions entered into by the corporate debtor rather than by its creditors.

Frequently Asked Questions

Can an operational creditor assign its claim after CIRP has commenced but before the resolution plan is approved?

Yes. Regulation 28 of the CIRP Regulations expressly permits this. The assignee must notify the RP with supporting documents, after which the RP updates the creditor list. The assignee's entitlements are then governed by the resolution plan as it is ultimately approved.

Does an assignee of an operational creditor claim get voting rights in the CoC?

No. Operational creditors have no voting rights in the CoC, whatever the size of their claim. The assignee inherits the same position as the original creditor. If the aggregate dues reach ten percent of total debt, the assignee may attend CoC meetings, but without a vote.

Can a government department assign its tax dues as operational claims during CIRP?

The NCLAT upheld this in Ellison Oil Field Services Pvt. Ltd. v. CITOC Ventures Pvt. Ltd. (2025), rejecting the argument that tax dues are sovereign and non-assignable. The Tribunal found nothing in the GST Act barring such an assignment when the IBC framework applies.

What happens to the assignment if the resolution plan extinguishes the claim?

Under Section 31, an NCLT-approved resolution plan binds all stakeholders. Where the plan provides for a haircut or partial payment, the assignee receives only what the plan allocates to that claim. The assignment agreement should address this risk and set out the assignee's remedies against the assignor if the claim is written down.

Is NCLT approval required before assigning an operational creditor claim?

No. Regulation 28 requires no judicial approval. The assignment is a private contract. The only step is notifying the RP with the relevant documents.

Can the corporate debtor object to an assignment of a claim against it?

No. The corporate debtor has no standing to object to the assignment under the IBC. Any dispute it has over the claim's validity or quantum stays available against the assignee. The assignment does not improve the assignee's standing relative to those pre-existing defences.

What documentation should accompany a claim assignment notice to the RP?

The notice should include the assignment agreement, evidence of payment of consideration, KYC and identity documents for the assignee, and a confirmation from the original creditor that it no longer holds the claim. The RP may call for additional documents before updating the records.

Is the corporate debtor's consent required before an operational creditor assigns its claim?

No. The assignment is a private transaction between the operational creditor and the assignee. The corporate debtor is neither a party to it nor entitled to object, and Regulation 28 of the CIRP Regulations requires only that the Resolution Professional be notified in writing with supporting documents, after which the Resolution Professional updates the creditor list to reflect the change.

How does assigning an operational creditor's claim differ from assigning a financial creditor's claim?

Both are permitted under Regulation 28 of the CIRP Regulations, but the consequences differ because financial creditors sit on the Committee of Creditors with voting rights proportionate to their claim, while operational creditors generally do not. An assignee of a financial debt can therefore acquire influence over the resolution plan that an assignee of an operational debt cannot.

Can other creditors challenge an assignment of an operational claim during CIRP?

Other creditors have no standing to object to a straightforward assignment recorded under Regulation 28, since it does not affect their own claims or entitlements. A challenge becomes realistic only where the assignment is alleged to be a sham or a related-party transaction structured to manipulate the resolution process, which would need to be raised before the National Company Law Tribunal on specific facts.

Is stamp duty payable on an assignment of an operational creditor's claim during CIRP?

An assignment of a debt or claim is generally an instrument attracting stamp duty under the applicable state stamp legislation, calculated on the basis prescribed for assignment of actionable claims or debts. Parties should confirm the applicable rate and documentation requirements under the relevant State Stamp Act before completing the transfer, since this varies by state and by how the assignment is structured.

Can an operational creditor assign only part of its admitted claim during CIRP?

Yes. Regulation 28 does not bar partial assignment, and the Resolution Professional can recognise two separate operational creditors from what began as a single admitted claim. The priority and set-off consequences of splitting a claim this way have not been fully settled by Indian courts, so the assignment documentation should address how any future recovery is divided.

What happens if the corporate debtor disputes the underlying operational debt after the claim has been assigned?

The dispute travels with the claim. The assignee acquires no better position than the original creditor had, so any defence, set-off, or dispute over quantum that the corporate debtor could have raised against the assignor remains available against the assignee, and the Resolution Professional adjudicates the claim on its merits regardless of who currently holds it.

Does an operational creditor's right to assign its claim continue after CIRP ends in liquidation?

Yes, in principle, since an assigned claim becomes part of the liquidation estate's creditor records and the assignee participates in the liquidation waterfall under Section 53 in the same position the original creditor would have held. The mechanics of notifying an assignment shift from the Resolution Professional to the Liquidator once liquidation commences.