Definitions under IBC

If a friend says, “I owe you fifty thousand rupees, but I dispute half of it,” does he owe you a debt? Is the amount that a court has not yet decided a claim? When a bank holds your flat as security, does it have a charge on it? Everyday speech is relaxed about such questions. A statute that can freeze a company’s business cannot afford to be, so section 3 of the Code fixes what each key word means.

In two minutes

Section 3 is the Code’s dictionary: a claim is a right to payment whether or not reduced to judgment or disputed, a debt is a liability due in respect of a claim, a default is non-payment when a debt has become due and payable, and security interest means a right over property created by agreement, not merely by operation of law.

The rest of this chapter

The full explanation, the cheat sheet, every previous-year question at every mark weight, the quiz and the answer skeletons are part of Bankruptcy Laws on LexBlox Semester. Sign in to unlock the subject, or read Module 1 of Legal Language and Writing free.