Insolvency rules: Port dues to state govts will not get preference

New Delhi: Outstanding port dues accruing to state governments will not be prioritised in a liquidation.

According to an office memorandum issued by the ministry of corporate affairs (MCA), amounts due to state governments (and their maritime boards) will continue to be treated on a par with operational creditors under the Insolvency & Bankruptcy Code. The clarification came after Karnataka Maritime Board (KMB) sought early clearance of port dues when liquidating entities such as shipbuilding firms, land lessors and operators, among others.

"It has been observed that the Insolvency and Bankruptcy Board of India (IBBI) does not consider the outstanding port dues while estimating the dues towards creditors. This has led to land/berth space being rendered useless and assets losing value, leading to loss for authority," the representation from KMB to the Centre said.


The maritime board also requested that MCA and IBBI direct liquidators to deposit port dues "promptly and vacate premises upon termination". This issue was also raised during the meeting of Maritime States Development Council, the apex advisory body for the development of the maritime sector in the country.

Responding to concerns flagged by the port authority, MCA said that port dues are classified under 'operational debts' as provided in Section 5 (21) of the IBC. Further, payment of dues from various entities is dealt in accordance with the waterfall mechanism provided under Section 53 of the IBC.