Pari Passu In Law
Category: Latin Legal Terms
What Does Pari Passu Mean?
Pari Passu is a Latin term meaning
1. On equal footing
or
2. At the same level.
Origin and Word Breakdown
| Aspect | Details |
|---|---|
| Origin | Latin |
| Word Breakdown |
|
| Combined Meaning | Pari Passu means with equal step or moving on the same level. |
Usage in Legal Context
It refers to equal ranking or treatment among parties, particularly in distribution of assets, repayment obligations, or rights under a contract.
This Ensures fairness among Parties ( i.e creditors or stakeholders).
Examples of Pari Passu in Law
Company Law:
When a company issues shares to multiple investors, they often rank pari passu in respect of voting rights and dividends.
This means all shareholders have equal status without any preference.
Insolvency Law:
Under the Insolvency and Bankruptcy Code (IBC), all secured creditors share proceeds from liquidation pari passu.
This ensures that no creditor gets priority unless specifically provided by law.
Contract Law:
If multiple lenders finance a borrower under the same loan agreement, their claims rank pari passu.
Each lender has an equal right to repayment in proportion to their contribution.
In a Sentence
“All the secured creditors shall be treated pari passu in distribution of assets.”
In the Judgment
In several IBC cases, the National Company Law Tribunal (NCLT) and Supreme Court have emphasized:
“The secured creditors rank pari passu in the distribution of proceeds unless expressly stated otherwise by agreement.”
Key Takeaways
- Pari Passu means on equal footing or same level.
- Origin: Latin (Pari = equal, Passu = step).
- Used in insolvency, company law, and loan agreements.
- Ensures fairness among creditors or stakeholders.
Stay tuned—another Legal Laxicon coming up!...
......Anupama Singh
Read. Decode. Rule the room.
Writer: Anupam Singh | legal Blogger











