IBC Sections 7, 9 and 10 Explained: Who Files What

Three doors lead into a corporate insolvency case, and picking the wrong one costs months. IBC section 7, 9 and 10 applications all go to the same National Company Law Tribunal, but each is filed by a different person, proves a different thing, and fails for a different reason. Section 7 belongs to a financial creditor, meaning a lender. Section 9 belongs to an operational creditor, usually a supplier, a contractor or a service provider. Section 10 is filed by the company against itself.

One gate is common to all three. Section 4 of the Insolvency and Bankruptcy Code 2016 fixes the minimum default, and since the notification of 24 March 2020 that figure is Rs 1 crore. Below it, no corporate insolvency resolution process can be started at all, however clean the default looks. That single number sends most mid-sized recovery matters back to a civil suit, a summary suit under Order XXXVII of the Civil Procedure Code, or a complaint under Section 138 of the Negotiable Instruments Act 1881.

The three routes side by side

Question	Section 7	Section 9	Section 10
Who files	Financial creditor	Operational creditor	The company itself
Debt covered	Money disbursed against the time value of money	Goods, services, employment and statutory dues	Any default by the applicant
Demand notice first	Not required	Yes, Section 8 notice, 10 days to reply	Not applicable
Effect of a business dispute	Usually irrelevant	A genuine pre-existing dispute defeats it	Not applicable
Internal authority needed	Board or authorised officer	Board or authorised person	Special resolution of shareholders
Form under the 2016 Rules	Form 1	Form 5	Form 6
Prescribed application fee	Rs 25,000	Rs 2,000	Rs 25,000

Section 7: debt and default, and nothing else

A financial creditor applies under Section 7 in Form 1. Financial debt is defined in Section 5(8), and the thread running through the definition is disbursement against the consideration for the time value of money. Term loans, working capital facilities, debentures, amounts raised under a note purchase facility and finance lease liabilities all sit inside it.

The Tribunal at this stage looks at two facts. Is there a debt, and has there been a default of at least Rs 1 crore. The company can answer that the debt was paid, that it is not yet due, that the applicant is not a financial creditor, or that the claim is time barred. What it usually cannot do is pull the Tribunal into a commercial quarrel about quality, delay or set off. That is the entire reason lenders prefer Section 7 to a recovery suit.

Two special classes added by the 2020 amendment catch people out. A financial creditor who is an allottee under a real estate project must file jointly with not less than 100 allottees of the same project, or 10 percent of the total allottees of that project, whichever is lower. The same threshold applies to debenture holders and other creditors in a class. A single homebuyer with a Rs 1 crore claim cannot file alone and has to look at the Real Estate (Regulation and Development) Act 2016 or a consumer forum instead.

Section 7(4) tells the Tribunal to ascertain the existence of default within 14 days. In practice that period is directory, and admission takes far longer, particularly where the company replies on limitation.

Sections 8 and 9: the notice decides the case

An operational creditor cannot walk straight into the Tribunal. Section 8 requires a demand notice in Form 3, or a copy of the invoice demanding payment in Form 4, delivered to the corporate debtor.

The company then has 10 days. It can pay, or it can reply bringing to the creditor’s notice the existence of a dispute, or the record of a suit or arbitration already pending before the demand notice was received. If it does that credibly, the Section 9 application is liable to be rejected under Section 9(5)(ii)(d).

The standard applied is deliberately generous to the company. The Tribunal does not decide who is right on the merits. It asks whether there is a plausible contention that requires further investigation, raised before the demand notice, and not a patently feeble legal argument or a bare assertion with nothing behind it. A quality complaint emailed six months before the notice will usually be enough to stop the petition. The same complaint drafted after the notice arrives will not.

Where no such reply comes, the operational creditor files under Section 9 in Form 5 once the 10 days expire. Section 9(3) requires an affidavit that no notice of dispute has been received, and a certificate from a financial institution maintaining the creditor’s accounts confirming that the debt is unpaid. That bank certificate has been read as directory where non-payment is otherwise proved, but getting it is still the safer course.

Operational debt is wider than trade supply. Employee dues and amounts payable to the Central Government, a State Government or a local authority fall within Section 5(21). A supplier sitting below the Rs 1 crore line has a better tool in the statutory delayed payment machinery described in our guide to recovering delayed payments through MSME Samadhaan, which has no minimum claim value at all.

Section 10: when the company files against itself

Section 10 lets a corporate applicant admit its own default and ask for a resolution process. The application goes in Form 6 with the books of account, and the internal authority is strict: a special resolution passed by shareholders holding at least three fourths of the voting power, or, for a limited liability partnership, the consent of at least three fourths of the total number of partners.

Directors should understand what Section 10 costs them before they sign the resolution. On admission the board’s powers are suspended and vest in the interim resolution professional under Section 17. Management leaves the promoter’s hands. Section 29A then bars a defaulting promoter from submitting a resolution plan for the same company, subject to a narrow relaxation for micro, small and medium enterprises under Section 240A.

There is a lighter route for MSMEs. The pre-packaged insolvency resolution process in Chapter III-A, introduced in 2021, lets an eligible MSME corporate debtor keep management in place while a base resolution plan is tested, and its notified minimum default is Rs 10 lakh rather than Rs 1 crore.

Who is barred from filing at all

Section 11 lists the disqualifications: a corporate debtor already in a resolution process, one that completed a resolution process in the preceding 12 months, one that breached a resolution plan approved within the preceding 12 months, and a corporate debtor already under a liquidation order.

Section 10A remains a live defence on older claims. It permanently bars any application under Sections 7, 9 or 10 in respect of a default arising during the notified COVID window beginning 25 March 2020. Defaults falling inside that window cannot be revived by sending a fresh demand later.

Limitation is the defence that wins most often

Section 238A applies the Limitation Act 1963 to proceedings before the NCLT and the NCLAT. An application under Section 7 or Section 9 falls under Article 137, which gives three years from the date the right to apply accrues, and that date is the date of default.

Two things extend it, and both are documents rather than arguments:

• A written acknowledgement of liability signed before the three years run out gives a fresh starting point under Section 18 of the Limitation Act. Balance sheets are the usual battleground, because an entry of the debt in audited accounts has been accepted as an acknowledgement, provided the auditor’s notes do not disclaim it.
• Part payment of the debt before expiry has the same effect under Section 19.

The date a loan account was classified as a non performing asset is not a safe substitute for the date of default, and the two are often years apart. Fixing the correct default date, with a document that proves it, is the most useful hour a creditor can spend before filing. Where the lender is a bank or a notified financial institution with a claim of Rs 20 lakh or more, the parallel route through the Debt Recovery Tribunal is often the better fit, and we set that procedure out in our banking and debt recovery practice.

What admission actually starts

Admission is not a payment order. It hands the company to a process:

1. Moratorium under Section 14. Suits and execution stop, assets cannot be transferred, and enforcement under the SARFAESI Act 2002 is frozen. It does not protect personal guarantors, who can still be pursued.
2. Interim resolution professional under Section 16, public announcement under Section 15, and claims invited from all creditors.
3. Committee of creditors under Section 21, made up of financial creditors. Operational creditors get a seat only in limited circumstances and vote in none.
4. Timeline under Section 12. 180 days, extendable by 90 days on a 66 percent vote, with an outer limit of 330 days including time taken in litigation.
5. Resolution or liquidation. A plan needs 66 percent of the committee’s voting share and then approval by the Tribunal under Section 31. Failing that, Section 33 leads to liquidation.

Withdrawal after admission is not a matter of changing your mind. Section 12A requires approval of 90 percent of the committee’s voting share, which is why settling before admission is far easier than settling after.

Two more provisions belong in any pre-filing note. Section 65 penalises fraudulent or malicious initiation, with a penalty that can run to Rs 1 crore, and it is used against creditors who file with recovery rather than resolution in mind. Section 66 exposes directors personally for fraudulent or wrongful trading. The Code is a resolution statute, not a collection agency, and tribunals say so bluntly when an application looks like arm twisting.

Before you file

• Fix the exact date of default and the exact amount, and check both against Rs 1 crore and against three years.
• For an operational claim, search your own correspondence for anything the buyer could recast as a pre-existing dispute. Find it before the company does.
• Pull the corporate debtor’s latest audited balance sheet and look for the debt in it.
• Check Section 11 and Section 10A before spending on the petition.
• Decide whether you want the company resolved or want your money. If it is the second, a summary suit, an arbitration or a Section 138 complaint may get there faster.

Applications for companies with their registered office in Madhya Pradesh go to the NCLT bench exercising jurisdiction over the state, which sits at Indore, with appeals to the NCLAT. We act in insolvency and creditor side matters as part of our corporate and commercial practice, and the question we are asked most often is the one worth settling first: which of the three sections is actually yours to file.

This article is general information about the Insolvency and Bankruptcy Code 2016 and is not legal advice on any particular matter. Thresholds, forms and fees are amended from time to time, and the right course always turns on the documents. If you are weighing an insolvency filing or have received one, you are welcome to reach us through the contact page to discuss your own facts.