For major defaults by corporate debtors (private and public limited companies), B2B creditors can invoke Section 9 of the Insolvency and Bankruptcy Code (IBC) 2016.
1. The Minimum Default Limit
To file an application under the IBC at the National Company Law Tribunal (NCLT), the minimum default amount must be ₹1 Crore. This threshold applies to undisputed operational debts.
2. The 10-Day Statutory Demand Notice
Before filing the NCLT insolvency application, the B2B creditor must serve a statutory 10-day Demand Notice (Form 3) to the corporate debtor. This notice demands payment of the unpaid operational debt.
3. Settlement Pressure
The threat of insolvency admission at NCLT implies the debtor company’s management could lose control of the firm to an Insolvency Resolution Professional. Consequently, most solvent corporate debtors prefer to settle the dues within the 10-day notice period.