A supplier, contractor, service provider or employee who is owed money by a company is an operational creditor under the Insolvency and Bankruptcy Code, 2016. If the company has defaulted on at least one crore rupees, the creditor can deliver a demand notice under Section 8 and, if the company neither pays nor raises a genuine dispute within ten days, apply to the National Company Law Tribunal (NCLT) under Section 9 to start a corporate insolvency resolution process. The application fails if the company shows a dispute that existed before the notice, so the strength of your paperwork decides whether this route is open at all.
Who is an operational creditor
Under Sections 5(20) and 5(21) of the Code, an operational creditor is owed a debt for the supply of goods or services, including employment, or certain dues to the government. In practice that means suppliers, contractors, service providers, and employees or workmen with unpaid dues. A lender is a financial creditor instead and applies under Section 7, without a demand notice. The process applies only where the debtor is a company or a limited liability partnership, not a sole proprietor or an ordinary partnership firm.
The threshold: one crore rupees
Since the Central Government’s notification S.O. 1205(E) dated 24 March 2020, the minimum amount of default for an insolvency application under Section 4 of the Code is one crore rupees. Below that, the claim has to go through a suit, arbitration or another route.
Separately, Section 10A permanently bars an application for a default that arose between 25 March 2020 and 24 March 2021, the period of the pandemic-era suspension. A creditor whose default falls in that window cannot rely on it.
Step 1: the demand notice under Section 8
The demand notice is served in Form 3 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, or by delivering a copy of the unpaid invoice demanding payment in Form 4. It should:
- Identify the company by its name, registered office and corporate identity number.
- State the amount claimed, how it is made up and the date of default.
- Attach the invoices, purchase orders, delivery records or employment records that prove the debt.
- Demand payment, and state that the creditor may file under Section 9 if neither payment nor a notice of dispute arrives within ten days.
The notice is delivered to the company’s registered office, and it is sensible to send it by more than one recorded mode, such as speed post and email to a whole-time director or the company secretary, so that the date of delivery can be proved. The Supreme Court held in Macquarie Bank v. Shilpi Cable Technologies (2017) that a lawyer may send the notice on the creditor’s behalf.
A demand notice is not the same as an ordinary legal notice for recovery. If you are not sure the debt clears the threshold or is free of dispute, a general legal notice may be the better first step.
Step 2: the ten-day window
Under Section 8(2), the company has ten days from receipt of the notice to do one of two things:
- Pay the unpaid debt, or
- Bring to the creditor’s notice the existence of a dispute, or a suit or arbitration about the debt filed before the notice was received.
Silence, or a reply that only asks for more time, does not stop the creditor. A reply that raises a dispute does not end the matter either: the tribunal later decides whether that dispute is genuine and whether it existed before the notice.
What is a pre-existing dispute
This is where most Section 9 applications are won or lost. In Mobilox Innovations v. Kirusa Software (2017) the Supreme Court held that the tribunal must reject the application if the company shows a dispute that:
- existed before the demand notice was received, and
- raises a plausible contention that needs further investigation, as opposed to a patently feeble legal argument or an assertion of fact unsupported by evidence.
The tribunal does not decide who is right, only whether a real dispute exists: earlier emails about defective goods or short delivery, a credit note under negotiation, or a pending suit or arbitration on the same invoices. A dispute that surfaces for the first time in the reply to the notice is usually treated as an afterthought. The Supreme Court has also said, in Transmission Corporation of Andhra Pradesh v. Equipment Conductors and Cables (2019), that the Code is not a substitute for a recovery suit. Before serving a notice, read your own emails and the buyer’s for any complaint about the goods or services.
Step 3: the Section 9 application
Once ten days from delivery have passed without payment or a notice of dispute, the creditor can file a Section 9 application in Form 5, with:
- a copy of the invoice or the demand notice and proof of delivery;
- an affidavit that no notice of dispute was received;
- a copy of the certificate from the bank or financial institution where the creditor’s account is kept, confirming non-payment, if available;
- the debt documents, ledger and any acknowledgment by the company;
- the name of a proposed interim resolution professional, if the creditor wishes to propose one; and
- the prescribed filing fee.
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 lets the Insolvency and Bankruptcy Board of India specify further information to accompany an application, which may include records filed with an information utility. We check the current requirements at the time of filing.
The application is filed before the NCLT bench with jurisdiction over the place where the company’s registered office is situated. For a company registered in Delhi, that is a New Delhi bench.
What to expect at admission
The company is given notice and usually objects, most often on the ground of a pre-existing dispute, limitation, or the amount being below the threshold. The Code asks the tribunal to admit or reject the application within fourteen days, and since the 2026 amendment it must record reasons when it takes longer. In practice an admission hearing commonly takes from a few weeks to several months.
If the tribunal admits the application, the company enters a corporate insolvency resolution process: a moratorium under Section 14 stops suits and recovery against it, an interim resolution professional takes over management, and creditors file their claims. As an operational creditor you do not vote in the committee of creditors, but the Code sets a minimum that operational creditors must receive under a resolution plan. A settlement after admission needs the approval of 90 percent of the committee’s voting share under Section 12A, so the leverage of the threatened petition is greatest before admission.
If the tribunal rejects the application, an appeal lies to the National Company Law Appellate Tribunal within 30 days, extendable by 15 days. Our page on NCLT and NCLAT proceedings in Delhi covers the full process.
When a civil suit or the MSME route may be better
Section 9 is a strong tool for a large, clean, undisputed debt. It is the wrong one when:
- The debt is below one crore rupees. The tribunal cannot admit the application.
- There is any real record of dispute. The application will be rejected, and time and cost are lost.
- You want your money, not the company’s restructuring. If the case is admitted, your claim joins every other creditor’s claim and is paid only under a resolution plan or in liquidation, often at a fraction of its value.
In those cases the alternatives are:
- A commercial suit or a summary suit under Order 37 of the Code of Civil Procedure, after pre-institution mediation where it is required, for the debt with interest. Our page on commercial dispute lawyers in Delhi explains the route.
- Arbitration, if the contract has an arbitration clause.
- The MSME Facilitation Council, if you are a micro or small enterprise registered under the Micro, Small and Medium Enterprises Development Act, 2006. Section 15 of that Act requires the buyer to pay within the agreed period, which cannot exceed 45 days. Section 16 adds compound interest at three times the bank rate notified by the Reserve Bank, and Section 18 lets the supplier refer the dispute to the council for conciliation and then arbitration. A buyer who challenges the council’s award must first deposit 75 percent of it under Section 19. The date of your registration relative to the contract matters, and medium enterprises are not covered.
- A cheque bounce complaint, if the buyer issued a cheque that was dishonoured. It runs on its own short deadlines.
A suit or arbitration filed before the demand notice is itself a pre-existing dispute, so the order of steps needs thought.
If you are the company served with the notice
Reply within the ten days, setting out any dispute with the earlier correspondence attached. Silence can leave you without a defence at admission, and settling before admission is far simpler than after it.
Where to go next
For a first conversation, call 99115 44811 or write to manujalawyers@gmail.com with the invoices, the ledger and the correspondence. We will tell you whether Section 9, a suit, arbitration or the MSME council fits your claim. This post is general information and not advice on your case, and no lawyer can guarantee that an application will be admitted or that a debt will be recovered.