Using the IBC to recover operational debts, and its limits. General legal information only.
The route
- Demand notice (section 8): the operational creditor delivers a demand notice for the unpaid operational debt.
- Ten days to respond: the corporate debtor has ten days to pay or to show that a dispute exists or that notice of the dispute was already given.
- Application (section 9): if there is no payment and no dispute, the creditor may apply to the NCLT.
Pre-existing dispute
An application can be rejected where a genuine dispute about the debt existed before the demand notice. Keep records showing delivery, acceptance and the absence of earlier disputes: invoices, delivery proof and correspondence.
Is the IBC the right tool?
The IBC is a collective process, not a recovery suit. If admitted, the company goes into a moratorium and the creditors share in the outcome of the resolution plan. Many operational creditors choose a civil suit, a summary suit, an MSME reference or negotiation instead. A minimum default amount applies to an IBC application.
Precautions
- Use the correct prescribed form and send the notice to the registered office.
- Do not use the IBC as a pressure tactic: the Code provides consequences for frivolous applications.
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Important disclaimer: This article is general legal information, not legal advice. It does not create a lawyer-client relationship and is not an advertisement or solicitation under Bar Council of India rules. Verify current statutes, rules and judgments before relying on it.
