WITH RISING DEFAULTS, ARE YOU RUNNING FROM DEBTS? HERE'S WHAT EVERYONE NEEDS TO KNOW ABOUT IBC !

Who Can File for Insolvency Under IBC, 2016?, A Complete Guide to Eligibility and Process.

Anupam Agarwal Founder – RAMNIWAS SURAJMAL

Struggling with unpaid debts and unsure of your legal options? Many believe only banks can initiate insolvency proceedings, but the Insolvency and Bankruptcy Code (IBC), 2016, provides a structured resolution process for financial creditors, operational creditors, and businesses themselves.

Understanding who can file for insolvency is the first step toward financial recovery. With over 20 years of experience in insolvency law and corporate litigation, I’ve helped businesses bounce back and creditors recover their dues—but only when the right legal steps are taken.

1. Financial Creditors (Section 7 of IBC)

When a company defaults on a loan or financial obligation, the lender has the right to initiate insolvency proceedings. These creditors play a key role in the resolution process and hold decision-making power.

Who can file? Banks, NBFC's, financial institutions, and lenders.

What is required? Proof of default and a proposed Interim Resolution Professional (IRP).

What happens next? The National Company Law Tribunal (NCLT) reviews the claim within 14 days.

Why is this important? Financial creditors lead the Committee of Creditors (CoC), deciding the future of the company.

Example: Lets Imagine a bank lends 10 crore to a company that fails to repay. The bank can file for insolvency under Section 7 of the IBC.

2. Operational Creditors (Section 9 of IBC)

Suppliers, service providers, and employees often struggle to recover unpaid dues. However, the IBC allows them to take legal action after sending a formal demand notice.

Who can file? Suppliers, vendors, employees, landlords, and service providers.

What is required? A demand notice under Section 8, giving the debtor 10 days to respond.

What happens next? If no payment is made or dispute raised, the creditor can apply for insolvency under Section 9.

Why is this important? Operational creditors don’t get voting rights in the CoC, so they need strong legal representation.

Example: Lets Imagine a logistics company is owed 50 lakhs by a retail chain. If unpaid after a demand notice, they can file for insolvency under Section 9.

3. Corporate Debtors (Section 10 of IBC)

Not all insolvency cases are initiated by creditors. Companies struggling with financial distress can voluntarily file for insolvency to restructure debt or liquidate assets.

Who can file? Any company unable to pay its debts.

What is required? Financial statements, records of default, and a proposed IRP.

What happens next? The NCLT reviews the application and either approves a resolution plan or orders liquidation.

Why is this important? It allows businesses to seek protection, reorganize debts, and avoid legal battles.

Example: A startup with mounting loans and declining revenue files for insolvency under Section 10 to restructure its finances.

Key Takeaways

1. Financial creditors, such as banks and lenders, can file under Section 7.
2. Operational creditors, including suppliers and employees, must send a demand notice before filing under Section 9.
3. Corporate debtors can file for their own insolvency under Section 10 to reorganize or liquidate.

Act Before It’s Too Late!

Financial distress won’t resolve itself—taking the right legal steps can make all the difference. The IBC is designed to protect creditors, businesses, and stakeholders, ensuring a structured and fair resolution process.

Whether you are a creditor struggling to recover dues or a business facing financial hardship, understanding your legal options is crucial. Filing for insolvency at the right time can help recover unpaid debts, restructure finances, and even revive struggling businesses.

With decades of experience in corporate litigation and insolvency law, I have helped hundreds of businesses and creditors navigate complex insolvency proceedings. At RS Legal, we provide expert guidance to ensure you take the best legal course of action.

Need legal advice on insolvency? Contact RS Legal today and safeguard your financial future!

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