Who Can Initiate CIRP Under IBC
Three applicants, three sections, one ₹1 crore threshold, and a different set of reasons the NCLT can say no to each.
Section 6 names three persons who can start a corporate insolvency resolution process when a corporate debtor defaults: a financial creditor, an operational creditor, and the corporate debtor itself. Each has its own section, its own paperwork and its own grounds on which the NCLT can say no.
One condition applies to all three: the default must be at least ₹1 crore. Section 4 still prints ₹1 lakh, but it allows the Central Government to raise the figure up to ₹1 crore, and notification S.O. 1205(E) of 24 March 2020 did so.
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Sections 7, 9 and 10 Compared
The law as at the exam cut-off of 4 February 2025.
Notice before filing
Financial creditor (s. 7)
None
Operational creditor (ss. 8, 9)
Demand notice or invoice under s. 8; file only after 10 days without payment or a notice of dispute
Corporate applicant (s. 10)
None
Proof of default
Financial creditor (s. 7)
Record of default with an information utility, or other evidence
Operational creditor (ss. 8, 9)
Invoice or notice, affidavit of no dispute, bank certificate and IU record where available
Corporate applicant (s. 10)
Books of account and other specified documents
Proposed IRP
Financial creditor (s. 7)
Must name one (s. 7(3)(b))
Operational creditor (ss. 8, 9)
May propose one (s. 9(4)); otherwise IBBI recommends
Corporate applicant (s. 10)
Must name one at the cut-off (s. 10(3)(b))
Extra condition
Financial creditor (s. 7)
Allottees and class creditors must file jointly (see below)
Operational creditor (ss. 8, 9)
No pre-existing dispute
Corporate applicant (s. 10)
Special resolution of shareholders, or three-fourths of partners (s. 10(3)(c))
Main grounds to reject
Financial creditor (s. 7)
No default, incomplete application, disciplinary proceeding pending against the proposed IRP
Operational creditor (ss. 8, 9)
Incomplete, paid, notice not delivered, dispute notice or IU record of dispute, disciplinary proceeding against the proposed IRP
Corporate applicant (s. 10)
Incomplete, disciplinary proceeding against the proposed IRP
| Financial creditor (s. 7) | Operational creditor (ss. 8, 9) | Corporate applicant (s. 10) | |
|---|---|---|---|
| Notice before filing | None | Demand notice or invoice under s. 8; file only after 10 days without payment or a notice of dispute | None |
| Proof of default | Record of default with an information utility, or other evidence | Invoice or notice, affidavit of no dispute, bank certificate and IU record where available | Books of account and other specified documents |
| Proposed IRP | Must name one (s. 7(3)(b)) | May propose one (s. 9(4)); otherwise IBBI recommends | Must name one at the cut-off (s. 10(3)(b)) |
| Extra condition | Allottees and class creditors must file jointly (see below) | No pre-existing dispute | Special resolution of shareholders, or three-fourths of partners (s. 10(3)(c)) |
| Main grounds to reject | No default, incomplete application, disciplinary proceeding pending against the proposed IRP | Incomplete, paid, notice not delivered, dispute notice or IU record of dispute, disciplinary proceeding against the proposed IRP | Incomplete, disciplinary proceeding against the proposed IRP |
Rules That Decide Section 7 Questions
- check_circleA financial creditor can file alone, jointly with others, or through a person notified by the Central Government (s. 7(1)).
- check_circleDefault to any financial creditor counts, not only to the applicant (Explanation to s. 7(1)). A lender who has been paid on time can still file if the company has defaulted to another bank.
- check_circleHomebuyers (allottees) must file jointly: at least 100 allottees of the same real estate project or 10% of them, whichever is less. The same rule applies to holders of securities or deposits represented by a trustee and to other large classes under s. 21(6A) (provisos to s. 7(1)).
- check_circleBefore rejecting for a defect, the NCLT must give 7 days to rectify (proviso to s. 7(5)). The same applies under ss. 9 and 10.
- check_circleThe CIRP commences on the date of admission (s. 7(6)), and the order is communicated within 7 days (s. 7(7)).
Who Cannot Apply (Section 11)
- A corporate debtor already in a CIRP or pre-packaged process
- It cannot file under this Chapter (s. 11(a)). Its financial and operational creditors also cannot file while it is in a pre-packaged process (s. 11(aa)).
- A corporate debtor that completed a CIRP, or had a pre-pack plan approved, in the last 12 months
- Barred by s. 11(b) and (ba).
- A corporate debtor or financial creditor that violated a resolution plan approved in the last 12 months
- Barred by s. 11(c).
- A corporate debtor under a liquidation order
- Barred by s. 11(d).
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Section 11 Bars Applying Against Itself, Not Others
Explanation II to section 11 makes clear that a company in CIRP can still start a CIRP against its own debtor. A favourite one-mark question.
Admission Under Section 7: Then and Now
At the exam cut-off, section 7(5)(a) said the NCLT "may" admit once satisfied that a default occurred. In Vidarbha Industries v Axis Bank (2022) the Supreme Court read this as a discretion: the NCLT could look at factors beyond the existence of default before admitting.
The IBC (Amendment) Act, 2026, in force from 26 May 2026, substituted section 7(5). The NCLT now "shall", within 14 days, admit if a default has occurred, the application is complete and no disciplinary proceeding is pending against the proposed IRP. Explanation I adds that no other ground may be used to reject. For an application by a financial institution, an information utility's record of default is enough to establish default (Explanation II). The same Act removed, for section 10 applications, the requirement to name an IRP; IBBI now recommends one (s. 16(3A)).
How the Limited Insolvency Examination Tests This
Typical questions: can this creditor file, under which section, and will the NCLT admit? The facts will hide a disqualifier: a debt of ₹80 lakh, a dispute raised before the demand notice, a homebuyers' petition signed by 40 of 900 allottees, or a company whose previous CIRP ended eight months ago.
The trap is applying section 9 logic to section 7. A pre-existing dispute defeats an operational creditor's application; it does not defeat a financial creditor's, where the test is only whether a default occurred.
FAQs
Who can initiate CIRP under IBC?expand_more
A financial creditor under section 7, an operational creditor under section 9 after a section 8 demand notice, or the corporate debtor itself through a corporate applicant under section 10.
What is the minimum default amount for CIRP?expand_more
₹1 crore, under section 4 read with the notification of 24 March 2020.
Can an operational creditor file if the company disputes the debt?expand_more
Not if the dispute, or a pending suit or arbitration on it, existed before the demand notice was received and is brought to the creditor's notice within 10 days (sections 8(2) and 9(5)(ii)(d)).
Can a company file for its own insolvency?expand_more
Yes, under section 10, through a corporate applicant, with a special resolution of shareholders or approval of three-fourths of partners, unless a section 11 bar applies.
Next steps
- FC vs OCarrow_forward
- Vidarbha casearrow_forward
- Information Utilitiesarrow_forward
- CIRP Stepsarrow_forward
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