Operational Creditors Under IBC: Demand Notices and Section 9 Applications

Suppliers, contractors and service providers owed ₹1 crore or more can use the IBC to press for payment. The prospect of losing control often pushes debtors to settle. But the process has strict rules, and weak applications fail.

Who Is an Operational Creditor

Anyone owed money for goods or services, including employees and, in some cases, government authorities. The debt must be due and payable, and in default.

Step 1: The Demand Notice

Send a demand notice in the prescribed form to the company, with invoices or other evidence of the debt. The company has ten days to pay or point out the existence of a dispute.

The Pre-existing Dispute Test

If the company shows a genuine dispute that existed before the demand notice — such as quality complaints, a pending suit or arbitration — the NCLT will usually reject the application. The dispute must be real, not a moonshine defence invented after the notice.

Step 2: Filing the Application

If there's no payment or genuine dispute, file an application under Section 9 with the NCLT, with the demand notice, proof of delivery, an affidavit on non-receipt of a dispute notice, and debt evidence. A bank certificate of non-payment can support it.

What Happens Next

• The NCLT hears both sides and decides whether to admit.
• Many debtors settle before admission.
• If admitted, a CIRP begins; operational creditors file claims but don't vote in the committee of creditors.
• Recovery depends on the resolution plan or liquidation waterfall.

Practical Tips

• Keep invoices, delivery proofs and acknowledgements organised.
• Document any complaints the customer raised, and your responses.
• Consider whether a settlement is better than a full CIRP.

Getting Help

Think Filing prepares demand notices and Section 9 applications with counsel.