Best File Insolvency Against a Company That Won't Pay Lawyer

When a company owes you a large sum and will not pay, the Insolvency and Bankruptcy Code gives you a way to put real pressure on it: you can apply to the National Company Law Tribunal to start a corporate insolvency resolution process. If the application is admitted, the board loses control, an insolvency professional takes over, and a moratorium stops all other proceedings against the company. For many promoters, the threat of losing control is what finally produces payment.

This page is for creditors owed ₹1 crore or more by a company or LLP: lenders, suppliers, service providers and others. Financial creditors, such as lenders, apply under Section 7. Operational creditors, such as suppliers of goods and services, first send a demand notice under Section 8 and, if the debt is not paid or genuinely disputed within ten days, apply under Section 9.

The IBC is not a debt recovery tool in the ordinary sense. Once the process starts, all creditors share in the outcome, and an operational creditor may receive little if the company is deeply insolvent. Use it where the company can pay but will not, or where a collective process is genuinely the right outcome.

Is this your situation?

Section 7 and Section 9 compared

Is insolvency the right tool for your debt?

IBC petitions work best against companies that are solvent enough to pay but unwilling. Faced with the prospect of an insolvency professional taking over and the promoters' shareholding becoming worthless, many companies settle before or soon after admission. Section 12A allows withdrawal of an admitted application, but since the 2026 amendment, only after the committee of creditors is constituted, with 90% of its vote, and before the first invitation for resolution plans. This makes the timing of a settlement important.

IBC is a poor choice where the company is already deeply insolvent with secured lenders owed far more than the assets are worth. An operational creditor would rank low in the distribution waterfall under Section 53, and might receive very little. It is also a poor choice where the debt is genuinely disputed, because the NCLT will reject a Section 9 application if there is a plausible pre-existing dispute.

Before advising a petition, we look at the debtor's financial statements, its secured borrowings registered with the Registrar of Companies, whether other insolvency petitions are pending against it, and the strength of any dispute it might raise.

How an operational creditor's petition runs

Time and typical cost range

Our fees are agreed in writing at the start, stage by stage, and are not linked to the outcome.

Documents needed

Where IBC petitions go

The pre-existing dispute test

In Mobilox Innovations v Kirusa Software (2017), the Supreme Court held that a Section 9 application must be rejected if the corporate debtor shows that a dispute existed before receipt of the demand notice, and that the dispute is plausible and not a patently feeble argument or spurious defence. The NCLT does not decide who is right; it only checks whether a real dispute exists.

So the record before the demand notice matters enormously. Emails complaining about quality, rejection notes, deductions communicated at the time, and pending suits or arbitrations all count as pre-existing disputes. A complaint raised for the first time in reply to the demand notice usually does not.

For suppliers, this means two things. Keep records of the buyer's acceptance and absence of complaints. And do not send an ordinary legal notice that invites the debtor to "raise any dispute" before sending the Section 8 notice, if you intend to use the IBC.

What changed in 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received assent on 6 April 2026 and most of it came into force on 26 May 2026. Several changes affect creditors filing petitions.

For financial creditors, admission is now mandatory once default is established, the application is complete, and the proposed resolution professional has no pending disciplinary proceedings. This settles the debate that followed Vidarbha Industries v Axis Bank (2022) about whether the NCLT could refuse admission on grounds such as the debtor's profitability. The amendment also asks the NCLT to decide such applications within 14 days, though actual timelines still vary.

Withdrawal under Section 12A after admission is now possible only after the committee of creditors is constituted, with 90% of its vote, and before the first invitation for resolution plans. Look-back periods for avoidance transactions now run from the date the application was filed. For appeals, the NCLAT is to aim to decide IBC appeals within three months.

For pending cases, whether a particular amended provision applies depends on its wording and the stage of the case. Take advice on your specific matter.

Laws that apply

How we work

We are a litigation and advisory practice led by Advocate BK Singh, with offices in Dwarka (New Delhi) and Vaishali (Ghaziabad). This is what you can expect: For detailed insolvency process guides, see our network site ncltlawyers.in.

• Honest assessment: whether IBC will actually help you recover.
• Clean records: demand notices and petitions built to withstand the dispute test.
• Settlement leverage: we use the threat of admission responsibly.
• 2026 rules applied: timing of Section 12A withdrawal planned in advance.
• Written fee terms: agreed stage by stage, never linked to the outcome.

Mistakes creditors make with IBC

Financial creditors: what the NCLT looks at

A financial creditor's application under Section 7 does not need a prior demand notice. The creditor files in Form 1 with the record of default, which can include records from an information utility, the loan account statement certified under the Bankers' Books Evidence Act, or other evidence. The tribunal checks whether a financial debt exists and whether there has been a default of at least ₹1 crore. Disputes about the amount, or claims that the lender caused the default, do not usually defeat a Section 7 application.

Financial debts are wider than bank loans. They include money borrowed against interest, debentures and bonds, amounts raised under any transaction having the commercial effect of borrowing, guarantees, and amounts paid by homebuyers in real estate projects (subject to the thresholds that apply to allottees). Inter-corporate loans with interest are financial debts. Advances for goods or services are usually operational debts.

Since 26 May 2026, the tribunal must admit a complete application once default is established, provided the proposed resolution professional has no pending disciplinary proceedings. The debtor's argument that it is solvent or profitable is no longer a reason to refuse. Promoters who wish to settle must therefore act before admission or plan for the Section 12A window afterwards.

After admission: what a creditor should do

Once the application is admitted, the interim resolution professional issues a public announcement inviting claims. File your claim in the prescribed form within the time given, with supporting documents. Financial creditors form the committee of creditors, which takes the key decisions, including approving a resolution plan. Operational creditors do not vote, but their representatives may attend committee meetings if their aggregate dues are at least 10% of the total debt.

A resolution plan must pay operational creditors at least what they would receive in liquidation, or what they would receive if the plan value were distributed under the Section 53 waterfall, whichever is higher. In many cases, operational creditors receive a fraction of their claim. If the plan treats you unfairly, objections can be raised before the NCLT, and appeals lie to the NCLAT.

If no plan is approved, the company goes into liquidation. The 2026 amendment allows a one-time restoration of the process for up to 120 days with 66% of the committee's vote, in suitable cases.

Alternatives worth comparing

If the debt is disputed, or below ₹1 crore, or the company is deeply insolvent, consider other routes. A registered micro or small supplier can go to the MSME Facilitation Council, where the 75% deposit rule makes challenges expensive for the buyer. A creditor with an arbitration clause can start arbitration and then execute the award. A creditor holding documents can file a summary suit. Where personal guarantees exist, claims against guarantors may be more productive than claims against the company.

Sometimes the best strategy is sequential: an arbitration or MSME award first, establishing the debt beyond dispute, followed by an insolvency petition if the award is not paid.

Limitation for IBC applications

Section 238A of the IBC applies the Limitation Act to applications before the NCLT. The Supreme Court has held that Article 137 applies, giving three years from the date of default. Acknowledgements of debt in writing, signed by the corporate debtor before the period expires, give a fresh period under Section 18 of the Limitation Act. The Supreme Court has held that entries in a company's balance sheet acknowledging the debt can, depending on the facts and any qualifying notes, amount to acknowledgements.

For creditors, this means older defaults may still be within time if the debtor's audited accounts acknowledged the liability. For debtors, it means statements in annual accounts can have consequences beyond accounting. Check the last three years' balance sheets before concluding that a claim is time-barred.

IBC petitions based on arbitral awards and decrees

An unpaid arbitral award or decree can support an insolvency application. For an operational creditor, the award establishes the debt and largely removes the "pre-existing dispute" defence, unless a Section 34 challenge is pending. Courts have taken different views on whether a pending challenge, without a stay, is itself a dispute that defeats a Section 9 application; where the challenge has been dismissed or not filed in time, the debt is generally treated as undisputed.

For financial creditors, an award for a financial debt can be part of the record of default. Remember the ₹1 crore threshold, and the limitation period, which may run from the date of the award or the default depending on the facts.