File Section 9 Applications for Operational Creditors

Filing Section 9 Applications for Operational Creditors Before NCLT

Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) empowers operational creditors to initiate a Corporate Insolvency Resolution Process (CIRP) against defaulting corporate debtors before the National Company Law Tribunal (NCLT). This mechanism is a powerful remedy, but its success hinges on strict compliance with statutory procedures and documentation.

Who Can File a Section 9 Application?

• Operational Creditors: Any person or entity to whom an operational debt is owed by a corporate debtor can file, provided there is no pre-existing dispute regarding the debt.

Prerequisites: Demand Notice under Section 8

1. Issue Demand Notice:

   • Serve a demand notice (Form 3) or a copy of the invoice (Form 4) to the corporate debtor, seeking payment of the outstanding operational debt.

   • The debtor has 10 days to:

     • Pay the debt,

     • Raise a dispute, or

     • Provide proof of payment.

2. No Pre-existing Dispute:

   • Section 9 cannot be invoked if there is an ongoing dispute or litigation regarding the debt prior to the notice.

When Can You File the Application?

• If the debtor fails to pay within 10 days of the demand notice, the operational creditor may file a Section 9 application before the NCLT.

Documentation Checklist

A Section 9 application must be comprehensive and include:

• Form 5: Application form as per IBBI (Application to Adjudicating Authority) Rules, 2016.

• Copy of Demand Notice: Proof of service of demand notice or invoice (Form 3/4).

• Affidavit: Stating that no notice of dispute has been received.

• Proof of Default: Bank statements, correspondence, or other evidence.

• Certificate from Financial Institution: Confirming non-payment, if available.

• Vakalatnama: Authorization for legal representation.

• Index, Memo of Parties, Synopsis, List of Dates & Events, Exhibits: As per NCLT filing standards.

• Court Fee: As per current NCLT schedule (typically Rs 2,000 for Section 9).

Drafting and Filing Requirements

• Language: English, or with an English translation if in another Indian language.

• Format: Double-spaced, specified margins, paginated, indexed, and stitched as a paper book.

• Electronic Filing: Bulky documents may be filed electronically; always check latest NCLT and IBBI rules.

NCLT’s Role and Process

• Examination: NCLT will scrutinize the application for completeness, proof of debt and default, service of demand notice, and absence of pre-existing disputes.

• Admission: If all requirements are met, NCLT admits the application, imposes a moratorium, and appoints an Interim Resolution Professional (IRP).

• Rejection: If defects exist, NCLT may allow 7 days for rectification or reject the application.

• Hearing: The corporate debtor is given an opportunity to respond and present evidence of payment or dispute.

Key Legal Considerations

• IBC is Not a Debt Recovery Tool: Section 9 is for insolvency resolution, not mere debt collection. Applications filed solely for recovery are likely to be dismissed.

• Limitation Period: Application must be filed within three years from the date the cause of action arises (after the 10-day notice period).

• Withdrawal: Applications can be withdrawn before admission with NCLT approval; post-admission, withdrawal requires 90% Committee of Creditors’ consent (if constituted).

Common Reasons for Rejection

• Pre-existing dispute or litigation concerning the debt.

• Incomplete or improper documentation.

• Failure to serve a valid demand notice or prove delivery.

• Application filed after limitation period.

Why AMLEGALS for Section 9 Applications?

• IBC Experts: Deep experience in drafting, filing, and litigating Section 9 applications across all NCLT benches in India.

• Strategic Advisory: Assessment of dispute risks, limitation, and compliance for successful admission.

• End-to-End Support: From notice drafting to NCLT hearings and IRP appointments.

• Pan-India Presence: Local expertise, national reach.

Contact Us

If you are an operational creditor seeking to initiate insolvency proceedings under Section 9 of the IBC, You may contact AMLEGALS on merit of your application.

Frequently Asked Questions

Q1: What is the minimum amount required to file a Section 9 application?
The default threshold is Rs 1 crore (subject to government notifications).

Q2: Can I file if the debtor disputes the invoice after receiving the demand notice?
Yes, it can be filed. It needs to be established by the debtor that there was a pre-existing dispute and not an after thought dispute on eceiving the notice.

Q3: Is a lawyer necessary for filing?
Professional legal expertise is highly recommended due to technical and procedural complexities.

The NCLT strictly examines whether a “pre-existing dispute” exists. Corporate debtors often try to create the illusion of a dispute to have the application dismissed. Our lawyers help you:

• Draft a legally flawless Demand Notice.
• Collate evidence to prove the existence of operational debt and default.
• Effectively counter claims of a “dispute” before the NCLT.
• File a complete and compliant Section 9 application to maximize the chances of admission.