Section 7 vs Section 9 — who files what
| Section 7 (Financial Creditor) | Section 9 (Operational Creditor) | |
|---|---|---|
| Who can file | Bank, NBFC, bondholder, or debenture holder owed a financial debt | Supplier of goods/services, or someone owed statutory dues |
| Pre-condition | Default of at least ₹1 crore | Section 8 demand notice sent, 10 days passed with no payment or dispute notice |
| Key evidence | NPA classification, bank statements, loan/facility agreement | Invoices, proof of demand notice delivery, no pre-existing dispute |
| Leading case | Innoventive Industries v. ICICI Bank, (2018) 1 SCC 407 | Mobilox Innovations v. Kirusa Software, (2018) 1 SCC 353 |
What happens once the application is admitted
- Moratorium (Section 14): An automatic stay comes into effect on all legal proceedings against the corporate debtor
- Resolution Professional (RP): Takes over management of the corporate debtor from the existing board
- Committee of Creditors (CoC): Made up of financial creditors; decisions require 66% voting share
- Resolution plan: Must be approved by the CoC and the NCLT within 330 days — a hard deadline
- Liquidation: If no plan is approved in time, the NCLT orders liquidation, with proceeds distributed under the Section 53 waterfall
Related mechanisms worth knowing
- Personal guarantors: Face separate insolvency proceedings before the DRT under Part III of the IBC
- Pre-packaged insolvency (PPIRP): A faster process for MSMEs under Section 54A
What a Section 9 application needs to establish
Under the Mobilox test, a Section 9 application can fail if the corporate debtor can show a genuine, pre-existing dispute about the debt that existed before the demand notice was sent — the dispute doesn't need to be resolved in the debtor's favour, just genuinely pending.
CIRP admission and outcome depend heavily on documentary evidence — NPA certificates, invoices, and proof of notice delivery — and on whether the NCLT finds the debtor's dispute (if any) to be genuine rather than a delay tactic. This is a specialist area; involve a lawyer before filing.