Section 9 of The Insolvency and Bankruptcy Code, 2016.
Application for initiation of corporate insolvency resolution process by operational creditor.
- (1)After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.
- (2)The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.
- (3)The operational creditor shall, along with the application furnish--
- (a)a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;
- (b)an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;
- (c)a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt 1 [by the corporate debtor; if available;] 2 [(d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and
- (e)any other proof confirming that there is no payment of an unpaid operational debt by the corporate debtor or such other information, as may be prescribed.]
- (4)An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional.
- (5)The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order
- (i)admit the application and communicate such decision to the operational creditor and the corporate debtor if,--
- (a)the application made under sub-section (2) is complete;
- (b)there is no 3 [payment] of the unpaid operational debt;
- (c)the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;
- (d)no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and
- (e)there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any;
- (ii)reject the application and communicate such decision to the operational creditor and the corporate debtor, if--
- (a)the application made under sub-section (2) is incomplete;
- (b)there has been 3[payment] of the unpaid operational debt;
- (c)the creditor has not delivered the invoice or notice for payment to the corporate debtor;
- (d)notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or
- (e)any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the Adjudicating Authority.
- (6)The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section.
Summary
- If an operational creditor does not receive payment or a notice of dispute within ten days of delivering the demand notice, they can file an insolvency application against the debtor.
- The application must be filed in the prescribed form, with the required fee, and accompanied by specified documents such as the demand notice and an affidavit.
- The operational creditor must submit an affidavit stating that no notice of dispute has been received from the corporate debtor.
- Unlike financial creditors, proposing an interim resolution professional is optional for an operational creditor under this provision.
- The Adjudicating Authority has fourteen days to admit or reject the application.
- If rejected due to an incomplete application, the authority must provide seven days to the creditor to rectify the defect.
Practical examples
FAQ
1. When can an operational creditor file an insolvency application under Section 9 of the Insolvency and Bankruptcy Code, 2016?
Under Section 9 of the Insolvency and Bankruptcy Code, 2016, the operational creditor can file the application after the expiry of ten days from the delivery of the demand notice or invoice, provided they have not received payment or a notice of dispute.
2. Is it mandatory for an operational creditor to propose an interim resolution professional under Section 9 of the Insolvency and Bankruptcy Code, 2016?
No, under Section 9 of the Insolvency and Bankruptcy Code, 2016, the operational creditor may propose an interim resolution professional, but it is not mandatory.
3. What happens if a dispute notice is received by the operational creditor before they file an application under Section 9 of the Insolvency and Bankruptcy Code, 2016?
Under Section 9 of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority must reject the application if a notice of dispute has been received by the operational creditor or if there is a record of dispute in the information utility.
4. What is the timeline for the Adjudicating Authority to decide on an operational creditor's application under Section 9 of the Insolvency and Bankruptcy Code, 2016?
Under Section 9 of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority must pass an order to admit or reject the application within fourteen days of receiving it.
Test yourself
1.Under Section 9 of The Insolvency and Bankruptcy Code, 2016, what must the operational creditor file to confirm that the debtor has not raised any dispute regarding the unpaid debt?
2.Under Section 9 of The Insolvency and Bankruptcy Code, 2016, if the operational creditor does not propose an interim resolution professional, what is the consequence?
3.Under Section 9 of The Insolvency and Bankruptcy Code, 2016, read with Section 8 of the Code, what is the absolute pre-requisite before an operational creditor can file an insolvency application with the Adjudicating Authority?
4.Under Section 9 of The Insolvency and Bankruptcy Code, 2016, if the Adjudicating Authority finds that the application is incomplete, how much time does the applicant have to rectify the defect?