IBC Limits & Thresholds in India 2026: ₹1 Crore Default, Demand Notice, Timelines & the 2026 Amendment
IBC limits in India: ₹1 crore default threshold, who can file under sections 7, 9 and 10, section 8 notice, timelines, MSME rules and the 2026 Amendment.
A component supplier in Patancheru is owed ₹70 lakh by a buyer that keeps promising payment next week. Another supplier, owed ₹1.4 crore, is told that it can send a notice and take the buyer to the insolvency tribunal. The difference between the two is not their strength of claim but a single figure: the minimum default threshold. The Insolvency and Bankruptcy Code, 2016 (IBC) is a collective recovery law with hard limits, and getting them wrong means a petition that is dismissed at the first hearing.
Limits at a glance
| Item | Limit | Source |
|---|---|---|
| Minimum amount of default | ₹1 crore | s.4 IBC; S.O. 1205(E), 24 Mar 2020 |
| Real-estate allottees as financial creditors | At least 100 allottees or 10% of the total allottees in the project, whichever is less | Proviso to s.7(1) verify |
| Demand notice by operational creditor | 10 days to reply or pay | s.8 IBC; Rule 5 of the Adjudication Rules |
| CIRP period | 180 days plus up to 90 days; outer limit of 330 days | s.12 verify |
| Limitation to file | Three years from the date of default | Article 137, Limitation Act, 1963 (as applied to IBC) |
| Withdrawal after admission | Approval of 90% of the committee of creditors | s.12A |
| Disqualification of defaulting promoters bidding for the company | Ineligibility, with relief for MSMEs in limited cases | s.29A, s.240A verify |
Who can file under sections 7, 9 and 10
Section 7 allows a financial creditor, such as a bank or a lender, to file when a default of ₹1 crore or more exists, supported by a record of default from an information utility or other evidence. Section 9 is for operational creditors, meaning suppliers of goods and services, employees and, in some cases, government authorities. Section 10 allows a corporate applicant, the company itself, to file for its own insolvency. A default can be partly cured: if the dues are paid before admission, the petition can be dismissed verify.
Operational creditor: the demand notice
- Serve the section 8 demand notice in the prescribed form, stating the amount in default.
- Wait 10 days. The debtor may pay or point to a pre-existing dispute or a pending suit or arbitration on the same debt.
- If neither happens, file the section 9 application with the invoices, the notice and the proof of service, and an affidavit that no dispute notice was received.
- The Adjudicating Authority, the National Company Law Tribunal (NCLT), decides admission. A genuine dispute is the most common reason for rejection.
Because a notice is the foundation, drafting it carefully matters; see our guide to legal notices. The NCLT Hyderabad Bench hears petitions for companies registered in Telangana and Andhra Pradesh verify.
Timelines
From the date of admission the moratorium under section 14 bars suits and recovery against the company, and a resolution professional takes over management. The resolution plan must be submitted within the CIRP period, approved by a committee of creditors holding at least 66% of voting share, and then by the NCLT. If no plan is approved the company goes into liquidation. Courts have treated the 330-day outer limit as directory in exceptional cases, but this is litigative and cannot be relied on verify.
MSMEs, pre-packs and promoters
- Pre-packaged insolvency (PPIRP): available to corporate debtors that are MSMEs, with the proposal backed by at least 66% of financial creditors who are not related parties. It is faster than CIRP and the management stays with the promoters until the plan is approved verify.
- Section 29A: promoters who are wilful defaulters or hold non-performing accounts for a year cannot bid for their own company, with a relaxation for MSMEs in specified cases.
- Personal guarantors: the provisions on insolvency of personal guarantors to corporate debtors have been brought into force, so a guarantor of a company in CIRP may face a parallel process verify.
The 2026 Amendment
Reports on the Insolvency and Bankruptcy Code (Amendment) Act, 2026 describe a new Chapter IV-A for creditor-initiated insolvency resolution in notified classes, with creditor approval of 51% of debt value, 150 days plus a 45-day extension, and the board retaining control until conversion. They also report that admission becomes mandatory once default is established, that liquidation must conclude in 180 days plus a 90-day extension, and that the NCLT may penalise frivolous proceedings between ₹1 lakh and ₹2 crore verify. Provisions on group and cross-border insolvency await rules, and the classes of creditors eligible for the new process are to be notified. The ₹1 crore threshold was not reported as changed. Read the Gazette text before relying on any of this.
Defending a petition
| Ground | Position | Risk |
|---|---|---|
| Pre-existing dispute | Show correspondence or a suit or arbitration before the demand notice | Moderate; courts look for a real dispute, not a moonshine defence |
| Debt below threshold or time-barred | Compute default properly; check limitation | Low to moderate |
| Defective notice or service | Examine form, address, amount and annexures | Moderate |
| Debt not due or not in default | Check contract and payment terms | Moderate |
Pay or contest within 10 days. A debt that is admitted and undisputed is hard to resist at the tribunal.
Why work with ComplianceKart
An IBC matter is a recovery strategy, a legal pleading and a financial analysis at once. ComplianceKart is a boutique practice bringing CAs, CSs and advocates under one roof, like a multi-speciality hospital where the surgeon and the physician plan the case together. We assess whether to demand, settle or defend, and prepare the notice or reply. No outcome is guaranteed.
Frequently asked questions
What is the minimum default amount for an IBC petition?
₹1 crore, notified under section 4 of the IBC on 24 March 2020. A creditor owed less cannot file under sections 7, 9 or 10.
Can several small creditors club their dues to cross ₹1 crore?
Some High Court decisions allowed a group of MSME creditors to combine for the threshold, but the position is litigative. Seek advice before filing on that basis.
What is a section 8 demand notice?
A notice by an operational creditor stating the unpaid amount and giving the company 10 days to pay or raise a dispute. It is a precondition to a section 9 petition.
How long does the corporate insolvency resolution process take?
180 days, extendable by 90 days, with an outer limit of 330 days including litigation. The 2026 Amendment reportedly sets new timelines for the creditor-initiated process (150 days plus 45).
Can GST or other government dues start an IBC petition?
Government dues are generally treated as operational debt, but the treatment depends on the statute and the facts. Seek advice before relying on it.
Is the IBC a recovery tool?
It is a resolution tool. Using it merely for recovery has been criticised by courts, and frivolous petitions may now attract penalty under the 2026 Amendment.
Owed money or served an IBC notice?
Share the invoices, the notice and the dates. We will tell you where you stand.
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Disclaimer. This article is general information on Indian law as at 20 October 2026 and is not advice on any specific case. Items marked verify should be checked against the current official text before reliance. Contact: team@compliancekart.com · 9959536391 · compliancekart.com.
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