For RS Legal’s clients and businesses seeking resolution under the Insolvency and Bankruptcy Code, 2016 (IBC)

In the dynamic world of corporate finance and insolvency, timely and well-structured action can make the difference between effective resolution and prolonged distress. If your business or your client’s business is facing default, understanding how to approach the NCLT for initiating insolvency proceedings is crucial. This blog from RS Legal lays out a clear, step-by-step guide to filing an application with the NCLT under the IBC, covering key sections, eligibility, documentation, filing process, and avoiding common pitfalls.

1. Understanding the Framework  

What is the NCLT and why does it matter?  

The National Company Law Tribunal (NCLT) is the adjudicating authority for insolvency proceedings under the IBC. It has exclusive jurisdiction over Corporate Insolvency Resolution Process (CIRP) matters, including those filed by financial creditors (under Section 7), operational creditors (under Section 9), and corporate applicants (under Section 10).

Key Sections under the IBC  

• Section 7: Allows a financial creditor to apply for initiating CIRP against a corporate debtor when a default has occurred
• Section 9: Allows an operational creditor (supplier of goods/services) to apply after following demand notice and waiting period procedures.
• Section 10: Allows the corporate debtor itself (or on its behalf) to make a voluntary application to commence CIRP.

Why use the NCLT route?  

• It invokes a creditors-in-control regime: once the application is admitted, the Interim Resolution Professional (IRP) takes over management of the corporate debtor.
• The process provides a structured environment for resolution or, if resolution fails, liquidation under supervision.
• The law prescribes timelines (e.g., 14 days for NCLT to decide on admission) and safeguards to prevent misuse.

2. Pre-Filing: Eligibility and Preparation  

Step 1: Confirm default and threshold  

• A default means the debtor failed to pay a debt when it became due. For financial creditors, the minimum default amount is currently at ₹1 crore (as per S.O. 1205(E) dated 24 March 2020) unless otherwise specified.
• If you’re an operational creditor, you must have served a demand notice/invoice, waited the required time, and ensured no valid dispute is pending before filing under Section 9.

Step 2: Determine jurisdiction  

The application must be filed at the NCLT bench which has jurisdiction over the registered office of the corporate debtor. For example, if the debtor is registered in Delhi, the Delhi bench applies.

Step 3: Choose the correct form and applicant  

• Financial creditor: Form 1 (Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016)
• Operational creditor: Form 5 or as prescribed under rules
• Corporate applicant: Form 6 (if corporate debtor initiates)

Step 4: Gather documentation and authorisations  

Essential documents include:

• Details of applicant(s) – name, address, PAN/CIN/LLPIN, contact info.
• Particulars of the corporate debtor – name, registered office, CIN/LLPIN, contact details.
• Evidence of default – invoices, demand notices, assignment agreements (if debt has been assigned), information utility records.
• If applicant is an assignee of debt, copy of assignment agreement & board resolution authorising the application.
• Proposed Interim Resolution Professional’s consent and credentials (for Sections 7 & 10).
• Proof of serving copy of application to registered office of corporate debtor and to the Insolvency and Bankruptcy Board of India (IBBI).

3. Filing the Application: Step-by-Step  

Step 1: Service of notice  

Before filing (or simultaneously, depending on section), you must serve a copy of the application on the registered office of the corporate debtor by registered post/speed post/hand or electronically to the whole-time director or key managerial personnel.

Step 2: Filing with NCLT  

• Prepare the application in the correct form (Form 1/5/6) with required annexures and affidavits.
• File electronically via NCLT e-Filing portal (https://efiling.nclt.gov.in) using the correct case type and upload as PDF. The manual states certain requirements (PDF only, size, authentication).
• Pay the filing fee as prescribed. Specifics depend on the bench and case type.
• Generate acknowledgment of filing and track listing. The NCLT portal will communicate listing details via SMS/email.

Step 3: Correcting defects  

Under the IBC scheme, if the NCLT finds defects in the application, it must allow the applicant 7 days to rectify them before outright rejection. The standard timeframe for NCLT to admit or reject is 14 days.

Step 4: Admission and commencement of CIRP  

• Once admitted, NCLT passes an order and corporate insolvency resolution process (CIRP) begins. The applicant becomes subject to the moratorium (no new suits/enforcement of security etc.).
• If rejected, the applicant may rectify and refile where permissible.

4. After Filing: What Happens Next?  

Appointment of Interim Resolution Professional (IRP)  

On admission, the IRP is appointed and takes charge of the debtor’s assets and operations. The management of the debtor is replaced by the IRP and the committee of creditors (CoC) takes control.

Moratorium stage  

During CIRP, a moratorium comes into force (no enforcement of security interest, no legal action against corporate debtor, etc.). This protects the debtor’s business and ensures treatment of all creditors under the IBC framework.

Resolution plan or liquidation  

The CoC decides whether to admit a resolution plan or move to liquidation if no feasible plan emerges within the prescribed timeline (initially 180 days, extendable to 330 days).

Role of NCLT during CIRP  

The NCLT monitors the process, approves the resolution plan, exercises jurisdiction over liquidation, and handles appeals via National Company Law Appellate Tribunal (NCLAT). The tribunal ensures compliance with IBC mandates.

5. Common Pitfalls & How to Avoid Them  

1. Inadequate evidence of default: Ensure high-quality documentation of debt, default date, invoice or contract. Lack of clarity often causes rejection.
2. Wrong jurisdiction/bench: Incorrect NCLT bench leads to delays or dismissal. Always check registered office location.
3. Using unsigned or un-authenticated documents: Each annexure must be signed/page numbered and supported by an affidavit.
4. Failure to serve application copy properly: Service defects can lead to non-admission. Follow service rules meticulously.
5. Selecting unqualified IRP or missing IRP consent: The IRP must meet eligibility criteria; disciplinary proceedings or conflict issues can derail the application.
6. Ignoring timelines for rectification: If defects are pointed out, respond within 7 days. Delay can mean loss of application rights.
7. Neglecting filing fee or e-filing formalities: Confirm payment and upload specifications (PDF format, size) to avoid technical rejection.

6. Why Engage RS Legal?  

At RS Legal, we specialise in guiding corporations, creditors and individuals through the insolvency labyrinth with precision and strategic insight. Our services include:

• Evaluating eligibility and crafting strategy (Section 7/9/10)
• Preparing the application, annexures, affidavits and serving notices
• Liaising with IRPs, monitoring CIRP stages and protecting stakeholder interests
• Defending against wrongful filings and ensuring compliance with best practices
• Providing representation before NCLT, NCLAT and other authorities

With the right legal partner, you gain a distinct advantage — compliance, speed and better outcomes.

Conclusion  

Filing an application with the NCLT under the IBC is a potent tool in your arsenal. Whether you’re a creditor seeking repayment, a corporate debtor seeking restructuring, or an operational entity seeking remedy — the process demands careful planning, accurate documentation and strict adherence to statutory provisions Ramnivas Surajmal Legal stands ready to assist you in navigating each step with clarity and strategy.

If you are considering invocation of insolvency remedies or need guidance on corporate distress scenarios, contact us today for a tailored consultation.

For more information and assistance: https://rslegal.in