| R & D Law Chambers LLP
Practice is led by Ravish Bhatt | Advocate, Bar Council of Gujarat (G/504/2008) | Dual-qualified lawyer (India and England and Wales) | Solicitor of England and Wales (non-practising), SRA Registration No. 492 477 | ADIT, Chartered Institute of Taxation, London Published: 3 November 2026 | Last reviewed: 3 November 2026 |
| This note is written against the Insolvency and Bankruptcy Code, 2016 as amended by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026, principal provisions in force 26 May 2026), the Bharatiya Sakshya Adhiniyam, 2023 (in force 1 July 2024), and the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. It states Indian law only. |
| A financial creditor applies under Section 7 of the Code to put a defaulting company into insolvency. The 2026 amendment removed the Tribunal’s discretion to refuse a proven default, reversing Vidarbha Industries. So resisting a Section 7 application no longer means pleading solvency or a dispute. It means attacking the building blocks: the creditor’s status, the debt, the default, the completeness of the application, the evidence, and limitation. |
Who can file under Section 7, and what must a financial creditor establish?
| A financial creditor, a person owed a financial debt under Section 5(7) and Section 5(8) of the Code, applies under Section 7 in Form 1. It must show a debt, a default of at least one crore rupees, and a complete application. A financial creditor may also proceed against a corporate guarantor. |
Section 7 of the Code lets a financial creditor, by itself or with others, move the National Company Law Tribunal to begin a corporate insolvency resolution process when a default has occurred. A financial creditor is a person to whom a financial debt is owed under Section 5(7), and a financial debt is a sum disbursed against the time value of money under Section 5(8), which includes borrowings, bonds, guarantees and counter-indemnities. A default is non-payment of a debt that has become due and payable, under Section 3(12).
The threshold is one crore rupees, fixed by notification S.O. 1205(E) dated 24 March 2020. The application is made in Form 1 under rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, with the record of default and the other particulars the Rules require. The Supreme Court in Swiss Ribbons Pvt Ltd v Union of India, (2019) 4 SCC 17, upheld this scheme, and a financial creditor may initiate against a corporate guarantor as well as the principal borrower.
After the 2026 amendment, what grounds are still open to resist a Section 7 application?
| Fewer than before. The amendment made admission mandatory within fourteen days once default and completeness are shown and no disciplinary action is pending against the proposed professional, barring any other ground and reversing the discretion read into may in Vidarbha. Solvency, viability, a temporary default or a dispute no longer help. What remains: debt, default, status, completeness, evidence or limitation. |
Before 2026, the Supreme Court in Vidarbha Industries Power Ltd v Axis Bank Ltd, (2022) 8 SCC 352, read the word may in Section 7(5)(a) as giving the Tribunal discretion to decline a financial creditor’s application even on a proven default, weighing matters such as the company’s solvency and viability. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 removed that discretion: Section 7(5) now says the Tribunal shall admit or reject within fourteen days, and once default, completeness and the absence of disciplinary proceedings against the proposed resolution professional are shown, no other ground may be considered. Vidarbha is legislatively reversed.
Two further doors were already shut before the amendment. A dispute about the debt is no defence to a Section 7 application: the Supreme Court in Innoventive Industries Ltd v ICICI Bank, (2018) 1 SCC 407, held that the Tribunal need only see that a default has occurred, and it is of no matter that the debt is disputed so long as it is due. Counterclaims and set-offs do not defeat admission either, following Swiss Ribbons. What survives is set out in the next question: no financial debt or no financial creditor, no default, an incomplete application, inadmissible evidence of default, or a time-barred claim.
How can a company show there is no default, or a defect that defeats the petition?
| By attacking a building block. Show the applicant is not a financial creditor or the sum is not a financial debt; or that the debt is not due and payable in law or in fact, so there is no default; or that the application is incomplete; or that the record of default is inadmissible, because an electronic record now needs a certificate under Section 63 of the Bharatiya Sakshya Adhiniyam, 2023. |
Even after the amendment, admission still requires a financial debt, a financial creditor, and a default. Innoventive preserves the company’s right to show that the debt is not due, that is, not payable in law or in fact, in which case there is no default to admit upon. So the attack runs to the substance: whether the sum claimed is a financial debt within Section 5(8) at all, whether the applicant is the person to whom it is owed under Section 5(7), and whether the debt has genuinely fallen due and remains unpaid under Section 3(12).
Completeness and evidence are the other live grounds. The application must be complete in Form 1 under the Rules, properly verified, and supported by evidence of the debt and default. Where the creditor relies on electronic records, the record now has to satisfy Section 63 of the Bharatiya Sakshya Adhiniyam, 2023, which replaced Section 65B of the Indian Evidence Act, 1872 with effect from 1 July 2024 and requires a certificate, now with additional safeguards including a hash value. The certificate requirement is mandatory, carrying forward the position in Arjun Panditrao Khotkar v Kailash Kushanrao Gorantyal, (2020) 7 SCC 1. A record of default tendered without a compliant certificate is open to challenge.
Is the Section 7 application barred by limitation, and can the creditor revive it?
| It may be. A Section 7 application must be filed within three years of the date of default, under Article 137 of the Limitation Act, 1963 applied through Section 238A of the Code. But the creditor can extend time by a written acknowledgement under Section 18, and the Supreme Court has held that an unqualified entry in the company’s balance sheet counts. Check the balance sheets before pleading limitation. |
The Limitation Act, 1963 applies to the Code through Section 238A, and the Supreme Court in B.K. Educational Services Pvt Ltd v Parag Gupta & Associates, (2019) 11 SCC 633, held that Article 137 gives three years from the date the default occurred. If the default is more than three years old, the application is prima facie barred.
The limitation point is rarely the end of the matter, because the creditor can show a fresh start. Under Section 18 of the Limitation Act an acknowledgement of the debt in writing before the period expires begins a fresh period, and the Supreme Court in Asset Reconstruction Company (India) Ltd v Bishal Jaiswal, (2021) 6 SCC 366, held that an entry in a company’s balance sheet, unless adequately qualified, is such an acknowledgement. The Court confirmed in Laxmi Pat Surana v Union Bank of India, (2021) 8 SCC 481, and Sesh Nath Singh v Baidyabati Sheoraphuli Co-operative Bank Ltd, (2021) 7 SCC 313, that Section 18 applies to the Code. A part payment can also restart time under Section 19. So a company relying on limitation must check its own balance sheets and payment record first, because the creditor will.
How is resisting a Section 7 application different from resisting a Section 9 application?
| The decisive difference is the dispute defence. An operational creditor under Section 9 can be stopped by a genuine pre-existing dispute, under Mobilox. A financial creditor under Section 7 cannot, under Innoventive. After 2026 both are decided in fourteen days, but Section 9 keeps the dispute ground while Section 7 does not. |
The two routes are built differently, and a defence that works against one fails against the other. Against an operational creditor the single most powerful answer is a genuine pre-existing dispute, which the Supreme Court in Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd, (2018) 1 SCC 353, held bars admission under Section 9. Against a financial creditor that answer is worthless. The table sets out the contrast.
| Feature | Section 7: financial creditor | Section 9: operational creditor |
| Pre-existing dispute | No defence (Innoventive) | Bars admission (Mobilox) |
| Solvency or viability | Removed by the 2026 amendment (reversing Vidarbha) | Never a defence |
| Counterclaim or set-off | Does not defeat admission (Swiss Ribbons) | Does not defeat admission on its face. To defeat: may constitute a pre-existing dispute if genuine, supported by material and raised before receipt of the demand notice (Mobilox) |
| Core lines of attack | No financial debt, no default, incompleteness, evidence, limitation | No operational debt, pre-existing dispute, incompleteness, limitation |
| Admission after 2026 | 14 days; mandatory once default, completeness and a clean RP record shown; no other ground | 14 days; the dispute question remains part of the checklist |
How R & D Law Chambers Works on These Matters
The practice advises financial creditors and corporate debtors on proceedings under Section 7 of the Code before the National Company Law Tribunal. That work covers the record of default and the information utility, the completeness and verification of the application, the admissibility of electronic evidence, limitation and acknowledgement, and the conduct of admission after the 2026 amendment, whether the client is pursuing admission or resisting it.
The firm’s insolvency and NCLT practice is described here: NCLT lawyers in Ahmedabad: insolvency, IBC and corporate debtor representation.
Related services and reading
Corporate law firms in India: corporate lawyers in Ahmedabad for Indian and international clients
Primary authorities
Insolvency and Bankruptcy Code, 2016, Sections 3(11), 3(12), 5(7), 5(8), 7, 238A. Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026). Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, rule 4 (Form 1). Notification S.O. 1205(E) dated 24 March 2020. Bharatiya Sakshya Adhiniyam, 2023, Section 63. Innoventive Industries Ltd v ICICI Bank, (2018) 1 SCC 407. Swiss Ribbons Pvt Ltd v Union of India, (2019) 4 SCC 17. Vidarbha Industries Power Ltd v Axis Bank Ltd, (2022) 8 SCC 352. B.K. Educational Services Pvt Ltd v Parag Gupta & Associates, (2019) 11 SCC 633. Asset Reconstruction Company (India) Ltd v Bishal Jaiswal, (2021) 6 SCC 366. Laxmi Pat Surana v Union Bank of India, (2021) 8 SCC 481. Sesh Nath Singh v Baidyabati Sheoraphuli Co-operative Bank Ltd, (2021) 7 SCC 313. Arjun Panditrao Khotkar v Kailash Kushanrao Gorantyal, (2020) 7 SCC 1. Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd, (2018) 1 SCC 353.
| This note is general information on the law, not legal advice, and no lawyer-client relationship arises from reading it. For a specific matter, consult a legal practitioner. |