In the complex world of financial distress, understanding how to request insolvency status can be crucial for creditors, debtors, and stakeholders alike. Whether you're a financial creditor seeking to initiate proceedings against a defaulting corporate debtor or a personal guarantor facing recovery demands, the Insolvency and Bankruptcy Code, 2016 (IBC) provides a structured framework. This blog post breaks down the process, drawing from key judicial precedents and statutory provisions to help you navigate granting the request for insolvency status effectively.
We'll explore the legal grounds, procedural requirements, and common pitfalls, ensuring you have actionable insights without venturing into personalized legal advice. Remember, laws evolve, and outcomes depend on specific facts—always consult a qualified professional for your situation.
Insolvency status refers to the formal declaration by the National Company Law Tribunal (NCLT) that a corporate debtor or personal guarantor is undergoing insolvency resolution. This triggers the Corporate Insolvency Resolution Process (CIRP) or personal guarantor insolvency proceedings, aimed at maximizing asset value and resolving debts collectively. Indore Development Authority VS Manoharlal & Ors. Etc. - 2020 5 Supreme 194
A request for insolvency status typically arises via petitions under:
- Section 7 IBC: Filed by financial creditors (e.g., banks).
- Section 9 IBC: Filed by operational creditors (e.g., suppliers).
- Section 95 IBC: For personal guarantors. Central Bank of India vs A Dominic Savio - 2025 Supreme(Online)(NCLT) 8220
The Adjudicating Authority (NCLT) admits the petition if there's a default (non-payment of debt over Rs. 1 crore, post-amendment) and no disputes on record. Once admitted, a Resolution Professional (RP) is appointed, moratorium kicks in, and creditors form the Committee of Creditors (CoC). Indore Development Authority VS Manoharlal & Ors. Etc. - 2020 5 Supreme 194
To succeed in a request for insolvency status:
- Prove Default: Evidence like recovery certificates or financial records. In one case, a petition with defaults of Rs. 160.87 crores was admitted based on a 2019 recovery certificate. Central Bank of India vs A Dominic Savio - 2025 Supreme(Online)(NCLT) 8220
- No Pre-Existing Dispute: Operational creditors must issue a demand notice under Section 8.
- Timely Filing: Within limitation periods. Indore Development Authority VS Manoharlal & Ors. Etc. - 2020 5 Supreme 194
Courts emphasize the IBC's complete code nature, with overriding effect under Section 238, superseding laws like the Electricity Act for auction purchasers. Dharti Agro Industries Pvt. Ltd. vs Managing Director, Pashchimanchal Vidyut Vitran Nigam Ltd. - 2025 Supreme(All) 3095
Indian courts have clarified when to grant the request for insolvency status through landmark rulings:
The Supreme Court in Indore Development Authority v. Shailendra overruled earlier decisions, holding:
Section 24(2) a penal provision to punish acquiring authority for its lethargy in not taking physical possession nor paying the compensation after making the award five years or more before.
Proceedings lapse only if both possession and compensation remain unpaid post-award (reading 'or' as 'and'). Deposits count as payment, preventing unjust enrichment. This underscores strict timelines in insolvency-like lapses.
Preference shareholders cannot request insolvency status as creditors:
Preference shareholders do not have creditor status under the Insolvency and Bankruptcy Code; their shares are deemed equity, not debt.
CRPS convert receivables to equity, barring Section 7 petitions.
Even non-resident personal guarantors can face insolvency if a valid recovery certificate exists:
Insolvency proceedings can be initiated against personal guarantors under the IBC, even if they are non-residents, provided there is a valid recovery certificate.
NCLT admitted a petition for Rs. 160+ crores default.
NCLAT cannot approve settlements bypassing Section 12A (90% CoC approval). Once CIRP starts, it's collective—individual deals need procedure. Financial creditors' objections on fund sources must be addressed. GLAS Trust Company LLC VS BYJU Raveendran - 2024 Supreme(SC) 964
High Courts err in interdicting CIRP via writs:
Unjustified interference with proceedings initiated under Insolvency and Bankruptcy Code 2016, breaches discipline of law.
IBC has built-in appeals (NCLAT, Supreme Court).
Here's how creditors typically proceed:
1. Issue Demand Notice: Operational creditors under Section 8; financial creditors directly petition.
2. File Petition: At NCLT with Form 5 (Section 7/9). Include default proof. Indore Development Authority VS Manoharlal & Ors. Etc. - 2020 5 Supreme 194
3. Admission Hearing: NCLT verifies default, appoints IRP.
4. Moratorium: No new suits, asset sales halted.
5. CoC Formation: RP collates claims; CoC approves resolution plans.
6. Resolution or Liquidation: 330-day timeline, extendable. Kridhan Infrastructure Pvt. Ltd. (Now known as Krish Steel and Trading Pvt. Ltd) VS Venkatesan Sankaranarayan - 2021 Supreme(SC) 361
Challenges and Defenses:
- Disputes: Genuine disputes bar admission.
- Section 29A: Disqualifies willful defaulters, promoters from bidding. Swiss Ribbons Pvt. Ltd. VS Union of India - 2019 2 Supreme 524
- Auction Purchasers: Not liable for prior dues. Dharti Agro Industries Pvt. Ltd. vs Managing Director, Pashchimanchal Vidyut Vitran Nigam Ltd. - 2025 Supreme(All) 3095
Third parties, like electricity boards, cannot demand prior dues from new owners post-IBC auction. Section 238 overrides. Dharti Agro Industries Pvt. Ltd. vs Managing Director, Pashchimanchal Vidyut Vitran Nigam Ltd. - 2025 Supreme(All) 3095
Disclaimer: This post provides general information based on precedents like Indore Development Authority VS Manoharlal & Ors. Etc. - 2020 5 Supreme 194 Central Bank of India vs A Dominic Savio - 2025 Supreme(Online)(NCLT) 8220 GLAS Trust Company LLC VS BYJU Raveendran - 2024 Supreme(SC) 964. It is not legal advice. Consult an insolvency expert for case-specific guidance, as outcomes vary by facts and jurisdiction.
For more on IBC, stay tuned. Share your thoughts below!
CITIZENS - REQUIREMENT TO AVOID OBITER OBSERVATIONS AND DISCUSSION OF PROBLEMS NOT INVOLVED IN THE PROCEEDINGS IS ALMOST COMPULSIVE ... ... -held, any natural consequence flowing from the order will not introduce ... AGAINST ORDER OF COMPETENT COURT, JUDICIAL ORDER OF COURT IN EXERCISE OF ITS INHERENT JURISDICTION IS TO HELP ADMINISTRATION OF ... When this request was made by Mr. ... Goda s request for prohibiting....
has to be excluded - No necessity for providing for exclusion of the period in the statute - Some States providing for exclusion ... in inclusion of such period or periods for purpose of reckoning the period of 5 years. ... - Held, period of operation of the interim order has to be excluded for counting #HL_S....
Distinction between judgments in rem and judgments in personam turns on their power as res judicata – A Judgment in rem determines status ... The restrictive interpretation approach on the other hand states that in case of doubt the disputes shall not be treated as covered ... expressions “rights in rem” and “rights in personam” may not be correct for determining non-arbitrability because of the inter-play ... , child custody; (iii)....
issues arising for consideration in application under Section 11 for appointment of arbitrators, are far narrower than those arising ... nbsp;Arbitration and Conciliation Act, 1996–Section 8–Limitation–Application under Section 8 should be made at the ... reply by defendant to an application for temporary injunction/attachment before judgment/ appointment of Receiver, cannot be considered ... to the appellant to request the court t....
(Para 32) ... (g)Interpretation of Statues – DRT Act ... The possession of movable and immovable properties of the company was taken by the bank on 15.2.2005 and the same were sold for a ... The non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for ... #HL....
Act - Issuance of Insolvency Notice thereof - Not permissible - Complete Machinery for adjudication provided under Act 1993 - Resort ... sub-section (1) would be attracted in relation to the provisions of the Insolvency Act. ... provisions of Section 34 clearly give overriding effect, would rule out resort to the provisions of Section 9(2) of the Insolvency ... ....
plant, converting receivables to CRPS at the request of the respondent. ... The appellant initiated insolvency proceedings for the non-payment of CRPS, which was dismissed by NCLT and NCLAT. ... (A) Insolvency and Bankruptcy Code, 2016 - Section 7 - Companies Act, 2013 - Sections 3(11), 5(7), 5(8), and 55 - Dismissal of appeal ... Insolvency and Bankru....
relief against the Noida Authority for failure to hand over possession of land for the Sports City project, claiming damages and ... writ petition and the justification for the delays in the project. ... of the consortium, lacked the standing to challenge the actions of the Noida Authority regarding the Sport....
(Paras 141-143) (F) Recommendations - The court provided guidelines for handling insolvency ... (Paras 130-134) (E) Corporate Insolvency - The court noted that the insolvency process initiated ... to grant relief to the petitioners. ... What will be the effect on a Consortium when a Member of the Consortium goes into insolvency under the #HL_ST....
Lease - Insolvency and Bankruptcy Code, 2016 - [Industrial Lease, Insolvency, Bankruptcy] - [Section 10 of Insolvency and Bankruptcy ... Issues: The main issue was the petitioner's request for time to vacate the premises and the settlement of outstanding rent ... of outstanding electricity charges for #HL_STA....
IBBI/IPA-001/IP-P00294/2017-18/10538 and Resolution Professional of Riverbank Developers Private Limited, having his office at Grant Thorton, Unit 1603 & 1604, Eco Centre, Plot No. 4 Street No. ... However, the same was rejected by email dated 11.08.2025 on the sole ground of delay, despite no dispute as to the Applicant’s status as a homebuyer or the payments made. As no resolution plan has yet been approved, no prejudice will be caused to any stakeholder if the delay is condoned. ... who is a bona fide homebuyer and senior citizen aged about 82 years, i....
file the notice, together with a request for issue. ... provisions of the Insolvency Act be construed strictly and in favour of the Debtor in as much as the status of the Debtor is sought to be affected thereby. ... Therefore it is quite clear that the Judgment Debtor is not serious about protecting his status. The Petitioing Creditor has been waiting since 2017 to recover dues of over Rs. 21 crores. ... True also as noted above that the provisions of the Insolvency Act have to be construed strictly. An....
At the time of admission, this Court had called for a report from the Sub Court, Thiruvananthapuram regarding the status of the proceedings. A report has been received which says that Ext.P1 insolvency petition (Insolvency Petition No.3 of 2017) has been consolidated along with O.P. ... (Insolvency) is maintainable. However, it is admitted that the question that was considered was regarding the maintainability in the light of the bar under the Insolvency and Bankruptcy Code (IB Code). ... The contenti....
Pursuant thereto, the Applicant filed a Final Status Report, however, the said application was marked defective by the Registry, and the advocate on record failed to cure the defects within the stipulated time. ... 2) The present Interlocutory Application has been filed by the Applicant/Chairperson of Monitoring Committee of the Corporate Debtor, to place on record the Status Report. ... 5) Through the present Interlocutory Application, the Applicant seeks closure of the Corporate Insolvency Resolution Process of the Corporate Debtor.6) H....
Section 217 of the Insolvency Code, 2016 provides that any person aggrieved by the functioning of an insolvency agency or insolvency professional or insolvency utility may file an application before the board within a specific time and in such manner as may be specified. ... It is for this reason that when the authority empowered to grant sanction is proceeding to exercise its discretion, it has to take into account the material facts of the incident complained of before passing an order of granting san....
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