The Threshold and Meaning of Operational Debt
Operational debt under Section 5(21) IBC includes claims in respect of the provision of goods or services, employment dues, or dues payable to Central or State Governments.
Post-2020 amendment, the minimum default threshold required to institute a CIRP application is ₹1 Crore. However, operational creditors can aggregate multiple unpaid invoices, purchase orders, or linked contracts to cross the statutory threshold.
The Mandatory Section 8 Demand Notice
Before approaching NCLT, the operational creditor must deliver a statutory Demand Notice in Form 3 or Form 4 under Section 8 of the IBC, giving the debtor 10 days to either pay or demonstrate the existence of a pre-existing dispute.
The notice must be supported by certified copies of invoices, delivery proofs (lorry receipts/challans), and bank account statements showing non-payment.
The Mobilox Pre-Existing Dispute Hurdle
In the landmark Mobilox Innovations v. Kirusa Software judgment, the Supreme Court established that if the corporate debtor shows a plausible pre-existing dispute raised prior to the Section 8 notice, the NCLT must reject the application.
However, spurious, illusory, or post-notice defenses fabricated solely to evade insolvency proceedings will not protect the corporate debtor.
Practical Guidance & Conclusion
While the IBC is fundamentally a resolution mechanism rather than a recovery court, the imminent prospect of losing corporate management compels debtors to settle valid commercial dues expeditiously.