Section 7 of the IBC: Initiation of Corporate Insolvency Resolution Process by Financial Creditors
Section 7 enables an eligible financial creditor to apply to the National Company Law Tribunal (NCLT) for initiation of the corporate insolvency resolution process (CIRP) against a corporate debtor following a qualifying default. The provision also sets out filing evidence, admission criteria, and communication of the NCLT order.
What is Section 7 and who may apply?
Under Section 5(7), a financial creditor is a person to whom a financial debt is owed, including a person to whom that debt has been legally assigned or transferred. Section 5(8) defines financial debt principally as debt disbursed against consideration for the time value of money, subject to the statutory inclusions. Section 3(12) defines default as non-payment of debt when the whole or part or an instalment has become due and payable and is not paid.
A financial creditor may apply alone, jointly with other financial creditors, or through a person notified by the Central Government acting on its behalf. A default relating to another financial creditor of the same corporate debtor can also be relevant under the explanation to Section 7(1).
Under Section 4 and the applicable Central Government notification, the general minimum default for initiating CIRP is Rs. 1 crore. This is the threshold for the default, not necessarily the applicant creditor's individual claim; eligibility and aggregation depend on the facts and governing law.
Special joint-filing thresholds
For specified creditors in a class under Section 21(6A)(a) or (b), the application must be jointly filed by at least 100 creditors in the same class or 10% of the total creditors in that class, whichever is less. For real-estate allottees, the corresponding test is 100 allottees under the same real-estate project or 10% of all allottees under that project, whichever is less. The transitional proviso introduced in 2020 addressed certain applications pending at that time.
Section 7: Explanation of each subsection
Section 7(1): Right to initiate CIRP
Allows a qualifying financial creditor to apply to the Adjudicating Authority when a default has occurred, subject to the special joint-application thresholds and other statutory requirements described above.
Section 7(2): Form, manner and fee
The application must comply with the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Rule 4 prescribes Form 1 for a financial creditor; the prescribed application fee is Rs. 25,000, subject to any subsequent change in the applicable rules.
Section 7(3): Documents and proposed interim resolution professional
The financial creditor must furnish (a) the record of default from an information utility or other specified evidence, (b) the name of the proposed interim resolution professional, and (c) other information specified by the Insolvency and Bankruptcy Board of India (IBBI).
Section 7(4): Ascertainment of default
The NCLT must ascertain whether default exists, using information utility records or other evidence supplied under Section 7(3), within the statutory period of 14 days from receipt of the application.
Section 7(5): Admission or rejection after the 2026 amendment
As amended with effect from 26 May 2026, the NCLT shall, within 14 days of receiving the application, admit it where default has occurred, the application is complete and no disciplinary proceeding is pending against the proposed resolution professional. It shall reject the application where default has not occurred, the application is incomplete or such a disciplinary proceeding is pending.
Before rejecting for a curable defect, the NCLT must provide notice allowing 7 days from receipt of the notice to rectify the defect. If the NCLT does not decide within 14 days, it must record reasons for delay in writing. Explanation I clarifies that no other ground may be used to reject an application satisfying the admission conditions. Explanation II provides that an information utility record of default concerning financial debt owed to a financial institution, furnished by that institution, is sufficient to ascertain default for this section.
Section 7(6): Commencement date
The CIRP begins on the date of admission of the Section 7 application, not merely on the date the creditor files it.
Section 7(7): Communication of the order
An admission order is communicated to the financial creditor and corporate debtor. A rejection order is communicated to the financial creditor. The statutory period for communication is 7 days after admission or rejection, as applicable.
How to file a Section 7 application before the NCLT
- Verify the financial debt and default: review agreements, disbursements, repayment schedules and the applicable minimum default.
- Check applicant eligibility: establish financial-creditor status and any class or allottee joint-filing requirements.
- Prepare Form 1: identify the corporate debtor, the debt, default date, amounts and supporting particulars.
- Attach evidence: include information utility records or other permissible evidence, and details and consent of the proposed interim resolution professional as required.
- Pay the prescribed fee and serve the application: follow Rule 4 and the current NCLT filing and service requirements.
- Respond to scrutiny: rectify notified defects within the statutory opportunity and monitor the NCLT order.
After admission, other provisions of the Code govern the moratorium, public announcement, appointment of the interim resolution professional and further CIRP steps. See The Insolvency and Bankruptcy Code, 2016 for the broader statutory framework.
Section 7 timelines at a glance
| Stage | Statutory position |
|---|---|
| Ascertain default | Within 14 days of receiving the application under Section 7(4) |
| Admission or rejection | Within 14 days under amended Section 7(5); reasons for delay must be recorded if exceeded |
| Opportunity to cure defect | 7 days from receipt of the NCLT notice |
| Start of CIRP | Date of admission |
| Communicate order | Within 7 days of admission or rejection |
Statutory time limits should be distinguished from actual tribunal processing times and any applicable judicial interpretation.
Official statutory text and regulatory resources
- India Code: Insolvency and Bankruptcy Code, 2016 (official consolidated PDF)
- IBBI: Application to Adjudicating Authority Rules and amendments
- IBBI: Latest legal framework, regulations and notifications
- IBBI: Forms and downloads
This article is a general explanation of the law as reviewed on 21 October 2026 and is not a substitute for the latest notified statutory text, applicable tribunal rules or legal advice for a specific case.