Initiation of corporate insolvency resolution process by financial creditor
Section 7 of the Insolvency and Bankruptcy Code, 2016 deals with initiation of corporate insolvency resolution process by financial creditor. A financial creditor either by itself or jointly with [other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government,] may file an application for initiating corporate insolvency resolution process against a corporate debtor before t The Act was enacted on 28 May 2016.
(1) A financial creditor either by itself or jointly with 1[other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government,] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.
2[Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent. of the total number of such creditors in the same class, whichever is less:
Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less:
Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission.]
Explanation.--For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.
(2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed.
(3) The financial creditor shall, along with the application furnish--
(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified;
(b) the name of the resolution professional proposed to act as an interim resolution professional; and
(c) any other information as may be specified by the Board.
(4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3).
3[Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time, it shall record its reasons in writing for the same.]
(5) Where the Adjudicating Authority is satisfied that--
(a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).
(7) The Adjudicating Authority shall communicate--
(a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor;
(b) the order under clause (b) of sub-section (5) to the financial creditor,
within seven days of admission or rejection of such application, as the case may be.
Section 7, The Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
This section refers to
Referred to by 13
- Income-tax Act s. 206 Special provision for minimum alternate tax and alternate minimum tax
- Income-tax Act s. 265 Return by whom to be verified
- s. 5 Definitions
- s. 10A Suspension of initiation of corporate insolvency resolution process
- s. 11A Disposal of applications under section 54C and under section 7 or section 9 or section 10
- s. 12A Withdrawal of application admitted under section 7, 9 or 10
- s. 13 Declaration of moratorium and public announcement
- s. 15 Public announcement of corporate insolvency resolution process
- s. 16 Appointment and tenure of interim resolution professional
- s. 54-O Initiation of corporate insolvency resolution process
- s. 75 Punishment for false information furnished in application
- s. 239 Power to make rules
and 1 more
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Vidarbha Industries Power Limited vs Axis Bank Limited
Court's Decision & Legal Precedent
Section 7(5)(a) of the Insolvency and Bankruptcy Code 2016 confers discretionary power on the Adjudicating Authority (NCLT) to admit or reject an application for Corporate Insolvency Resolution Process filed by a financial creditor, even when default is established and the application is complete. The NCLT must apply its mind to relevant factors including the feasibility of initiating CIRP against the corporate debtor, the impact of pending regulatory appeals and awards, and the overall financial health and viability of the corporate debtor under its existing management. The existence of a financial debt and default in payment thereof only gives the financial creditor the right to apply for initiation of CIRP; it does not mandate automatic admission. The NCLT may exercise its discretion to keep the admission of the application in abeyance or reject it if the corporate debtor demonstrates that a substantial award or decree in its favor is pending, which if realized would exceed the debt claimed by the financial creditor.
On this section: Initiation of CIRP by financial creditor - core provision at issue regarding discretionary versus mandatory nature of admission
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Pioneer Urban Land and Infrastructure Ltd. v. Union of India
Court's Decision & Legal Precedent
Allottees of real-estate projects are financial creditors under IBC s.5(8)(f) explanation; they may trigger CIRP under s.7. RERA and IBC operate in distinct spheres; RERA does not oust IBC. Not a Companies Act oppression petition.
On this section: Allottees (threshold satisfied) may file s.7 CIRP against the builder.
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Innoventive Industries Ltd. v. ICICI Bank
Court's Decision & Legal Precedent
Once a financial creditor shows a debt and default under IBC s.7, the Adjudicating Authority must admit the application if complete; there is no discretion to go into the merits of a pending state-relief statute. IBC s.238 overrides inconsistent Maharashtra Relief Undertaking law. Use Judgement order-7.pdf, not same-date order-6.pdf ROP.
On this section: On proof of a financial debt and default, the s.7 application is to be admitted if complete — no merits inquiry into a state relief statute.
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Swiss Ribbons Pvt. Ltd. v. Union of India
Court's Decision & Legal Precedent
The Insolvency and Bankruptcy Code, 2016 withstands Article 14 challenge. Classification of financial versus operational creditors, the committee-of-creditors voting structure, and section 29A ineligibility are not manifestly arbitrary. Economic legislation receives judicial hands-off within constitutional bounds.
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Uppal Chadha Hi Tech Developers Pvt. LTD vs Union of India
Court's Decision & Legal Precedent
Real estate allottees are 'financial creditors' within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016, as they advance money against consideration for the time value of money to finance real estate construction projects. The Explanation to Section 5(8)(f) inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, is constitutionally valid as it is clarificatory of the original provision's language and does not infringe Articles 14, 19(1)(g), or 300-A of the Constitution. Allottees are entitled to trigger insolvency proceedings under Section 7 of the Code against real estate developers, and their inclusion as financial creditors does not violate principles of reasonable classification or legislative objects. The Code and RERA operate harmoniously in different spheres providing concurrent remedies to home buyers.
On this section: Financial creditors can trigger insolvency proceedings on the basis of default. The Court confirms home buyers, as financial creditors, have this right and clarifies that NCLT must examine whether default actually exists based on the agreement terms and applicable law.
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Sds Infracon PVT LTD vs Union of India
Court's Decision & Legal Precedent
Amendments to the Insolvency and Bankruptcy Code 2016 treating real estate project allottees as financial creditors are constitutionally valid under Articles 14 19 1 g and 300 A of the Constitution. Real estate allottees genuinely finance projects by advancing payments for future delivery of apartments and constitute financial creditors under Section 5 8 f as amounts raised have commercial effect of borrowing considering time value of money. The explanation to Section 5 8 f is clarificatory in nature and allottees would fall within this provision even without it. Allottees have right to trigger insolvency proceedings under Section 7 by filing applications before NCLT. Code and RERA provide concurrent and complementary remedies not conflicting jurisdictions. There is no violation of Article 14 as legitimate intelligible differentia exists between allottees and other operational creditors. There is no violation of Article 19 1 g as restriction on right to business is reasonable being in public interest of protecting allottee investments.
On this section: Financial creditor can make application for insolvency resolution process on default of financial debt
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Raman Prakash Mangla vs Anuj Jain
Court's Decision & Legal Precedent
The Adjudicating Authority has limited jurisdiction in approving a resolution plan, circumscribed by Sections 30(2) and 31 of the Insolvency and Bankruptcy Code, 2016. The Authority cannot interfere with the commercial aspects of the decision taken by the Committee of Creditors. If the Adjudicating Authority finds shortcomings in the resolution plan vis-à-vis the specified parameters of keeping the corporate debtor as a going concern, maximizing the value of its assets, and taking care of interests of all stakeholders, it must send the plan back to the Committee of Creditors for reconsideration, not modify the plan itself. Payment to dissenting financial creditors must be in monetary terms, not in kind or through transfer of equity or land. Once homebuyers as a class vote in favor of a resolution plan through their authorized representative, individual homebuyers cannot challenge the plan as dissenting creditors or aggrieved persons. The INR 750 crores deposited by the holding company pursuant to Supreme Court orders in Chitra Sharma is the property of the holding company, not the corporate debtor, and cannot be appropriated by the corporate debtor or the resolution applicant.
On this section: Application for initiation of corporate insolvency resolution process by financial creditor
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Action Ispat and Power Pvt. LTD vs Shyam Metalics and Energy Limited
Court's Decision & Legal Precedent
Even post-admission of a winding up petition and after appointment of a Company Liquidator to take over assets of a company sought to be wound up, discretion is vested in the Company Court to transfer such petition to the NCLT. Such discretion should be exercised based on whether irreversible steps have been taken in the winding up proceedings. If no actual sales of immovable or movable properties have taken place and the proceedings have not reached a stage making it impossible to set the clock back, the Company Court should transfer the proceedings to NCLT to be dealt with as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code 2016, in accordance with the legislative intent to prioritize corporate revival over liquidation.
On this section: Application by financial creditor for initiation of corporate insolvency resolution process; State Bank of India filed application under this section
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Landmark Apartments Pvt. LTD vs Union of India
Court's Decision & Legal Precedent
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, which deems allottees of real estate projects as financial creditors under Section 5(8)(f) and provides for their representation on Committee of Creditors through authorized representatives under Sections 21(6A) and 25A, is constitutionally valid under Articles 14, 19(1)(g), and 300-A of the Constitution of India. The amendment does not violate Article 14 as allottees, who finance their own apartment projects and provide consideration for time value of money through installment-based advance payments, constitute a rationally distinct class of financial creditors similar to debenture holders and fixed deposit holders, with intelligible differentia bearing nexus to the Code's object of maximizing creditor recovery and protecting stakeholders in corporate rehabilitation. The amendment does not infringe Article 19(1)(g) as it is a reasonable restriction in public interest for protecting millions of home buyers with substantial invested amounts. The amendment does not deprive developers of property without constitutional authority as it operates through valid legal process respecting due process and defenses. The explanation to Section 5(8)(f) merely clarifies that allottees already fell within the definition's ambit and is not substantively enlarging the scope. The classification does not offend the UNCITRAL Legislative Guide as allottees are recognized as financial creditors based on genuine financing characteristics. The Code and RERA can harmoniously coexist as parallel remedies serving different purposes, with Code taking primacy due to its later non-obstante clause. Parliament's legislative judgment in treating allottees as financial creditors is entitled to judicial deference as an economic experiment within free play in joints doctrine.
On this section: Trigger for insolvency resolution process by financial creditor; Section 7(4) provides 14-day timeline for NCLT to ascertain existence of default; Section 7(5) requires NCLT satisfaction that default has occurred
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Spaze Towers Private Limited vs Union of India
Court's Decision & Legal Precedent
Amendments to the Insolvency and Bankruptcy Code 2016 classifying allottees of real estate projects as financial creditors and allowing them to trigger insolvency proceedings against developers are constitutionally valid. These amendments do not violate Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution. Allottees constitute a distinct class of financial creditors with intelligible differentia from operational creditors due to their role in financing real estate projects through installment payments, their vital interest in the company's well-being, and their similarity to other individual financial creditors like deposit and debenture holders. The amendments have rational nexus with the Code's objects of maximizing asset value and rehabilitating corporate debtors. Section 5(8)(f) as originally enacted already subsumed allottees within the definition of financial debt as a residuary provision covering transactions having the commercial effect of borrowing. The explanation added by the Amendment Act is merely clarificatory. The Code and RERA provide concurrent remedies and must be read harmoniously with the Code prevailing in case of conflict. Representation of allottees through authorized representatives under Section 21(6A) and 25A is constitutionally valid. The legislature has free play in the joints when enacting economic legislation and courts must accord deference to such experimentation.
On this section: Allottees as financial creditors can now trigger insolvency proceedings when default occurs in payment obligations
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Kalyani Transco vs M/s Bhushan Power and Steel Limited
Court's Decision & Legal Precedent
Once a Resolution Plan is duly approved by the Adjudicating Authority under Section 31(2) of the IBC, the claims as provided in the Resolution Plan stand frozen and binding on all stakeholders. Claims not part of the approved Resolution Plan or the RfRP stand extinguished, and no person can initiate proceedings for such claims. The Committee of Creditors does not become functus officio after plan approval but continues to exist until full implementation or finality of appeals, with authority to monitor and supervise implementation through a monitoring committee. The commercial wisdom of the CoC in approving a Resolution Plan is paramount and non-justiciable, and courts cannot interfere with the CoC's business decisions unless the plan violates mandatory statutory provisions or is based on extraneous considerations or is ex facie arbitrary and illegal. Delay in implementation of an approved Resolution Plan does not justify setting aside the plan unless the delay is unjustified and attributable to the SRA. Compulsorily convertible debentures are treated as equity instruments as they involve mandatory conversion without repayment obligation. EBITDA generated during CIRP cannot be claimed by creditors unless specifically provided for in the RfRP or Resolution Plan. Erstwhile promoters and directors, as personal guarantors vitally interested in the Resolution Plan's outcome, have locus standi to appeal under Sections 61 and 62 of the IBC, but their appeals must be decided on merits considering their conduct during CIRP.
On this section: Comprehensive application of IBC provisions governing CIRP, CoC powers, Resolution Plan approval, appeal jurisdiction, and immunity from prosecution. Section 32A was particularly analyzed regarding immunity of corporate debtor from prosecution for prior offences after resolution plan approval.
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Essar Bulk Terminal (salaya) Limited vs Reserve Bank of India
Court's Decision & Legal Precedent
When a statute confers a specific power upon an authority and prescribes the method of its exercise, the authority can only exercise that power in the manner prescribed by the statute. If the statute specifies that directions may be issued regarding 'a default' (singular) only after Central Government authorization for specific cases, the authority cannot issue general directives applicable to all defaults above a particular amount without individual case-by-case consideration. Accordingly, the RBI Circular of February 12, 2018, which applies a blanket mandatory restructuring timeline followed by mandatory insolvency filing to all accounts above Rs 2000 crore, exceeds the scope of authorization granted under Section 35AA of the Banking Regulation Act, 1949, and is therefore ultra vires.
On this section: Provides for application by financial creditor to initiate corporate insolvency resolution process; RBI Circular was attempting to mandatorily trigger this section for large accounts
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Action Ispat and Power (p) LTD vs Reserve Bank of India
Court's Decision & Legal Precedent
The RBI circular dated 12.02.2018 mandating reference of all accounts with aggregate exposure of INR 20 billion and above that default for 180 days to insolvency proceedings is ultra vires Section 35AA of the Banking Regulation Act, 1949, as it issues general directions to a class of borrowers rather than specific directions regarding individual defaults as required by Section 35AA. Section 35AA requires prior Central Government authorization and applies only to specific defaults, not to debtors generally. The power to issue insolvency resolution directions under the Insolvency Code can only be exercised by the RBI under Section 35AA with such authorization - Sections 21 and 35A cannot serve as alternative sources without satisfying Section 35AA's conditions. When a statute prescribes a specific method and conditions for exercising power (requiring Central Government authorization and being specific to individual defaults), the statute by necessary implication prohibits exercise in any other manner (by issuing general circulars applicable to categories of defaults).
On this section: Filing of insolvency application by financial creditor; discussed as the endpoint of 180-day resolution period under the circular
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… The appeals arise under the Competition Act, 2002 ("Competition Act"). I. BACKGROUND 2. On 21.10.2021, the National Company Law Tribunal, Kolkata Bench ("NCLT") admitted CP (IB) 369/2020, an application filed by DBS Bank under section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") against Hindustan National Glass and Industries Limited ("HNGIL"). HNGIL is the corporate debtor engaged in manufacturing and supplying glass containers. HNGIL admittedly has a substantial market presence in the relevant market in India. 3. AGI Greenpac …
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… The appeals arise under the Competition Act, 2002 ("Competition Act"). I. BACKGROUND 2. On 21.10.2021, the National Company Law Tribunal, Kolkata Bench ("NCLT") admitted CP (IB) 369/2020, an application filed by DBS Bank under section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") against Hindustan National Glass and Industries Limited ("HNGIL"). HNGIL is the corporate debtor engaged in manufacturing and supplying glass containers. HNGIL admittedly has a substantial market presence in the relevant market in India. 3. AGI Greenpac …
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… The appeals arise under the Competition Act, 2002 ("Competition Act"). I. BACKGROUND 2. On 21.10.2021, the National Company Law Tribunal, Kolkata Bench ("NCLT") admitted CP (IB) 369/2020, an application filed by DBS Bank under section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") against Hindustan National Glass and Industries Limited ("HNGIL"). HNGIL is the corporate debtor engaged in manufacturing and supplying glass containers. HNGIL admittedly has a substantial market presence in the relevant market in India. 3. AGI Greenpac …
Made under this section, and citing it
5 instruments state that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.
- Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022Regulation 2022
- The Insolvency and Bankruptcy (Application to Adjudicating Authority) (Amendment) Rules, 2020Rule 2020
- The Insolvency and Bankruptcy (Application to Adjudicating Authority) Amendment Rules, 2019Rule 2019
- The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (upto 19-03-2019)Rule 2019
- Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016Rule 2016
Another 9 instruments name this provision in its title or its text without being made under it.
- Notification under section 7(1) of Insolvency and Bankruptcy Code, 2016 (Dated 27.02.2019)Notification 2019
- Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023Regulation 2023
- nsolvency and Bankruptcy Board of India (Information Utilities) (Amendment) Regulations, 2022Regulation 2022
- IBBI (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2020Regulation 2020
- The Insolvency and Bankruptcy Code (Amendment) Act, 2020Statute 2020
- The Insolvency and Bankruptcy Code (Second Amendment) Act, 2020Statute 2020
- Insolvency and Bankruptcy (Insolvency and Bankruptcy Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 dated 15.11.2019Rule 2019
- The Insolvency and Bankruptcy Code (Amendment) Act, 2019Statute 2019
- The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018Statute 2018
Questions about Section 7
What have the courts held on Section 7 of the Insolvency and Bankruptcy Code?
Vidarbha Industries Power Limited vs Axis Bank Limited (12 Jul 2022) is the leading judgment on this section among those set out below: Initiation of CIRP by financial creditor - core provision at issue regarding discretionary versus mandatory nature of admission. Another 12 judgments on this section are set out below, all of them from the Supreme Court. They run from 2017 to 2025.
How do I find court cases under Section 7 of the Insolvency and Bankruptcy Code?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Insolvency and Bankruptcy Code 7, section 7 Insolvency and Bankruptcy Code, section 7 of the Insolvency and Bankruptcy Code. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 13 reported judgments on this section are set out on this page, beginning with Vidarbha Industries Power Limited vs Axis Bank Limited (12 Jul 2022).
What should I read with Section 7 of the Insolvency and Bankruptcy Code, and has it changed?
Its own text turns on section 21 (Committee of creditors), so none of them can safely be read on its own. 13 other provisions in this corpus refer back to it. The rules and notifications made under it are where it actually bites, and there are 5: most recently Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022 (2022), then The Insolvency and Bankruptcy (Application to Adjudicating Authority) (Amendment) Rules, 2020 (2020), and 3 more.
When was Section 7 of the Insolvency and Bankruptcy Code enacted?
Section 7 of the Insolvency and Bankruptcy Code, commonly called cirp or corporate insolvency resolution process, and cited as Insolvency and Bankruptcy Code 7, was enacted on 28 May 2016 as Act 31 of 2016. It is in force as at the date shown on this page.
Other sections of this Act
- 240. Power to make regulations2349 words
- 5. Definitions2326 words
- 3. Definitions1381 words
- 29A. Person not eligible to be resolution applicant1152 words
- 239. Power to make rules963 words
- 196. Powers and functions of Board942 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.