Receiving an IBC demand notice can be a serious event for a company. It may indicate an unpaid operational debt and can precede an application to the National Company Law Tribunal for commencement of the Corporate Insolvency Resolution Process. However, receiving a notice does not itself mean CIRP has started. Section 8 of the Insolvency and Bankruptcy Code, 2016 gives a corporate debtor an important opportunity to make payment or bring an existing dispute to the operational creditor’s notice before a Section 9 application is filed. The response period is short. A company should therefore examine the notice, underlying transaction, accounts and dispute records immediately.
What is an IBC demand notice?
A Section 8 demand notice is issued by an operational creditor to a corporate debtor in relation to unpaid operational debt. Section 8 requires the operational creditor to deliver the demand notice after a default has occurred. The notice is a statutory step before the creditor can ordinarily proceed under Section 9 to seek initiation of CIRP. The prescribed framework permits a demand notice in Form 3 or a copy of an invoice with a notice in Form 4. Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 also sets out permitted modes of delivery and the information expected in the demand notice. The notice should therefore not be treated like an ordinary payment reminder. Its receipt can trigger a statutory ten day period under Section 8.
What should you do immediately after receiving the notice?
The first step is to record the exact date and manner of receipt. The company should preserve the envelope, email, attachments, delivery record and the complete notice. The date of receipt can become important when calculating the response period. The notice should then be circulated internally to the directors, finance team and relevant commercial personnel. The contract, invoices, purchase orders, delivery records, payment history and correspondence should be collected without delay. The company should also check whether the person who received the notice was authorised to receive communications on behalf of the corporate debtor. A rushed admission or informal reply can create difficulties later. The response should be based on the underlying records rather than assumptions.
What is the ten day period under Section 8?
Section 8 gives the corporate debtor ten days from receipt of the demand notice to respond in the manner contemplated by the Code. The company can make payment of the operational debt. Alternatively, it can bring to the notice of the operational creditor the existence of a dispute or the record of a pending suit or arbitration proceedings relating to the dispute. Section 8 also recognises evidence of payment through the records specified in the provision. This ten day period should be treated as a critical response window. The company should not assume it can wait for an NCLT application before responding. Section 9 permits the operational creditor to proceed where payment is not received and the requirements of Section 8 have otherwise been satisfied.
Check whether the claimed debt is actually an operational debt
Not every unpaid amount automatically qualifies as operational debt under the IBC. The Code defines operational debt in Section 5(21). It broadly concerns claims in respect of provision of goods or services, including employment related dues and certain statutory dues. The classification must be examined against the underlying transaction. This matters because Section 8 and Section 9 operate within the statutory framework for operational creditors. The company should therefore identify precisely what the creditor is claiming. It should verify the contract, invoices, purchase orders, delivery records, work completion documents and account statements before deciding how to respond.
Verify the amount claimed and the date of default
A Section 8 notice should contain particulars of the operational debt and the default. Rule 5 and Form 3 require information including the total amount of debt, the amount claimed to be in default, the date of default, details of the transaction and the provision of law or contract under which the debt became due. Supporting documents are also contemplated by the prescribed form. The company should reconcile these details against its own books. Check whether payments have already been made. Check credit notes, deductions, withholding tax, set offs, disputed invoices and adjustments. Interest should also be examined against the contract and applicable law. A mismatch does not automatically defeat a Section 8 notice. However, material discrepancies may form part of the company’s response and should be properly documented.
Identify whether a genuine pre existing dispute exists
One of the most important issues is whether a dispute already existed before the demand notice was received. The Supreme Court in Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd explained the role of a dispute under Section 8 and Section 9. A dispute must be genuine and must exist before the demand notice or the Section 9 application. A merely invented or unsupported dispute raised for the first time after receiving the notice will not necessarily prevent insolvency proceedings. The Code’s definition of dispute includes matters concerning the existence of the debt, the amount of the debt, the quality of goods or services and breach of a representation or warranty. It also includes a suit or arbitration proceeding relating to such matters. This is why the company’s records matter. If the company had already complained about defective goods, rejected invoices, disputed measurements, challenged service quality or invoked arbitration before the Section 8 notice arrived, those records can be significant.
What counts as a pre existing dispute?
A pre existing dispute can arise in several commercial situations. For example, a buyer may have informed the supplier before the demand notice that goods were defective. A customer may have disputed the quality of services before an invoice became the subject of an insolvency claim. A contractor may have raised a written dispute concerning measurements or incomplete work. The existence of a dispute should be supported by contemporaneous records. Emails, contractual notices, meeting minutes, inspection reports, debit notes, correspondence, arbitration notices and earlier legal proceedings may help establish when the disagreement arose. The key question is not simply whether the company disagrees with the invoice today. The issue is whether a real dispute existed before the statutory demand process reached the company.
Can a company raise a dispute for the first time after receiving the notice?
A company should not manufacture a dispute merely to resist an IBC proceeding. The Supreme Court’s decision in Mobilox makes the distinction important. The adjudicating authority is concerned with whether a plausible dispute exists and requires investigation, rather than conducting a full trial on the merits at the Section 9 admission stage. At the same time, a defence which is spurious, hypothetical or illusory will not necessarily prevent admission. A response should therefore state the actual dispute clearly and refer to supporting records. Silence can also create practical difficulties. Even where the company believes the creditor’s claim is incorrect, failing to communicate the existing dispute within the statutory period can weaken the company’s position.
What if the company has already paid the debt?
If the debt has already been paid, the company should provide clear evidence. Section 8(2) specifically addresses proof of payment through an attested record of electronic transfer or an attested record showing encashment of a cheque, among the statutory methods recognised by the Code. The response should identify the payment, date, amount, bank reference and corresponding invoice or liability. The accounting records should be reconciled before the response is sent. A statement such as “the amount has been paid” without supporting evidence may not adequately address the creditor’s claim.
Check whether the demand notice was properly served
Service is an important procedural issue. Rule 5 permits service at the corporate debtor’s registered office by hand, registered post or speed post with acknowledgement due. It also permits electronic mail service to a whole time director, designated partner or key managerial personnel, where applicable. The Supreme Court considered service of a Section 8 notice in Visa Coke Ltd v M/s Mesco Kalinga Steel Ltd, decided on 29 April 2025. The judgment addressed service upon the corporate debtor and the circumstances in which service through a key managerial person at the registered office can satisfy the statutory requirement. A company should therefore examine how the notice was delivered, where it was delivered and to whom it was addressed. A technical objection should not be raised without considering the actual facts and the applicable case law.
Does an improperly served notice automatically end the matter?
Not necessarily. The purpose of Section 8 service is to give the corporate debtor notice of the operational debt and an opportunity to respond before a Section 9 application is filed. Courts have examined whether service requirements were satisfied based on the facts of individual cases. Where there is a genuine service defect, it should be identified promptly. The company should still consider responding to the substance of the claim rather than relying entirely on a procedural objection. An operational creditor may attempt fresh service where a previous notice was defective.
Check whether the amount meets the IBC threshold
The minimum default threshold is another important consideration. Section 4 of the IBC currently specifies ₹1 crore as the minimum amount of default for Part II proceedings concerning corporate debtors. The Central Government originally notified ₹1 crore as the applicable threshold in March 2020. Recent NCLAT decisions have continued to recognise ₹1 crore as the threshold for maintaining a Section 9 application. The relevant date and composition of the debt still require careful examination. Interest cannot simply be added to reach the threshold where there is no legal or contractual basis for claiming it. The company should therefore calculate the actual amount in default rather than relying solely on the figure stated in the demand notice.
What if the creditor’s claim is below ₹1 crore?
A Section 8 notice and a Section 9 application are different stages. A creditor may issue a commercial demand for an amount below the current IBC threshold. However, the statutory minimum under Section 4 becomes relevant when assessing whether a CIRP application under Part II can be maintained. A company should therefore not ignore a smaller demand merely because it appears below the IBC threshold. The underlying debt may still be recoverable through other legal mechanisms, and the creditor may have other contractual or statutory remedies.
Check whether there is an arbitration clause
Many commercial contracts contain arbitration agreements. If the dispute concerns quality, payment, performance or another contractual issue and arbitration has already been invoked, the existing arbitration record may become highly relevant to the Section 8 response. The IBC expressly includes a pending suit or arbitration proceeding relating to the existence or amount of debt, quality of goods or services, or breach of representation or warranty within the concept of dispute. The Supreme Court’s Mobilox decision also remains central to the assessment of pre existing disputes in Section 9 proceedings. Where the contractual dispute resolution framework is significant, the company may need advice from lawyers for arbitration alongside insolvency counsel.
Can an operational creditor file a Section 9 application immediately?
No. Section 8 creates a statutory step before Section 9 proceedings. The operational creditor must first deliver the demand notice. If payment is not received or the relevant notice of dispute is not received within the statutory framework, the creditor may proceed with a Section 9 application, subject to the other requirements of the Code. Rule 6 requires an operational creditor to file the Section 9 application in Form 5 with the prescribed documents and records. This does not mean every Section 9 application will be admitted. The NCLT must examine statutory requirements, including the existence of debt, default, threshold, completeness of the application and the existence of a genuine pre existing dispute where one is raised.
What happens if the company does nothing?
Ignoring the notice can allow the creditor to move to the next statutory stage. Where the operational creditor does not receive payment or a qualifying notice of dispute, Section 9 permits an application for initiation of CIRP. The NCLT then considers the application under the statutory framework. The company should therefore not assume the matter will disappear because it has not responded. Even where the claim is disputed, the safer approach is to preserve the documentary record and communicate the actual position within the statutory period.
What documents should be reviewed before replying?
The company should examine the complete contractual file. This normally includes the principal agreement, amendments, purchase orders, invoices, credit notes, delivery records, work completion documents, payment records, account statements and correspondence. Earlier complaints are particularly important. If the company had already disputed quality, quantity, delivery, pricing or performance, those communications should be identified and preserved. Where arbitration or litigation has already started, the relevant pleadings, notices and filing records should also be reviewed. The purpose is to build a factual chronology before sending the response.
Can the company settle after receiving an IBC demand notice?
Yes, the parties can explore settlement before a Section 9 application is admitted. The Section 8 stage itself gives the parties an opportunity to resolve the dispute or payment issue before insolvency proceedings progress further. NCLT decisions have recognised the role of the statutory notice process in giving the corporate debtor an opportunity to respond and potentially avoid further proceedings. If settlement is reached, the terms should be documented clearly. The company should also verify whether any pending proceedings need to be withdrawn or disposed of and whether the settlement fully resolves the underlying contractual or payment dispute.
How should the reply to an IBC demand notice be prepared?
The reply should address the actual claim rather than merely denying liability. If the debt has been paid, the response should provide payment evidence. If there is a pre existing dispute, it should identify the dispute, explain when it arose and refer to the supporting documents. If the amount is incorrectly calculated, the company should provide its own reconciliation. If the notice contains factual or procedural errors, those issues can also be identified. However, the response should remain focused and supported by records. This is an area where a bankruptcy and insolvency lawyer may examine the notice, contractual documents, payment records and dispute history before the ten day period expires.
What if the creditor files a Section 9 application?
If a Section 9 application is filed, the company should examine the application and its supporting documents carefully. The company may contest the application on grounds supported by the Code and the evidence. Depending on the circumstances, issues can include absence of operational debt, absence of default, failure to satisfy the threshold, defective service, a genuine pre existing dispute or other statutory deficiencies. The company should also check whether the demand notice relied upon in the Section 9 application corresponds with the debt actually claimed in the petition. The NCLT does not decide every contractual dispute through a full civil trial at the admission stage. Its inquiry under Section 9 is focused on the statutory requirements for commencement of CIRP.
What does recent case law say about Section 8 notices?
Recent decisions reinforce the importance of both statutory compliance and the substance of the dispute. In Visa Coke, the Supreme Court considered the validity of service of a Section 8 demand notice and emphasised the statutory purpose of bringing the demand to the corporate debtor. In Mobilox, the Supreme Court established the leading framework for assessing pre existing disputes in Section 9 proceedings. In Macquarie Bank Ltd v Shilpi Cable Technologies Ltd, the Supreme Court also considered the Section 8 demand notice requirement and the procedural framework governing operational creditor applications. These decisions show why the response should be based on the actual transaction and contemporaneous records rather than a generic denial.
Common mistakes after receiving an IBC demand notice
One common mistake is waiting until the ten day period is nearly over before reviewing the claim. Another is sending a bare denial without explaining the existing dispute. A further mistake is raising a dispute which has no supporting record. A dispute created only after receipt of the demand notice may not satisfy the principles developed by the Supreme Court in Mobilox. Companies also sometimes overlook the threshold requirement or fail to reconcile interest and other additions to the principal debt. Another problem is relying entirely on an alleged defect in service while ignoring the substantive claim. The response should instead address the notice as a serious statutory communication and deal with the underlying debt, dispute and evidence together.
Conclusion
An IBC demand notice should never be ignored. It is an important statutory step in the process leading from an operational default to a possible Section 9 application for CIRP. The immediate priorities are to record the date of receipt, verify the debt, examine the contractual relationship, check payments, identify any genuine pre existing dispute and preserve the supporting documents. The company should also verify the applicable IBC threshold and examine whether the notice has been served in accordance with the prescribed framework. Most importantly, the response should reflect the actual facts. A genuine dispute supported by contemporaneous records is materially different from a defence created after the notice arrives. The ten day statutory period can pass quickly. Careful review at this stage can therefore have a significant bearing on how the dispute proceeds.
