Unpaid by an Indian Company? Using the IBC Insolvency Route

Your company supplied goods, software or services to an Indian company. The invoices were accepted, part-payments stopped, and months of reminders have produced only promises. You are outside India, the amount is significant, and a civil suit in an Indian court sounds slow and uncertain.

For a clear, undisputed debt of ₹1 crore or more, Indian insolvency law gives creditors — including foreign creditors — a powerful option: asking the National Company Law Tribunal (NCLT) to put the defaulting company into insolvency. Handled correctly, the prospect of losing control of the company is often what brings the debtor to the table.

When the IBC route fits

The Insolvency and Bankruptcy Code, 2016 route works best when:

• The debtor is an Indian company or LLP (not an individual or a partnership firm).
• The unpaid amount is at least ₹1 crore and is due — invoices, a settlement that was not honoured, or an unpaid award.
• The debt is not genuinely disputed. Emails accepting the goods, acknowledging the balance or proposing a payment plan are strong evidence. Complaints about quality raised before your demand are not.
• You are within limitation — generally three years from the default.

If the company disputes the debt in good faith, arbitration or a suit is the better route, and an arbitral award can later support enforcement. See cross-border disputes and foreign award enforcement.

How it works, step by step

1. Demand notice under Section 8. The creditor serves a demand notice (Form 3 or 4) on the company, setting out the unpaid operational debt. A lawyer may send it on a foreign creditor's behalf.
2. Ten days for the company to respond. The company must pay or point to a dispute that existed before the notice.
3. Application under Section 9. If it does neither, the creditor applies to the NCLT bench where the company has its registered office, with the invoices, the notice, proof of delivery and an affidavit that no dispute notice was received.
4. Admission. If the NCLT is satisfied that a default of ₹1 crore or more exists and there is no pre-existing dispute, it admits the application, declares a moratorium and appoints an interim resolution professional to run the company.

Why companies often settle

Before admission, the company's promoters still control it. Admission means a moratorium, a professional taking over management and a public insolvency process. That is why many debtors pay or propose a settlement after the demand notice or while the application is pending — and why the notice and application must be prepared carefully so that the company cannot easily manufacture a "pre-existing dispute".

What the IBC is not

The Supreme Court has repeatedly said that the Code is a resolution process, not a debt collection tool. Once a company is admitted, operational creditors are paid only through an approved resolution plan, often at a discount, and filing an application with a malicious or fraudulent purpose is punishable under Section 65. The route should be used where the debt is real and the company is not paying — not as a threat against a genuine commercial dispute.

Cost and time

A demand notice can be prepared and served within days. NCLT admission can take weeks to many months depending on the bench and on objections. A resolution process, once admitted, runs for months more. The earliest and cheapest leverage is usually a well-drafted demand notice.

How to start

Collect the paper trail — contract or purchase orders, invoices, delivery and acceptance records, statements of account and every email in which the company acknowledged the debt.

Check the numbers and dates — the principal in default, the default date, and whether the ₹1 crore threshold and three-year limit are met.

Get a preliminary case assessment of whether to use the IBC route, arbitration or a suit, and how to frame the demand notice. Enquiries from outside India can be handled entirely online.

Smaller or disputed claims usually fit other routes: see recovering money owed in India and, for micro and small suppliers, MSME payment recovery.