Currently set to Index
Currently set to Follow


A corporate debtor under Insolvency and Bankruptcy Code, 2016 (IBC) is the Corporate Person who owes a debt to any person. Corporate person is defined u/s 3(7) of IBC which include

  • Companies defined Companies Act
  • LLP defined under LLP Act
  • Any other person incorporated with limited liability

But does not include financial services provider i.e. banks or NBFCs.


As per section 7 and 9 of IBC, it is not compulsory to give the opportunity of being heard to the corporate debtor, before the admission of IBC application. And as per section 14, once IBC application is admitted, the management of the company goes in the hands of IRP proposed by such applicant. Hence, there become high chances that even a small default may trigger the situation where the company goes out to hands.

Due to the above mechanism, at one hand where creditors are recovering debts from the distressed company, whereas some creditors, are using IBC provision to threaten and harass the corporate debtor. It is a misuse of new law to create a pressure upon the corporate debtor to recover the fraudulent/bogus claims.


A corporate debtor can defend the Insolvency Petition filed against them if the claim raised by the creditor is not genuine or have been raised to harass the corporate debtor. When an application is filed against the corporate debtor, the corporate debtor should verify the accounts and identify whether the claim raised is genuine or not.


Under IBC every creditor, financial or operational, has to follow a certain procedure to establish the claim and initiate the insolvency resolution process. If the procedure is not duly followed then the corporate debtor has a very good defense to get the petition disposed of. Recently, Hon’ble Supreme court in the case of B.K. Educational Services Pvt. Ltd. has upheld the applicability of limitation Act to the IBC application and defaults.


If the petition is filed by the financial creditor the corporate debtor should:-

  1. Check whether the key essentials to file the petition have been fulfilled or not?

Firstly, the debt and default should have occurred before filing of petition and if none of the element is present, the petition filed by the financial creditor shall get rejected.

  1. Identify, whether the claim is genuine or not?

The corporate debtor should check the accounts thoroughly and verify the claim from the accounts. If any discrepancy arises, the corporate debtor should file the reply within the prescribed time period.


If the petition is filed by the operational creditor then the corporate debtor should check:-

  1. Prior to filing of petition the demand notice should have been issued by the operational creditor in the prescribed format.
  2. The existence of any dispute is between the corporate debtor and operational creditor
  3. The pendency of any proceedings already pending between the operational creditor and corporate debtor.

If any of the above situations exists, then the corporate debtor has strong grounds to defend the petition.


Business does not always flourish. It might face many challenges like financial crunch and business crisis due to which the Corporate Debtor delays in fulfilling its liability towards the creditors.

If the corporate debtor is unable to discharge it liabilities and does not have enough resources like funds available, to revive the business then corporate debtor can voluntarily file the insolvency petition to undergo the Corporate Insolvency Resolution Process and NCLT shall admit it if the petition has not been filed to defraud the creditors.


Our well-qualified team of IBC, which includes Insolvency Professionals, is having versatile experience and represent various clients before NCLT and NCALT at PAN India level. Our experts do the preliminary research and give you the complete value addition. Please get in touch with us at or call our expert at 8383011629

Get your first FREE consultation today


Latest Blogs

Our Latest Blogs