Chapter I - Preliminary
Section 4
Section 4: application of this Part
Section 4 sets the minimum default needed for Part II of the Insolvency and Bankruptcy Code to apply to a corporate debtor. The enacted section refers to ₹1 lakh, but the Central Government notified ₹1 crore for ordinary corporate insolvency applications from 24 March 2020.
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This article is for general information. Refer to the Insolvency and Bankruptcy Code, 2016 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees:
Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.
Provided further that the Central Government may, by notification, specify such minimum amount of default of higher value, which shall not be more than one crore rupees, for matters relating to the pre-packaged insolvency resolution process of corporate debtors under Chapter III-A.
Introduction
The statutory ₹1 lakh baseline must be read with the notifications issued under both provisos. S.O. 1205(E) fixes ₹1 crore for the ordinary Part II process; the pre-packaged process under Chapter III-A has its own notification and threshold of ₹10 lakh under S.O. 1543(E). Section 4 is a gateway condition, not a finding that default actually occurred.
Key takeaways
Ordinary CIRP: ₹1 crore notified threshold
For an ordinary corporate insolvency application, assess the amount of default against the ₹1 crore threshold notified under the first proviso, not the ₹1 lakh figure printed in the main subsection.
Pre-packaged process has a separate threshold
The second proviso allows a distinct notification for Chapter III-A. S.O. 1543(E) specifies ₹10 lakh for that process.
Threshold alone is insufficient
The applicant must still meet the appropriate conditions in the chapter governing its application, including the applicable route for a financial creditor, operational creditor or corporate applicant.
Read the enacted baseline with the notification
The first sentence says ₹1 lakh, then gives the Central Government power to notify a higher minimum up to ₹1 crore. The Government used that power through S.O. 1205(E), dated 24 March 2020, to set ₹1 crore for ordinary corporate insolvency proceedings.
Keep the pre-packaged process separate
The second proviso, inserted in 2021, concerns Chapter III-A only. The separate notification S.O. 1543(E), dated 9 April 2021, specifies ₹10 lakh for matters relating to the pre-packaged insolvency resolution process. Do not apply that amount to an ordinary CIRP petition.
Check amount and application route
Identify the corporate debtor, the alleged default and the process being sought. Then identify who is applying under Section 6 and the relevant application section. Whether a particular sum qualifies as default may depend on the records and facts of the case.
Practical checklist
Do
- Identify whether the proposed filing is ordinary CIRP or Chapter III-A pre-packaged resolution.
- Document the amount and date of the alleged default, and check the notification applicable to that process.
- Confirm the applicant's route under Sections 6–10 before preparing a petition.
Avoid
- Do not treat the ₹1 lakh figure in the main text as the current ordinary CIRP filing threshold.
- Do not use the ₹10 lakh pre-packaged threshold for an ordinary CIRP application.
Glossary
- Default
- Non-payment of a debt when it has become due and payable, within the Code's definition in Section 3(12).
- CIRP
- Corporate insolvency resolution process under Chapter II of Part II.
- Pre-packaged insolvency resolution
- The separate process governed by Chapter III-A of Part II.
Frequently asked questions
Why does the bare law say ₹1 lakh when the guide says ₹1 crore?
Section 4 authorises the Government to notify a higher amount. S.O. 1205(E), dated 24 March 2020, specifies ₹1 crore for ordinary corporate insolvency proceedings.
Does the ₹10 lakh pre-packaged threshold apply to an ordinary CIRP filing?
No. It was separately notified for Chapter III-A under the second proviso to Section 4.
Need help applying this provision to your situation?
Contact BizeneedLast updated 9 October 2026