Chapter II - Corporate Insolvency Resolution Process
Section 7
Section 7: insolvency application by a financial creditor
Section 7 lets a financial creditor, alone or jointly, apply to the National Company Law Tribunal (the Adjudicating Authority) to start a corporate insolvency resolution process (CIRP) after a default. Subsection (5) was substituted with effect from 26 May 2026. The tribunal must now, by order within fourteen days, admit or reject the application. It must record reasons if it takes longer.
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Need advice on Section 7?
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) 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 the Adjudicating Authority when a default has occurred.
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).
(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—
(a) admit the application, if it is satisfied that a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceeding pending against the proposed resolution professional; or
(b) reject the application, if it is satisfied that a default has not occurred or the application under sub-section (2) is incomplete or a disciplinary proceeding is pending against the proposed resolution professional:
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b), give a notice to the applicant to rectify the defect in his application within seven days from the date of receipt of such notice from the Adjudicating Authority:
Provided further that if the Adjudicating Authority has not passed an order under this sub-section within a period of fourteen days from the date of receipt of the application under sub-section (2), it shall record the reasons for such delay in writing.
Explanation I.—For the purposes of this sub-section, it is hereby clarified that where the requirements under clause (a) have been complied with, no other ground shall be considered to reject an application filed under this section.
Explanation II.—For the removal of doubts, it is hereby clarified that where a record of default in respect of a financial debt owed to a financial institution recorded with the information utility has been furnished along with the application filed by such financial institution under this section, such record shall be considered sufficient for the Adjudicating Authority to ascertain the existence of default under this section.
(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.
Introduction
Section 4 of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 omitted the old proviso to subsection (4), which required reasons if default was not ascertained within fourteen days. It also substituted subsection (5). The provision came into force on 26 May 2026 under notification S.O. 2625(E). The substituted text adds a fourteen-day order requirement with reasons for delay, Explanation I limiting rejection grounds once clause (a) is met, and Explanation II on information utility records filed by financial institutions.
The application must also satisfy the minimum default under Section 4, and Section 11 lists persons who cannot apply. Filing steps come from the Application to Adjudicating Authority Rules, 2016 and the IBBI CIRP Regulations. The 2026 Act contains no specific transition rule for applications already pending on 26 May 2026, so check the position case by case.
Key takeaways
Default to any financial creditor counts
Under the Explanation to subsection (1), the default relied on may be a default owed to another financial creditor of the corporate debtor, not only to the applicant.
Joint filing for classes and allottees
Creditors in a class under Section 21(6A)(a) or (b), and allottees of the same real estate project, must file jointly. The minimum is one hundred of them or ten per cent of the total, whichever is less.
Fourteen-day order, reasons if late
Substituted subsection (5) directs the tribunal to admit or reject by order within fourteen days of receipt. If it does not, it must record its reasons in writing. Nothing in the text makes admission automatic after fourteen days.
Rejection grounds are confined
Explanation I says that once default, completeness and the absence of disciplinary proceedings against the proposed resolution professional are met, no other ground is to be considered for rejection.
Assemble the application and evidence
Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 requires a financial creditor's application in Form 1, with the documents listed there and in the CIRP Regulations. Before filing, a copy must be served on the corporate debtor's registered office and on the Insolvency and Bankruptcy Board of India (IBBI). Under rule 9, the applicant encloses a written communication in Form 2 from the insolvency professional proposed as interim resolution professional.
Section 7(3)(a) accepts the information utility record of default or other specified evidence. Regulation 2A of the CIRP Regulations lists certified bankers' book entries and a court or tribunal order on non-payment whose appeal period has expired. Regulations 2C and 2D add the applicant's PAN and email ID and a chronology of the debt, default, part payments, last acknowledgment and applicable limitation.
How the tribunal decides
The tribunal ascertains default from information utility records or other evidence under subsection (4). Under substituted subsection (5), it admits the application if default has occurred, the application is complete and no disciplinary proceeding is pending against the proposed resolution professional. Otherwise it rejects. Before rejecting, it must give the applicant seven days to rectify the defect.
Explanation II applies only where a financial institution files the application with an information utility record of default on a financial debt owed to it. That record is then sufficient to ascertain the existence of default. Other applicants still prove default through the record or evidence permitted by subsection (3).
After admission
Under subsection (6), CIRP commences from the date of admission. The tribunal communicates an admission order to the financial creditor and the corporate debtor, and a rejection order to the financial creditor, within seven days. Moratorium and public announcement then follow under Sections 13 to 15. Withdrawal after admission is governed by the substituted Section 12A.
A separate 2026 proviso to Section 5(11) deals with multiple applications. If several CIRP applications against the same corporate debtor are pending on the insolvency commencement date, the initiation date is the date the first of them was made.
Practical checklist
Do
- Check that the debt is a financial debt and that the default meets the Section 4 threshold before filing.
- Obtain the information utility record or other Regulation 2A evidence, and prepare the Regulation 2D chronology, including the limitation position.
- Serve the application on the corporate debtor's registered office and on IBBI before filing, and keep proof of service.
- Obtain the proposed interim resolution professional's Form 2 communication and confirm that no disciplinary proceeding is pending against them.
Avoid
- Do not treat the fourteen-day period as automatic admission; the tribunal must still pass an order.
- Do not rely on a pre-2026 copy of Section 7(5) or the omitted proviso to subsection (4).
- Do not file alone as a class creditor or allottee where the joint-filing proviso applies.
Glossary
- Financial creditor
- A person to whom a financial debt is owed, including a person to whom such debt has been legally assigned or transferred, as defined in Section 5(7).
- Information utility
- A person registered with IBBI as an information utility under Section 210, as defined in Section 3(21).
- Adjudicating Authority
- For Part II, the National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013, as defined in Section 5(1).
Frequently asked questions
Can a financial creditor rely on a default owed to someone else?
Yes. The Explanation to Section 7(1) says a default includes a default on a financial debt owed to any other financial creditor of the corporate debtor.
Is the application admitted if the tribunal does not decide in fourteen days?
No. Substituted Section 7(5) directs an order within fourteen days. If the order is late, the tribunal records its reasons in writing. The Code does not provide for deemed admission.
What changed on 26 May 2026?
Subsection (5) was substituted and the proviso to subsection (4) was omitted. The new text adds the fourteen-day order with reasons for delay, Explanation I on rejection grounds and Explanation II on information utility records filed by financial institutions.
Do homebuyers have to file jointly?
Allottees under a real estate project must file jointly. The minimum is one hundred allottees of the same project or ten per cent of the total allottees of that project, whichever is less.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026