If you lent money to a company, or invested money that the company must repay with a return, and the company has defaulted by Rs 1 crore or more, you can ask the NCLT to start a corporate insolvency resolution process (CIRP) against it. This is done through a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).
Section 7 is a powerful remedy. Once the petition is admitted, the company's board is suspended, an interim resolution professional takes charge, and the company's future is decided by its financial creditors. Since 26 May 2026, the NCLT is required to admit a complete petition once the default is established. That makes careful preparation more important than ever, both for lenders filing and for companies responding.
हिंदी में सारांश
अगर आपने किसी कंपनी को लोन दिया है और कंपनी ₹1 करोड़ या उससे ज़à¥à¤¯à¤¾à¤¦à¤¾ की चूक (default) कर चà¥à¤•à¥€ है, तो आप IBC की धारा 7 के तहत NCLT में दिवाला याचिका दायर कर सकते हैं। 26 मई 2026 से लागू संशोधन के बाद, अगर चूक साबित है और आवेदन पूरा है, तो NCLT को याचिका सà¥à¤µà¥€à¤•à¤¾à¤° करनी होगी और 14 दिनों में फैसला करने की अपेकà¥à¤·à¤¾ है। याचिका आम तौर पर चूक की तारीख से 3 साल के à¤à¥€à¤¤à¤° दायर होनी चाहिà¤à¥¤
Is this your situation?
- You lent money to a company, or gave an inter-corporate deposit, and it has not been repaid
- The total default (principal plus interest due) is Rs 1 crore or more
- The default happened within the last three years, or the company has acknowledged the debt in writing since
- You hold debentures or other instruments the company has failed to redeem
- You are a bank or NBFC with a loan account classified as a non-performing asset
- You are one of a group of homebuyers whose builder has defaulted
- The company also gave a corporate guarantee for someone else's loan and has not honoured it
Who counts as a financial creditor
The IBC separates creditors into two kinds. A financial creditor is someone owed a "financial debt", which in plain words means money disbursed against the time value of money: loans, interest-bearing deposits, debentures, bonds, hire purchase and certain guarantees. Suppliers and service providers are operational creditors and use Section 9 instead.
Banks and NBFCs
Term loans, working capital limits and cash credit facilities are classic financial debts. Banks also have the option of DRT and SARFAESI, and often use Section 7 when they want the whole company resolved.
Private lenders and group companies
A loan from an individual or another company is a financial debt if interest or some other return for the use of money was agreed. Interest-free friendly loans can be harder to bring under Section 7 and need careful analysis.
Investors and debenture holders
Unpaid debentures, bonds and some structured investments with assured returns may qualify. Pure equity investments do not.
Homebuyers
Allottees of a real estate project are treated as financial creditors. They must file jointly, as explained on our homebuyers' petition page.
Guarantee beneficiaries
A lender can file against a company that gave a corporate guarantee for another borrower's loan once the guarantee is invoked and not honoured.
Assignees
A party that has bought the debt, such as an asset reconstruction company, can file once the assignment is properly documented.
How a Section 7 petition moves
Check default, amount and limitation
We work out the date of default, the amount in default and whether the claim is within three years. The limitation period generally runs from the date of default, but written acknowledgments of the debt by the company, including some balance-sheet entries, can extend it. Defaults that occurred between 25 March 2020 and 24 March 2021 cannot be used for a petition at all because of the COVID-period bar in Section 10A.
Collect proof of debt and default
The petition needs the loan agreement or sanction letter, proof of disbursal, statement of account and proof of default. A record of default with an information utility is now treated as sufficient proof of default. Banks can usually generate this record quickly; private lenders can also file their debt with the utility.
Choose the interim resolution professional
You propose an insolvency professional who is willing to act, with written consent. Under the 2026 amendment, the proposed professional must not have any disciplinary proceedings pending against them. We help lenders pick an experienced professional and agree the fee basis.
Draft and file in Form 1
The application is filed in Form 1 before the NCLT bench that covers the company's registered office, with the filing fee set by the tribunal's rules, an affidavit and a copy served on the company. If the NCLT finds a defect, it gives seven days to cure it.
Hearing and admission
The company is heard, but the scope of the hearing is now narrow. If the default above Rs 1 crore is shown, the application is complete and the proposed professional is clean, the NCLT must admit it. The tribunal is expected to decide within 14 days and must record reasons if it does not.
What follows admission
A moratorium starts, the interim resolution professional takes over management, a public announcement invites claims and a committee of creditors is formed. You will then be voting on the company's future, usually alongside other lenders. See our page on the committee of creditors.
What the 2026 amendment changed for lenders
Before 2026, there was debate over whether the NCLT could refuse to admit a Section 7 petition even after a default was proved. In Vidarbha Industries Power Ltd v Axis Bank (2022), the Supreme Court said the tribunal had some discretion, and later decisions limited that ruling to its own facts. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 settles the point. With effect from 26 May 2026:
- the NCLT must admit the application once a default is established, the application is complete and no disciplinary proceeding is pending against the proposed resolution professional;
- the proviso to Section 7(4), which earlier dealt with the time for ascertaining default, has been removed;
- a record of default from an information utility is enough to prove default;
- the NCLT is expected to pass its order within 14 days of receiving the application, and must record reasons in writing if it does not.
For lenders this means a well-prepared petition should move faster. For borrowers it means arguments about "the company is otherwise viable" are unlikely to stop admission. The real defences now are on the debt itself: whether it is a financial debt, whether there is a default, whether the amount crosses Rs 1 crore and whether the claim is within time. Our page on defending an insolvency petition covers this from the company's side.
Time and typical cost
Our fees are agreed in writing at the start, stage by stage. They are not linked to the outcome.
| Stage | Usual time | What it involves |
|---|---|---|
| Review of papers and limitation check | 3 to 7 days | Our fee for the opinion |
| Information utility record and IRP consent | 1 to 3 weeks | Utility charges; IRP's consent and fee proposal |
| Drafting and filing Form 1 | 1 to 2 weeks after papers are complete | NCLT filing fee as per the tribunal's rules; our fee |
| Hearing up to admission | Due within 14 days by law; in practice often a few weeks to a few months | Hearings, written submissions |
| CIRP after admission | 180 days, extendable by 90; outer limit 330 days including litigation | CIRP costs shared by creditors as the committee decides |
Documents you will need
Debt documents
- Loan agreement, sanction letter or term sheet
- Promissory notes, debenture trust deed or investment agreement
- Proof of disbursal: bank statements or RTGS records
- Security documents and guarantee deeds, if any
Proof of default
- Statement of account showing the default
- Record of default from an information utility
- Recall notice or demand letters sent to the company
- NPA classification letter (for banks and NBFCs)
Limitation and acknowledgment
- Letters, emails or settlement offers acknowledging the debt
- Balance sheets of the company showing the loan
- Records of part payments and their dates
For the petition
- Board resolution or authority letter to file (for corporate lenders)
- Written consent of the proposed resolution professional (Form 2)
- Master data of the corporate debtor from the MCA portal
- Proof of service of the application on the company
Where the petition is filed
A Section 7 petition goes to the NCLT bench that has territorial jurisdiction over the place where the company's registered office is located, regardless of where the loan was given. A company registered in Delhi goes to NCLT New Delhi. A company registered in Noida or Ghaziabad goes to NCLT Allahabad, and one registered in Gurugram to NCLT Chandigarh. If the company has shifted its registered office recently, we check when, because shifts made to avoid a particular bench can be challenged.
An appeal against an order admitting or rejecting the petition goes to the NCLAT within 30 days. See NCLAT appeals under the IBC.
A private lender and a three-year deadline
Here's a made-up example. Mr Arora's company lent Rs 2.5 crore to a Delhi trading company at 12% interest, repayable in instalments ending in June 2023. The borrower paid nothing after March 2023. In April 2026, Mr Arora asked whether it was too late.
We found that the borrower's audited balance sheet for 2023-24, signed in September 2024, showed the loan as owed to Mr Arora's company. That acknowledgment restarted the limitation period. We filed the record of default with an information utility, obtained the written consent of an insolvency professional and filed a Section 7 petition before NCLT New Delhi. Faced with likely admission, the borrower's promoters offered a structured settlement before the hearing, which was recorded and the petition withdrawn.
Mistakes lenders make with Section 7
- Counting the wrong default date: the date of default drives limitation. Using the date of a recall notice instead of the first missed instalment can make a claim look in time when it is not, or the other way round.
- Relying on an expired acknowledgment: an acknowledgment extends limitation only if it is made before the period runs out. A balance sheet signed after expiry does not revive a dead claim.
- Weak proof of disbursal: for private loans, a loan agreement without bank records of the money actually going out invites a fight over whether there was a financial debt at all.
- Ignoring the COVID-period bar: defaults between 25 March 2020 and 24 March 2021 can never found a petition, even if the borrower kept defaulting afterwards. Rely on a later default where possible.
- Picking an inexperienced professional: the interim resolution professional will run the company from day one. Lenders who propose a professional without sector experience often regret it at the first committee meeting.
- Filing without a settlement strategy: many Section 7 petitions end in a deal. Decide in advance what you would accept, so you can respond quickly when the promoters call.
Key terms in plain words
| Term | What it means |
|---|---|
| Financial creditor | A person owed a financial debt, such as a lender, debenture holder or homebuyer |
| Financial debt | Money disbursed against the time value of money, usually with interest or a return |
| Default | Non-payment of a debt that has become due and payable |
| Corporate debtor | The company against which insolvency is sought |
| Interim resolution professional (IRP) | The insolvency professional who takes charge of the company on admission |
| Information utility | A registered entity that records debts and defaults, such as the National E-Governance Services Limited |
| Committee of creditors (CoC) | The body of financial creditors that decides the company's future |
Frequently Asked Questions
What is the minimum default for a Section 7 petition?
Rs 1 crore. The amount includes principal and interest that is due and unpaid. Under Section 7, a default to any financial creditor of the company counts, not only a default to you, but you will need reliable proof of whichever default you rely on.
Can an individual who lent money file under Section 7?
Yes, if the loan was disbursed against the time value of money, for example with agreed interest, and the default crosses Rs 1 crore. Interest-free or informal loans need closer scrutiny.
What is the time limit to file?
Generally three years from the date of default. Written acknowledgments of the debt by the company, made before the period expires, start a fresh period. See our guide on limitation for Section 7.
Can the NCLT still refuse to admit my petition if the company is profitable?
After the 2026 amendment, admission is mandatory once the default is established, the application is complete and the proposed resolution professional has no pending disciplinary proceedings. Profitability is no longer a ground to refuse.
Do I need a record from an information utility?
It is not the only way to prove default, but under the 2026 amendment it is treated as sufficient proof. It usually makes the hearing quicker.
Can I file against a company that only guaranteed the loan?
Yes. A corporate guarantor whose guarantee has been invoked and not honoured can be proceeded against under Section 7, even if the main borrower is not in insolvency.
Will I get all my money back?
Not necessarily. Recovery depends on the resolution plan or liquidation value. Many lenders use the petition to bring the company to the table, and settle before or soon after admission.
How are your fees decided?
By the size and complexity of the matter and the stage, agreed in writing before we start. They do not depend on the result.
Talk to Us About Your Loan Default
Send us the loan papers and account statement. We will check the default, the limitation date and the best forum, and tell you plainly what a Section 7 petition would involve.
This page gives general information about the law as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. IBC rules and NCLT procedures change often, so outcomes depend on your own documents, dates and facts.
Need help with Lender's Insolvency Petition Against a Defaulting Company?
Send us the notice, the petition or the order. We will tell you where you stand, which bench hears it and the date the next step is due, in plain words.
