NCLAT dismissed the appeal challenging the rejection of a ...

Employees' Individual Claims Under Rs. 1 Crore Cannot Trigger Corporate Insolvency Resolution Process Under Section 9

May 9, 2025

Case Laws     IBC     AT

NCLAT dismissed the appeal challenging the rejection of a Section 9 insolvency application. The Tribunal held that individual operational creditors' claims must exceed Rs. 1 Crore to initiate Corporate Insolvency Resolution Process (CIRP). In this case, each appellant's individual claim was below the statutory threshold, rendering the application non-maintainable. The Tribunal emphasized that employees are separate operational creditors, and their claims cannot be aggregated to meet the default amount. The minimum default threshold under Section 4 of the Insolvency and Bankruptcy Code is mandatory, and debts below Rs. 1 Crore cannot form the basis for initiating CIRP against a corporate debtor. The Adjudicating Authority's original rejection was upheld.

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