CIRP Threshold Under IBC: Why Claims Below ₹1 Crore Don't Qualify

Background

The Insolvency and Bankruptcy Code, 2016 was enacted to consolidate laws relating to reorganisation and insolvency resolution of corporate persons. One of the key gatekeeping provisions is Section 4, which prescribes the minimum threshold for triggering insolvency proceedings.

The ₹1 Crore Threshold

Originally, the minimum default required to initiate CIRP was ₹1 lakh. Via Notification No. S.O. 1205(E) dated 24th March 2020, the Central Government raised this to ₹1 crore.

This was significant for several reasons:

• It filtered out frivolous petitions
• It reduced the burden on the NCLT
• It provided relief to MSMEs during the COVID-19 period

Applicability

The threshold applies to all applicants under the IBC:

• Financial Creditors under Section 7
• Operational Creditors under Section 9
• Corporate Debtors under Section 10

Date of Default vs. Date of Filing

The threshold must be satisfied on the date of filing, not the date of default. Even if the default pre-dates March 2020, if the petition is filed after that date, ₹1 crore is required.

Can Operational Creditors Aggregate Claims?

No. Unlike financial creditors, operational creditors cannot club their debts to cross ₹1 crore. Each must independently satisfy the threshold.

Can Interest Be Included?

Yes. The ₹1 crore threshold includes both principal and interest. If the principal is below ₹1 crore but contractual interest takes the total above ₹1 crore, the application may be maintainable.

Practical Table

| Scenario | Maintainable? | |---|---| | Principal ₹90L + interest ₹15L = ₹1.05 crore | Yes | | Principal ₹80L, no interest | No | | Two creditors ₹60L each, joint filing | No | | Single creditor ₹1.05 crore | Yes |

Conclusion

The ₹1 crore threshold is a firm jurisdictional requirement. Creditors with smaller dues must explore civil suits, Order XXXVII CPC proceedings, or arbitration under the underlying contract.