Why the IBC ₹1 Crore Threshold Matters More Than Most Lawyers Realise

When the Central Government raised the CIRP threshold from ₹1 lakh to ₹1 crore in March 2020, most practitioners assumed it was a temporary COVID-era measure. Three years later, the threshold remains — and it has quietly reshaped how operational creditors approach debt recovery in India.

The Practical Shift

Before the amendment, IBC was used aggressively — sometimes as a first resort — even for relatively modest claims. The low threshold meant that a creditor owed even a few lakhs could threaten a corporate debtor with insolvency proceedings, creating enormous pressure to settle.

That dynamic has changed. Today, for claims below ₹1 crore, the IBC route is simply unavailable. Creditors must return to slower, costlier remedies: civil suits, arbitration, or summary proceedings under Order XXXVII CPC.

The Unintended Consequence

The threshold has created an uncomfortable middle ground. Claims between ₹50 lakh and ₹95 lakh are large enough to be seriously disruptive to a small creditor, yet too small to trigger the only truly coercive insolvency mechanism available.

For MSME suppliers and service providers who operate on thin margins and extended credit terms, this gap can be devastating. The practical leverage that IBC offered has simply vanished for this category.

What This Means for Notices

The most common error I see today is a Section 8 notice that threatens CIRP for a claim well below ₹1 crore. Not only is the threat not actionable — a legally informed opponent will immediately call it out, significantly weakening the creditor's negotiating position.

If the claim doesn't meet the threshold, the notice should honestly state alternative remedies. That is both more accurate and more strategically sound.

Looking Ahead

There is no indication the threshold will be revised downward. Practitioners who continue to reflexively reach for IBC without checking the threshold are doing their clients a disservice.