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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Corporate and Economic Laws

Case: Orion Foods Ltd has a manufacturing unit. A group of its financially stressed trade suppliers is considering insolvency action. Orion owes Rs 12 lakh to an operational creditor, Zenith Packers, for goods supplied. Zenith has delivered a demand notice under the IBC and Orion did not pay within the stipulated days nor raise a dispute. What is the period within which the corporate debtor must reply or pay after receiving the demand notice, failing which the operational creditor may file an application before NCLT?

The corporate debtor has 10 days from receipt of the demand notice to pay or to show a dispute. However, the current minimum default threshold for initiating insolvency is Rs 1 crore, so a default of Rs 12 lakh would not qualify for a CIRP application.

  1. A10 daysCorrect
  2. B30 days
  3. C7 days
  4. D45 days

Explanation

Under the IBC, an operational creditor delivers a demand notice, and the corporate debtor has 10 days from receipt to repay or bring to notice the existence of a dispute or prior suit or arbitration. If neither happens, the creditor may file an application before the NCLT. Rs 12 lakh exceeds the minimum default threshold of Rs 1 crore? No: the threshold is Rs 1 crore, so this default of Rs 12 lakh would not qualify for initiating CIRP at present.

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