Section 78 of IBC : Section 78: Application

Explanation using Example

Imagine John, who is a partner in a small catering firm, has accumulated debts from various suppliers. The business isn't doing well and John, along with his partners, is unable to pay back the debts amounting to INR 50,000. They consider applying for insolvency under the Insolvency and Bankruptcy Code, 2016. However, upon consulting a legal expert, they learn that Section 78 of the Code applies to their situation since their default amount is more than the minimum threshold of INR 1,000. This section allows them to seek a resolution for their insolvency. If the government had set a higher minimum default limit, say INR 50,000, John's firm would still be eligible to apply under this section as their default amount meets the threshold.