Section 95 of IBC : Section 95: Application By Creditor To Initiate Insolvency Resolution Process

Explanation using Example

Imagine a situation where a supplier, ABC Enterprises, has provided materials to a partnership firm, XYZ Partners, on credit. Despite multiple reminders, XYZ Partners fails to clear the outstanding dues within the agreed credit period. After the credit period has lapsed, ABC Enterprises serves a notice of demand to XYZ Partners, giving them an additional 14 days to settle the debt. However, XYZ Partners still does not pay the debt.

ABC Enterprises, as a creditor, decides to take legal action to recover the debt. They choose to apply for initiating an insolvency resolution process against XYZ Partners under Section 95 of The Insolvency and Bankruptcy Code, 2016. ABC Enterprises can file the application on its own or jointly with other creditors who are also owed money by XYZ Partners.

In their application to the Adjudicating Authority, ABC Enterprises includes details of the debt owed, evidence of the default, and the notice of demand served to XYZ Partners. They also ensure that a copy of the application is provided to XYZ Partners as required by law.

If another supplier, DEF Corporation, is facing a similar issue with XYZ Partners and has also filed an application, the Adjudicating Authority may consolidate both applications to streamline the process, as per subsection (3).

The application by ABC Enterprises would be in the prescribed form, include the necessary documents, and be accompanied by the required fee.