Resolution in Name, Recovery in Fact: The Operational Creditor and Section 9

A column arguing that operational creditors, such as suppliers, file under Section 9 of the Insolvency and Bankruptcy Code mainly to be paid, and that the insistence of courts on a “resolution” motive is largely unworkable. It traces the tension between Mobilox Innovations v. Kirusa Software, which confined the admission inquiry to debt, default and pre-existing dispute, and Swiss Ribbons, which treats revival as the Code’s aim and recovery as incidental.

Once a process begins, the column notes, the operational creditor has no vote in the Committee of Creditors, ranks low in the Section 53 waterfall, and typically receives a minimal floor under Section 30(2)(b), with claims left out of an approved plan liable to be extinguished. It finds that the 2026 amendments improve transparency without materially improving that position, while courts guard against misuse and Section 65 penalises abusive initiation.

The author proposes a mandatory pre-institution mediation window of about 30 days within Section 9, with an urgency exception, along with a rebuttable presumption of inability to pay, a voice for operational creditors at distribution, a minimum plan share with MSME priority, and changing “may” to “shall” in Section 30(4).