A Vendor Has Served an IBC Demand Notice on My Company: The Ten-Day Reply That Decides Everything

Your company has ten days from receipt of a section 8 demand notice under the Insolvency and Bankruptcy Code, 2016 to do one of two things: bring the existence of a dispute to the vendor's notice, with the record of any suit or arbitration filed before the notice arrived, or prove that the debt was paid, with an attested bank record of the transfer or of the vendor encashing your cheque. That is section 8(2), and the IBC demand notice reply that does it is the subject of this guide. If the company does neither, section 9(1) lets the vendor file a petition with the National Company Law Tribunal on day eleven, and section 9(5)(i) directs the Tribunal to admit a complete petition where no notice of dispute was received.

Part of the corporate and commercial law practice at S Jain & Attorneys, Bangalore.

This is written for the director of a company that has just been handed a notice from a vendor's lawyer on invoices the company has been contesting for months over quality or delivery.

The notice must be answered with one of three responses, in writing, inside the ten days:

Before the reply is drafted, do these things in the first 48 hours:

• Record the date and mode of receipt, because the ten days run from receipt.
• Put every written complaint, debit note, rejection email and inspection report about these invoices in date order.
• List any suit, arbitration or Facilitation Council reference already pending between the parties, with number and filing date.
• Reconcile the ledger and stop all oral communication with the vendor about the invoices. Every word from now on goes in writing.

What is this notice, and what happens if we ignore it for ten days?

The notice is the first compulsory step in a supplier's route to putting your company into corporate insolvency resolution, and ignoring it hands the vendor the petition. Section 8(1) allows an operational creditor, on the occurrence of a default, to deliver a demand notice of the unpaid operational debt or a copy of the invoice demanding payment. Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 gives it a shape: a demand notice in Form 3, or the invoice with a covering notice in Form 4, delivered at the registered office by hand, registered post or speed post with acknowledgement due, or by email to a whole-time director, designated partner or key managerial personnel. Form 3 itself invites the company, within ten days, to report a pending suit or arbitration or to prove payment.

Silence is the worst of the available options. Section 9(1) permits the petition after the ten days if the vendor "does not receive payment from the corporate debtor or notice of the dispute". Section 9(3)(b) then requires the vendor to file an affidavit that no notice of dispute was given, and section 9(5)(i) requires the Tribunal to admit the petition if it is complete, the debt is unpaid, the notice was delivered and no notice of dispute was received. A silent company can still argue at the hearing that a dispute existed, but it walks in with the vendor's affidavit against it and its own conduct unexplained.

Deadline warning. The ten days in section 8(2) run from receipt of the notice, not from the date printed on it, and the vendor may file on the eleventh day. A reply posted on day ten and delivered on day twelve is one the vendor can swear was not received before filing, so email it the same day and post it for the record.

Can the vendor use the IBC for this amount at all?

Only if the amount in default is at least one crore rupees, the claim is an operational debt, and it is not time-barred. Section 4 fixes the minimum default at one lakh rupees and lets the Central Government raise it by notification to a figure not above one crore, which the Ministry of Corporate Affairs did by notification S.O. 1205(E) of 24 March 2020. The NCLAT in Jumbo Paper Products v Hansraj Agrofresh Pvt Ltd (Company Appeal (AT)(Ins) No. 813 of 2021, 25 October 2021) held that the floor applies to every petition filed on or after that date, even on older invoices. How the floor is computed is covered in the threshold guide, and whether interest can be added to the principal to cross the line is dealt with in interest and the CIRP threshold. A claim that reaches one crore only with contractual interest, or only by adding a second unrelated contract, is worth challenging on the threshold alone.

Two further gates matter. The claim must be an operational debt under section 5(21), which a supplier's invoice usually is, so the distinction in operational versus financial debt rarely helps unless the vendor actually lent money. Limitation is the more useful gate. Section 238A applies the Limitation Act, 1963 to proceedings before the Tribunal, and the Supreme Court in Gaurav Hargovindbhai Dave v Asset Reconstruction Company (India) Ltd (18 September 2019), applying B.K. Educational Services v Parag Gupta (2018), held that Article 137 governs, so three years run from the default and the Code gives no new life to a debt already barred.

Our invoices are disputed on quality: what counts as a pre-existing dispute?

A dispute counts if it existed before the notice arrived, concerns the debt, the goods or the contract, and is real rather than invented for the reply. Section 5(6) says "dispute" includes a suit or arbitration relating to the existence of the amount of debt, the quality of goods or service, or the breach of a representation or warranty. The word is "includes", and the Supreme Court in Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd (21 September 2017) read the "and" in section 8(2)(a) as "or", so the company need not have a suit or arbitration on foot: a dispute that exists and is communicated is enough. The Tribunal then sees only "whether there is a plausible contention which requires further investigation" and whether the dispute "is not a patently feeble legal argument or an assertion of fact unsupported by evidence". It rejects a defence that is "mere bluster", but it does not decide who is right. So long as the dispute "truly exists in fact and is not spurious, hypothetical or illusory", the petition must be rejected.

Mobilox itself turned on an email sent months before the notice, saying the supplier had breached the non-disclosure agreement and that payments were withheld until it was resolved, and that was enough to bar the petition. Swiss Ribbons Pvt Ltd v Union of India (25 January 2019) puts it generally: goods or services "may be substandard", and these are "matters to be proved in arbitration or in the courts of law", not in the Tribunal.

These documents have carried disputes:

• A written rejection or quality complaint sent before the notice, referring to the invoice number, with the inspection report or photographs.
• A debit note against the invoice for short supply or rectification cost, entered in the books and sent to the vendor.
• Emails refusing acceptance of a consignment, or accepting it under protest pending testing.
• A suit, a notice invoking the arbitration clause, a counter-claim, or a consumer complaint filed before the notice was received, with number and date.
• A pending challenge under section 34 of the Arbitration and Conciliation Act to an award the vendor has obtained. K. Kishan v Vijay Nirman Company Pvt Ltd (Supreme Court, 14 August 2018) held that the dispute continues at least until sections 34 and 37 are exhausted, even where the arbitrator rejected the company's cross-claims.

What does not count: a dispute raised for the first time in the reply with nothing behind it, a grievance about a different contract, or an objection that lives only in a director's memory. A complaint written on day eight is a complaint written after the notice.

Key takeaway. The Tribunal does not decide whether your quality objection is correct. It decides whether the objection is real, pre-dates the notice and needs a court to resolve it. Documents dated before the notice do that work. Assertions in the reply do not.

The three things the reply must establish, in one glance:

How do we write the IBC demand notice reply inside ten days?

The reply is a short letter, addressed to the vendor and to the lawyer who signed the notice, that states the dispute, dates it, and encloses the record. No form is prescribed for it. Section 8(2) requires only that the company "bring to the notice of the operational creditor" the existence of the dispute or the pendency of the suit or arbitration, so the test is substance and proof of dispatch, not format. A reply that works has these parts:

1. Heading and reference: the vendor's notice by date, the invoices by number, and the words "notice of dispute under section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016".
2. Receipt: the date and mode on which the notice was received, so the ten days are on record.
3. The dispute, in one paragraph: which invoices, what was wrong, and the amount the company says is not due.
4. The chronology: each written complaint, debit note, rejection and reply, by date, with the vendor's responses or silence noted.
5. Pending proceedings, if any: forum, case number and filing date, with the first page annexed.
6. The account: invoiced, paid, credited and set off.
7. A reservation: the reply is without prejudice to the company's claims for damages, rectification cost or refund, and nothing in it is an admission.
8. Annexures, indexed and page-numbered, earliest first, and a signature by a director or authorised officer with the board resolution or letter of authority attached.

Two things to keep out of it. Do not offer to pay "the undisputed portion" without a figure and a reservation, because an open-ended offer reads as an admission that the rest is due. And do not argue insolvency law in it: the letter is evidence of the dispute, and the fewer adjectives it carries the better it reads.

Send it to the address given in the notice for the operational creditor and to the signing lawyer, by email the same day and by speed post with acknowledgement due, and keep both receipts. Rule 5 governs only the vendor's notice, so the company chooses the mode, and the question that later matters is whether the vendor received it. After Macquarie Bank an email to the lawyer who signed is an email to the vendor's authorised agent. Section 9(5)(ii)(d) also counts "a record of dispute in the information utility" as a ground for rejection, so if the vendor has lodged the debt with a utility, ask counsel whether the dispute should be recorded there too.

We actually owe the money: pay, part-pay or negotiate?

If the invoices are good and the money is due, pay or sign a written settlement before the vendor files, because after admission the company no longer controls the outcome. Section 8(2)(b) is the clean exit: an attested copy of the bank record of the transfer, sent within the ten days, ends the matter, and section 9(5)(ii)(b) requires the Tribunal to reject a petition where the debt has been paid. Part payment does not have the same effect. Section 3(12) defines default as non-payment of the whole "or any part or instalment" of the amount due, so a company that pays half is still in default of the other half, and if that half is itself above one crore the petition survives.

A negotiated schedule works only if it is documented. The settlement should record the total, the instalments and their dates, that the vendor withdraws the section 8 notice and will not file under section 9 while the schedule is honoured, and what happens on a missed instalment. If the vendor has already filed, rule 8 lets the applicant withdraw with the Tribunal's permission before admission, and the settlement should oblige the vendor to do so. After admission the route narrows to section 12A, substituted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 with effect from 26 May 2026: the resolution professional applies with the approval of ninety per cent of the voting share of the committee of creditors, in Form FA under regulation 30A of the CIRP Regulations within three days of that vote, with a bank guarantee or demand draft for the process costs so far, and no withdrawal is possible before the committee is constituted or after the first invitation for resolution plans has gone out.

Does a defect in the vendor's notice save us?

Some defects do and most do not, and the Supreme Court has closed the two that companies most often try. Macquarie Bank Ltd v Shilpi Cable Technologies Ltd (15 December 2017) held that a demand notice under section 8 may be sent by the operational creditor's lawyer or authorised agent, reading section 8 with Forms 3 and 5, and that the bank certificate under section 9(3)(c) is not a condition precedent to the petition. Both objections therefore fail. The same judgment quotes Surendra Trading Company v Juggilal Kamlapat Jute Mills Company Ltd (19 September 2017), which held the fourteen days in section 9(5) and the seven-day cure period directory, not mandatory, so a petition is not thrown out because the Tribunal took longer.

Defects that have mattered go to delivery and content. Section 9(5)(ii)(c) requires rejection where the notice "has not been delivered", so a notice sent to a former registered office, or emailed to a junior employee rather than to a whole-time director, designated partner or key managerial person as rule 5(2)(b) requires, is open to attack, and the vendor has to show delivery under section 9(3)(a). A notice that does not identify the invoices, the date of default and the amount, which Form 3 requires in tabular form, leaves the vendor struggling to show a default of one crore or more on the day of filing. Treat these as arguments for the hearing, not as reasons to skip the reply. Relying on a defective notice and sending nothing bets the business on a technicality, and the vendor can simply serve a fresh notice.

What happens at the NCLT if the vendor files anyway?

The vendor files Form 5 under rule 6, sends a copy to the company's registered office by registered or speed post, and the Tribunal lists it, notifies the company and hears both sides before deciding admission. Form 5 must set out the total debt and the date of default with workings, and annex the demand notice served, the bank statement, an affidavit and, where one is proposed, the consent of the interim resolution professional. The Supreme Court in Swiss Ribbons recorded that the corporate debtor "is served with a copy of the application" and "has the opportunity to file a reply" and to "be heard" before an admission order is made, which is where the notice of dispute, its annexures and the threshold and limitation objections go on record.

Section 9(5) then gives the Tribunal two orders. It admits if the petition is complete, the debt is unpaid, the notice was delivered, no notice of dispute was received and no record of dispute exists in an information utility, and no disciplinary proceeding is pending against the proposed professional. It rejects if any of those fails, and where the petition is merely incomplete it must first give the vendor seven days to cure the defect. Applying Mobilox, a Tribunal that finds a real pre-existing dispute on the record rejects the petition, and the vendor is left to its suit, its arbitration or its civil recovery action. An order either way is appealable to the National Company Law Appellate Tribunal within thirty days under section 61(2), with fifteen further days condonable for sufficient cause and no more.

What changes for the company and its directors the day the petition is admitted?

The admission order is the commencement date under section 9(6), and everything changes on it. Under section 13 the Tribunal declares a moratorium, causes a public announcement calling for claims, and appoints an interim resolution professional. Section 14(1)(a) stays the institution and continuation of suits and proceedings against the company, and section 14(1)(b) bars the company from transferring or encumbering its assets. Section 17 vests management in the interim resolution professional, suspends the board, and instructs the company's banks to act only on the professional's instructions. The Supreme Court said in Innoventive Industries Ltd v ICICI Bank (31 August 2017) that "entrenched managements are no longer allowed to continue in management if they cannot pay their debts", and held that once a professional is appointed the erstwhile directors cannot maintain an appeal on behalf of the company. Any appeal is theirs to file as persons aggrieved under section 61(1).

The committee of creditors that then takes the decisions consists of the company's financial creditors under section 21(2). The suspended directors may attend its meetings under section 24(3), as may one representative of operational creditors holding ten per cent of the debt, but section 24(4) gives neither a vote. Section 12 gives the process one hundred and eighty days, one extension of up to ninety, and an outer limit of three hundred and thirty days, after which section 33 leads to liquidation if no plan is approved. The moratorium protects the company, not the people who stood behind it. Section 14(3)(b) says it does not apply to "a surety in a contract of guarantee to a corporate debtor", so a director's personal guarantee to the vendor or to a bank remains enforceable while the company is protected, an exposure dealt with in the personal guarantor guide.

Can the company hit back: a suit, a counter-claim or a section 65 penalty?

Yes, before admission, because a filed proceeding is the strongest form of dispute the Code recognises. Section 5(6) names "a suit or arbitration proceedings" first, and section 8(2)(a) asks for the record of one "filed before the receipt of such notice". A suit for damages or a notice invoking arbitration sent after the section 8 notice does not enjoy that status, but it is still evidence that the dispute is real, and Mobilox lets the Tribunal weigh it. After admission the board is suspended under section 17 and the resolution professional decides whether the company pursues any claim, while every proceeding against the company is stayed under section 14(1)(a).

Section 65 is the Code's own deterrent. If any person initiates the resolution process "fraudulently or with malicious intent for any purpose other than for the resolution of insolvency", the Tribunal may impose a penalty of not less than one lakh rupees and up to one crore rupees. The Supreme Court in Embassy Property Developments Pvt Ltd v State of Karnataka (3 December 2019) confirmed that the Tribunal has jurisdiction to enquire into allegations that a process was initiated fraudulently under section 65, and in Swiss Ribbons it described the section as the Code's protection against a company "being dragged into the corporate insolvency resolution process malafide". A vendor who serves a section 8 notice on a debt it knows is disputed, to pressure a settlement rather than to resolve an insolvency, is the case the section describes, though it yields a penalty, not compensation.

Does the vendor's own conduct matter: it is an MSME, it went to Samadhaan first, it accepted part payments?

All three feed the dispute, and the second can be decisive. A vendor registered as a micro or small enterprise has the delayed payment machinery of the Micro, Small and Medium Enterprises Development Act, 2006 available to it, described from the supplier's side in the MSME recovery guide and in the answer to a company is not paying my MSME invoice. If the vendor has already referred the invoices to the Facilitation Council, that reference is a proceeding on the record. Section 18 of that Act moves the reference through conciliation and then, on failure, into arbitration, and the Supreme Court in Jharkhand Urja Vikas Nigam Ltd v State of Rajasthan (15 December 2021) held that the Council must actually conduct the arbitration under the Arbitration and Conciliation Act before any award. A vendor that chose a forum where the quality dispute will be adjudicated, and then served a section 8 notice while that reference is pending, has made the company's argument for it.

Part payments accepted after the quality complaints were raised cut both ways. They show the company was paying what it accepted as due, which supports a dispute confined to the balance. They also acknowledge the debt for limitation. Every such payment should therefore have gone with a covering email stating which invoices it covered and that the rejected quantities remained in dispute.

What are the timelines, from the notice to the outer limit of the process?

Only the first of these periods belongs to the company.

Step by step: what the company does in the ten days

1. Day 1: log receipt, calendar day ten, instruct counsel, and freeze oral contact with the vendor about the invoices.
2. Days 1 to 2: assemble the file in date order, reconcile the ledger, and confirm whether any proceeding is pending between the parties.
3. Days 2 to 4: decide the response. Real dispute on the record: notice of dispute. Debt paid: attested bank record. Debt due and undisputed: pay, or negotiate a written settlement with a withdrawal clause.
4. Days 4 to 6: draft the reply in the form set out above, with indexed annexures and a board resolution or letter of authority.
5. Day 6 or 7: send it by email and by speed post with acknowledgement due to the address in the notice, and keep the delivery receipts.
6. Days 7 to 10: invoke the arbitration clause if there is one, or consider a suit for damages, so the dispute has a forum.
7. After day 10: watch the Tribunal's cause list, and be ready to file the reply with the notice of dispute and the threshold and limitation objections on the first date.

Where these notices actually go wrong for the company

What I tell clients on the first call is that the Tribunal will read the dates before it reads the arguments. A company that has genuinely fought about quality for months usually has the paper to prove it, but scattered: a rejection email from the stores manager, a debit note in the accounts system that was never sent, a chat thread with the vendor's sales head. The ten days are spent gathering that record into a chronology, not drafting prose. Where these cases turn is almost always one question: is there a document, dated before the notice, in which the company told the vendor in writing that it would not pay because of a specific defect? If yes, the reply writes itself. If the objection lived only in phone calls, the vendor will say the reply was manufactured to defeat the notice.

Common mistake. Paying a round sum on account during the ten days, without a covering letter that names the invoices it covers and reserves the dispute on the rest, gives the vendor an acknowledgement of the whole debt and a part payment that section 3(12) still treats as default.

The other mistakes:

• Silence, on the theory that the claim is below one crore or the notice is defective. The vendor files, swears the section 9(3)(b) affidavit, and the company argues from behind.
• A reply that disputes everything and proves nothing, with no chronology and no annexures.
• Treating a settlement discussion as a reason not to reply. Negotiate and reply in parallel, and record that the reply is without prejudice.

After admission, these are the four consequences that a later settlement cannot undo on its own:

Frequently Asked Questions

This article is for general informational purposes only and does not constitute legal advice. Consult a qualified advocate for advice on your specific situation.

Related Guides

Companies served with insolvency notices and the vendors who send them are advised by our corporate and commercial law practice, with recovery on the invoices themselves handled by the money recovery practice.

• Insolvency Threshold Under IBC: The Rs 1 Crore Minimum Default
• Operational Debt vs Financial Debt Under the IBC
• Interest Cannot Be Clubbed With Operational Debt for CIRP