An operational creditor is a person to whom an operational debt is owed, meaning a claim for goods or services supplied, employment dues, or certain government dues (Sections 5(20) and 5(21) of the IBC). Such a creditor can send a Section 8 demand notice and then file a Section 9 application before the NCLT against a defaulting company or LLP. Since March 2020 the minimum default for any insolvency application is ₹1 crore.
How it works in India
The IBC splits creditors into two groups. Financial creditors lent money against the time value of money: banks, NBFCs, bondholders. Operational creditors supplied the business with something it needed to operate: raw material, finished goods, freight, software, contract labour, professional services. A typical MSME supplier is an operational creditor.
To use the Code, the operational creditor first serves a demand notice under Section 8 on the corporate debtor. If the debtor neither pays nor points to a pre-existing dispute within 10 days, the creditor may file an application under Section 9 before the bench of the NCLT where the debtor's registered office is. If the application is complete and the debt is undisputed and in default, the NCLT admits it, a moratorium begins and an interim resolution professional takes over the company.
Why it matters for getting paid
Insolvency is not meant to be a recovery suit, but the prospect of losing control of the company is a powerful reason for a solvent buyer to pay. The catch is the ₹1 crore threshold: most single-buyer MSME dues fall below it, and the IBC does not entertain a supplier with a genuinely disputed claim. Once the process starts, operational creditors rank low in the waterfall under Section 53, so filing against a buyer that is truly insolvent often recovers little. Below it, the practical routes are a legal notice, MSME Samadhaan or a summary suit.
How FundRaksha uses it
When a supplier's undisputed dues against a company cross ₹1 crore, FundRaksha's advocates assess whether a Section 8 demand notice is the right lever, and check the buyer's filings on the MCA master data first. For smaller or disputed claims they use other forums. About 60% of FundRaksha cases settle before any filing, and the fee is 30% of what is recovered. A free consultation tells you which route fits your dues.
Worked example (hypothetical)
A Pune steel trader supplies a private limited fabricator across eight invoices. The buyer accepts every delivery, never raises a complaint, and stops paying. Total undisputed principal in default: ₹1,40,00,000. Because the default is above ₹1 crore and there is no pre-existing dispute, the trader can serve a Section 8 demand notice and, after 10 days, file under Section 9. A second supplier of the same buyer, owed ₹60,00,000, cannot file on its own, because its default is below the threshold. Being a Udyam-registered micro enterprise, it files on MSME Samadhaan instead.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.