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Section 8 Demand Notice: Meaning, Format & Legal Procedure

  • Section 8-Demand Notice is a legal mandatory first step for operational creditors under the Insolvency and Bankruptcy Code of 2016.
  • It provides a corporate debtor a window of 10 days to either pay or dispute the debt before proceedings at the National Company Law Tribunal (“NCLT”).
  • Section 8-Demand Notices must be made on Form 3 or. Form 4 specifically per Rule 5 of the IBC (Application to Adjudicating Authority) Rules, 2016.
  • Improper form, drafting errors or the wrong service address can lead to dismissal of insolvency petitions.
  • Justifiable and timely Section 8-Demand Notices look after creditor rights and can present quick settlements.
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Introduction

Section 8 Demand Notice

Who can issue a Section 8 Demand Notice?

Demand Notice

Who is an operational Creditor?

Operational Creditor vs. Financial Creditor

Process

Why Choose Diligence Certificaions?

Introduction

When Suyash Engineering Pvt. Ltd., a mid-sized machinery parts supplier in Pune, delivered ₹48 lakh worth of precision gear assemblies to a large automotive manufacturer, they expected timely payment.
 The purchase order was clear, quality checks flawless, and deadlines met.

Yet 90 days after the due date, the payment was still “under processing” according to the debtor’s accounts team. Calls went unanswered, reminder emails piled up, and the finance manager avoided meetings altogether.

At that point, Suyash Engineering’s legal counsel suggested sending a Section 8-Demand Notice under the Insolvency and Bankruptcy Code of 2016, which is a demand notice to the corporate debtor to clear their dues or face process at the National Company Law Tribunal (NCLT).

 For the creditor, this was not just a delivery of yet another reminder; it was initiating a process to invoke statutory legal rights as an operational creditor through Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

Section 8-Demand Notice – Legal Meaning & Scope

In Indian insolvency law, a Section 8-  Demand Notice is more than a letter — it is a statutory trigger.

It is a word-for-word replica of Section 8 of the Insolvency and Bankruptcy Code, 2016 and Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

In essence: If you are an operational creditor (supplier of goods or services) and there is a corporate debtor (company) that fails to pay you, you must first serve a Section 8-  Demand Notice and that notice must be served prior to you taking them to the National Company Law Tribunal (NCLT).

It is a compulsory pre-litigation step. If you do not serve that notice, your insolvency petition will be rejected at the filing stage.

Who Can Issue a Section 8- Demand Notice?

  • Operational Creditors: Suppliers, service providers, professionals owed operational debt.
  • Authorised Legal Representatives: Lawyers issuing the notice on behalf of the creditor with proper authorisation.

Who Receives It?

  • The corporate debtor’s registered office (as per MCA records).

Purpose of the Notice

  • To inform the debtor of unpaid dues.
  • To allow 10 days for payment or dispute.
  • To establish legal readiness for NCLT action.
Example: An Ahmedabad adhesive supplier issued a Section 8 notice; within 7 days, the debtor cleared ₹32 lakh — avoiding public insolvency proceedings.

Demand Notice

A demand notice as envisaged by Section 8 of the insolvency and bankruptcy code, 2016 is a written communication issued by an operational creditor to a corporate debtor, demanding payment of an unpaid operational debt or an operational debt where default has occurred. The demand notice gives the corporate debtor ten days to pay turnover debt. Additionally, a copy of the demand notice served on the corporate debtor must also be forwarded to the relevant adjudicating authority for record.

Who is an Operational Creditor?

In Insolvency and Bankruptcy Code, 2016 (IBC) Section 5(20), an operational creditor means the person to whom an operational debt is owed by a corporate debtor that includes a person to whom the operational debt is owed and has either been assigned or transferred in accordance with the law.

Section 5(21) defines operational debt as a claim in respect of:

  • Provision of goods or services, including employment; or
  • Payment of dues under any existing law, payable to the Central Government, State Government, or a local authority.

Examples of operational creditors include:

  • Suppliers of goods or services.
  • Employees owed wages or salaries.

Government authorities owed statutory dues such as GST, PF, or ESI.

Operational Creditor vs. Financial Creditor

  • Financial Creditor (Section 5(7)): A person to whom a financial debt is owed.
  • Financial Debt (Section 5(8)): A debt (with or without interest) disbursed against the consideration for the time value of money.

Examples:

  • Bank loans and NBFC financing.
  • Money raised via bonds or debentures.
  • Liabilities under hire-purchase or lease contracts treated as borrowings.

The difference:

  • Operational debt comes from business operations and statutory obligations.

Financial debt comes from borrowing or financing arrangements.

Who is a Corporate Debtor?

Under Section 3(8) of the IBC, a corporate debtor is any corporate person—company or LLP—that owes a debt to one or more creditors.
 It may owe:

  • Financial debt to financial creditors.
  • Operational debt to operational creditors.

If a corporate debtor fails to repay, creditors may initiate corporate insolvency resolution or liquidation proceedings under the IBC.

Procedure to Issue a Section 8- Demand Notice

When we guide clients through Section 8- Demand Notice drafting, the process is never just about filling a template — it’s about meeting every legal tick box so the NCLT can’t reject your application.

1. Verify the Debt and Supporting Evidence

  • Confirm it’s operational debt.
  • Ensure no pre-existing dispute.
  • Gather invoices, delivery challans, completion certificates, emails, or payment commitments.

Client Tip: A supplier lost their NCLT case because WhatsApp messages about “product defects” before due date were treated as a dispute.

2. Draft in Form 3 or Form 4

  • Form 3 – If creditor sends directly.
  • Form 4 – If through an authorised lawyer.
     Mandatory fields: creditor/debtor details, debt breakup, proof list.

Serve Properly

  • RPAD or speed post to registered office.
  • Email to whole-time director or authorised officer.
  • Always verify MCA records for current address.

4. Wait 10 Days

Debtor can:

  • Pay up.
  • Show dispute.
  • Provide proof of prior payment.

5. File Section 9 Application

If unresolved, file with NCLT jurisdiction over debtor’s registered office.

Analogy: The notice is like a cricket team’s LBW signal — not the wicket, but the green light for the umpire to hear your appeal.

Section 8-Demand Notice

Common Mistakes to Avoid in a Section 8-Demand Notice

  1. Wrong Address: Service to branch office or old MCA address.
  2. Unclear Debt Details: Missing breakup of principal and interest.
  3. Ignoring Existing Disputes: Filing when debtor has prior documented objections.
  4. Improper Format: Not using Form 3 or 4.
  5. Lack of Proof of Delivery: No postal tracking or acknowledgment slip.

Case Example: In Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., the Supreme Court held that notice issued by an advocate on behalf of the creditor is valid — but only if compliant with IBC rules.

Strategic Tips for Creditors

  • Use the notice as a negotiation lever — many debtors prefer to settle quietly before NCLT filing.
  • Maintain documentary proof at every step; NCLT works strictly on records.
  • Cross-check the corporate debtor’s financial health on the MCA and IBBI databases.
  • If debt is borderline disputed, consider civil recovery before invoking IBC.

Why Choose Diligence Certification for Section 8 Demand Notice?

  • Accuracy in Drafting – Ensures the notice is in Form 3 or Form 4 in accordance with Rule 5 of the IBC Rules, 2016. 
  • Error Prevention – Reduces the possibility of dismissal due to clerical error, incorrect address, or defect in service.
  • Compliance – Ensures the notice is fully compliant with all statutory and procedural requirements of the IBC.
  • Creditor Position – Increases the credibility of the creditor’s position in any potential NCLT proceeding. 
  • Risk Prevention – Decreases the chance of a dispute being raised on a technicality.
  • Credibility & Confidence – Assures all relevant parties that the process was followed as prescribed.
  • Better Chance of Collection – Increases the likelihood that the debtor will settle or pay on time.

Conclusion – Using Section 8-Demand Notice Effectively

In India’s fast-moving corporate credit landscape, a Section 8- Demand Notice is not just a compliance requirement — it’s a strategic tool.
 Done right, it can push reluctant debtors into swift payment, protect your legal standing, and prepare you for NCLT proceedings if needed.

If you’re owed operational dues, don’t let procedural mistakes dilute your position.
 Get the drafting, service, and evidence right the first time. At Diligence Certifications, we’ve seen even long-pending debts turn into quick recoveries with a well-executed notice.

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Frequently Asked Questions

A statutory notice under Section 8 of IBC 2016 issued by an operational creditor to a corporate debtor for unpaid operational debt, giving 10 days to respond before NCLT action.

 

 Any operational creditor or their authorised lawyer can issue it in Form 3 or Form 4, following IBC rules.

 Yes. Without it, your Section 9 application will be rejected.

 Yes, per Supreme Court ruling, provided it follows Rule 5 requirements.

 If dispute is valid and predates notice, NCLT will not admit the insolvency petition.

Email is valid if sent to a whole-time director or authorised officer, but postal proof is still advised.

The creditor can file a Section 9 application before NCLT with proof of non-payment.

Yes. As of current law, the default threshold is ₹1 crore for corporate insolvency.

Yes, by mutual settlement before NCLT admission

Forms are in the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, downloadable from IBBI’s website.

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