Get a Quote
Get a Quote and Find Services to Fit Your Needs 50000+ Satisfied Clients
5000+ Licenses & Registration
15 Branches across India
75 Years + Combined experience
The Insolvency and Bankruptcy Code (IBC), 2016, is the primary piece of legislation governing insolvency resolution and bankruptcy proceedings for companies, limited liability partnerships, partnership firms and individuals in India. Under the Code, an operational creditor (OC) is required to serve a demand notice u/s 8, in Form 3 (where a demand notice is issued without attaching an invoice) or Form 4 (where the demand notice is accompanied by invoice copy).
The purpose of serving the demand notice is to give the corporate debtor 10 days to either repay the debt or raise a dispute before initiating insolvency proceedings. In this blog post, we shall provide you with the format of both Form 3 and Form 4. We shall also provide you a brief explanation of these forms.
Form 3 u/s 8 of IBC 2016 is a general demand letter/notice that must be served by the operational creditor (OC) to the corporate debtor to demand payment of the unpaid operational debt or to notify the existence of such default. It is issued prior to initiating corporate insolvency resolution proceedings.
Here is the Form 3 IBC format:
Form 4 u/s 8 of IBC 2016 is also a demand letter/notice that must be served by the OC to the corporate debtor before initiating corporate insolvency resolution proceedings.
However, unlike Form 3 of the IBC, Form 4 is specifically used when the demand is based on an operational debt supported by an invoice. Therefore, it must be served along with a copy of invoice demanding payment.
Here is the Form 4 IBC format:
Form 3 and Form 4 u/s 8 of IBC 2016 ensure that the corporate debtor is given an opportunity to either repay the outstanding operational debt or raise a valid dispute within 10 days. However, even after service of Form 3 or Form 4 by the OC, many corporate debtors tend to fail to either repay the debt or raise a valid dispute within the stipulated time.
In such cases, under Section 9 of the Insolvency and Bankruptcy Code, 2016, the OC may file an application before the NCLT to initiate corporate insolvency resolution proceedings for recovery of dues.
Also Read:- Section 9 Petition Format to Start Insolvency Resolution Process
Q1. Is it mandatory to attach an invoice with Form 4 of Insolvency and Bankruptcy Code?
A. Yes. When using Form 4 of the Insolvency and Bankruptcy Code for recovery of operational debt, the operational creditor must mandatorily attach a copy of the invoice demanding payment. In absence of invoice, the creditor must use Form 3 instead.
Q2. Who is an operational creditor under IBC 2016?
A. Under Section 5(20) of IBC 2016, the definition of operational creditor is provided. The section states that “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.
Q3. What happens if the corporate debtor fails to repay operational debt after getting served Form 3/4 under IBC?
A. If the corporate debtor fails to repay operational debt within 10 days after getting served Form 3/4 under IBC, the operational creditor can proceed with filing an application for initiation of the Corporate Insolvency Resolution Process before the NCLT u/s 9 of IBC.
Q4. Who is a corporate debtor under IBC?
A. Under Section 3(8), the definition of corporate debtor is provided. The section states that “corporate debtor” means a corporate person who owes a debt to any person.
Q5. Who serves 3 Form IBC?
A. The operational creditor or their authorized representative serves this form to the debtor.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
Want to know More ?
