Data from the Insolvency and Bankruptcy Board of India (IBBI) shows that banks and other financial creditors accounted for 47% of cases admitted between April and December, compared with 33% by operational creditors. The rest of the cases were initiated by the companies themselves.
In the December quarter, the difference is starker: 67% of the cases were initiated by financial creditors and 30% by operational creditors. This is huge variance with the average of 44% by financial creditors and 43% by operational creditors in the FY17-25 period, data showed.
An analysis by the IBBI in its latest quarterly update said that cumulatively, operational creditors had started bankruptcy proceedings in 80% of the cases where the default is less than ₹1 crore and 80% of defaults of above ₹10 crore were taken to the National Company Law Tribunal (NCLT) by financial creditors. The year-wise data on the magnitude of payment defaults across types of creditors is not available.
The trend of operational creditors becoming less aggressive in triggering bankruptcy process started in FY21, after the government raised the payment default threshold under the IBC from ₹100,000 to ₹1 crore in March 2020. But it took time for this to become pronounced as was seen in the December quarter of the current fiscal year.
“It seems that the IBC has now become more of a ‘bank-led restructuring regime’ rather than a trade-credit recovery forum,” said Yogendra Aldak, an executive partner at Lakshmikumaran and Sridharan attorneys.
“In recent years, applications filed by operational creditors under the IBC have seen a noticeable decline. This trend may be driven by the fact that operational creditors typically receive very low recoveries under the IBC’s waterfall mechanism, where their claims are subordinate to those of financial creditors,” said Aldak.
Vishal Gehrana, partner designate at law firm Karanjawala & Co, said that over time, operational creditors have learned that pursuing corporate insolvency resolution for modest claims can be cumbersome, costly, and uncertain. Many now prefer settlements or alternative recovery methods, rather than engaging in lengthy proceedings, he said.
“The economics of insolvency matter. Most operational creditor cases involve relatively small amounts. Corporate insolvency resolution frequently extends far beyond statutory timelines, with uncertain recoveries,” Gehrana said. It takes an average of 619 days for debt resolution, far exceeding the 180 days envisaged in the IBC, which is extendable up to 330 days, he added.
Also, the NCLT, the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court have, in recent years, started strictly enforcing the “pre-existing dispute” doctrine and held that IBC cannot be used as a money recovery mechanism, added Aldak of Lakshmikumaran and Sridharan.
Hence, many bankruptcy petitions by operational creditors are rejected even on minimal evidence of a pre-existing dispute, said Aldak.
The IBC says that operational creditors can move NCLT only if it has not received a notice of dispute once it served the demand for repayment.
“As a result, many operational creditors have shifted to alternative recovery mechanisms—such as civil/commercial suits, arbitration, and MSME Samadhan—for more effective and timely relief,” said Aldak. MSME Samadhan is an online government portal for small businesses’ payment-related grievance redressal.
Operational creditors are often lower in the payout hierarchy, while financial creditors take priority. “For many, the cost, time, and limited recovery make formal insolvency a less viable option than negotiation or write-offs,” said Gehrana of Karanjawala.
In fact, operational creditors have limited control over the resolution process. They are generally excluded from the Committee of Creditors and have no voting rights on resolution plans. Financial creditors, on the other hand, control the process and the outcome, Gehrana explained.
The law governing debt resolution is maturing, and so are the creditors. “It is evolving from a broadly accessible recovery tool into a structured, lender-driven mechanism focused on larger debts,” he said.
Data also showed that cumulatively, more cases initiated by operational creditors since FY17 were settled out of tribunals, or withdrawn or dropped, due to successful legal challenge of the admission itself, than those triggered by financial creditors. This shows how the IBC has been used by vendors to pressurize companies for recovery of dues.
Provisional data shows that 99 personal guarantors of companies were taken to bankruptcy tribunals during April-December 2026 for defaulting on ₹291 crore of debt payments.