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Insolvency and Bankruptcy Code, 2016 brought in a substantial financial discipline among Indian Companies. Prior to the said Code, taking advantage of delay in litigations due to high pendency of cases in the courts, companies were always dragging the payments. The above said Code mandated that if a company is not able to make the payment within 10 days from the date of receipt of a demand notice from the creditor, it is treated as default. Hence, the creditor can approach National Company Law Tribunal (NCLT) seeking to initiate insolvency proceedings against the defaulter. The minimum amount in default for invoking these proceedings, originally was Rs.1,00,000 only. Hence, thousands of petitions were filed by creditors initiating these proceedings against various companies including MSMEs. The Said proceedings can be initiated either by Financial creditors or operational creditors. Financial creditors are allowed to include the applicable interest amount also in the demand notice, whereas the operational creditors are not allowed to include the interest amount in the demand notice.

Due to the negative effect on the industry created by COVID-19 Epidemic, increased Petitions against MSMEs, the Government of India has increased the above said minimum default amount from Rs. 1,00,000 (One Lakh) to Rs.1,00,00,000 (Rs. One Crore) by way of a notification dated 24th March 2020. The above said amendment even though is a relief for MSMEs, the other companies also will take advantage of the increased threshold and delay the payments. Hence, here in after if a default is less than one crore parties require to approach the normal courts or arbitration to resolve their disputes.