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Start with the threshold, because it determines everything. A corporate insolvency petition requires a default of at least one crore rupees, and a very large proportion of diamond and textile trade debts fall below it. Where they do, recovery runs through Section 138 prosecutions, Order XXXVII summary suits, Commercial Court claims, or the MSME Samadhaan route with its compound interest at three times the RBI bank rate — which is frequently the strongest lever a registered small unit has.

Where the threshold is met, a financial creditor proceeds under Section 7 and an operational creditor under Section 9 after a statutory demand notice. For operational creditors the decisive question is whether the debtor raised a genuine dispute before that notice — over quality, quantity or a counterclaim. If one exists the petition will not be admitted, because the IBC is an insolvency mechanism and not a substitute for a recovery suit, so the correspondence trail has to be assessed candidly before filing.

Admission changes the debtor's position entirely: a moratorium halts suits and enforcement, the board is displaced in favour of a resolution professional, and the promoter may be barred under Section 29A from bidding for the company. That is why the credible threat of admission produces so many settlements, commonly formalised as a Section 12A withdrawal with committee approval. Appeals from Ahmedabad go to the NCLAT in New Delhi.