Pre-Packaged Insolvency Resolution Process

Section 54E of the Insolvency and Bankruptcy Code, 2016 deals with Declaration of moratorium and public announcement during prepackaged insolvency resolution process. It states that:

The Adjudicating Authority shall, on the pre-packaged insolvency commencement date, along with the order of admission under section 54C -

(a)declare a moratorium for the purposes referred to in sub-section (1) read with sub-section (3) of section 14, which shall, mutatis mutandis applies, to the proceedings under this Chapter;

(b)appoint a resolution professional -

(i)as named in the application, if no disciplinary proceeding is pending against him; or

(ii)based on the recommendation made by the Board, if any disciplinary proceeding is pending against the insolvency professional named in the application.

(c)cause a public announcement of the initiation of the prepackaged insolvency resolution process to be made by the resolution professional, in such form and manner as may be specified, immediately after his appointment.

(2)The order of moratorium shall have effect from the date of such order till the date on which the

prepackaged insolvency resolution process period comes to an end.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6(c) (Syllabus 2022).

Duties of resolution professional before initiation of pre-packaged insolvency resolution process. (Section 54B)

As per Section 54 B (1) of the Insolvency and Bankruptcy Code, 2016, the insolvency professional, proposed to be appointed as the resolution professional, shall have the following duties commencing from the date of the approval under clause (e) of sub-section (2) of section 54A, namely: -

(a)prepare a report in such form as may be specified, confirming whether the corporate debtor meets the requirements of section 54A, and the base resolution plan conforms to the requirements referred to in clause (c) of sub-section (4) of section 54A;

(b)file such reports and other documents, with the Board, as may be specified; and

(c)perform such other duties as may be specified.

When will the duties of insolvency professional under Section 54B (1) of the Code cease?

Section 54B (2) of the Insolvency and Bankruptcy Code, 2016 provides the following circumstances:

(a)If the corporate debtor fails to file an application for initiating prepackaged insolvency resolution process within the time period as stated under the declaration referred to in clause

(f)of subsection (2) of section 54A; or

(b)the application for initiating prepackaged insolvency resolution process is admitted or rejected by the Adjudicating Authority, as the case may be.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6A(ii) (Syllabus 2022).

As per Section 54 B (1), the insolvency professional, proposed to be appointed as the resolution professional, shall have the following duties commencing from the date of the approval under clause (e) of sub-section (2) of section 54A, namely:

(a)prepare a report in such form as may be specified, confirming whether the corporate debtor meets the requirements of section 54A, and the base resolution plan conforms to the requirements referred to in clause (c) of sub-section (4) of section 54A;

(b)file such reports and other documents, with the Board, as may be specified; and

(c)perform such other duties as may be specified.

Section 54B (3) provides that the fees payable to the insolvency professional in relation to the duties performed under subsection (1) shall be determined and borne in such manner as may be specified and such fees shall form part of the pre-packaged insolvency resolution process costs, if the application for initiation of pre-packaged insolvency resolution process is admitted.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 6(c) (Syllabus 2017).

Sections 54A to 54P of the Insolvency & Bankruptcy Code contain provisions relating to Prepackaged Insolvency Resolution Process.

•An application for initiating pre-packaged insolvency resolution process may be made in respect of a corporate debtor classified as a micro, small or medium enterprise under subsection (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006. The minimum amount of default for initiating pre-packaged insolvency resolution process is Rs. 10 lakhs.

•Pre-packaged insolvency resolution process shall be completed within a period of one hundred and twenty days from the pre-packaged insolvency commencement date.

•The resolution professional shall submit the resolution plan, as approved by the committee of creditors to the Adjudicating Authority within a period of ninety days from the pre-packaged insolvency commencement date.

•An application for pre-packaged insolvency resolution process may be filed by a corporate applicant. The Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021 contains the procedure for pre-packaged insolvency resolution process.

•The corporate debtor shall, within two days of the pre-packaged insolvency commencement date, submit to the resolution professional a list of claims and a preliminary information memorandum. During the pre-packaged insolvency resolution process period, the management of the affairs of the corporate debtor shall continue to vest in the Board of Directors or the partners, as the case may be, of the corporate debtor.

•The resolution professional shall, within seven days of the pre-packaged insolvency commencement date, constitute a committee of creditors, based on the list of claims confirmed. As per Section 54I(2), the first meeting of the committee of creditors shall be held within seven days of the constitution of the committee of creditors.

•The committee of creditors (CoC), at any time during the pre-packaged insolvency resolution process period, by a vote of not less than sixty-six per cent. of the voting shares, resolve to vest the management of the corporate debtor with the resolution professional.

•The corporate debtor shall submit the base resolution plan to the resolution professional within two days of the pre-packaged insolvency commencement date, and the resolution professional shall present it to the committee of creditors.

•The CoC may provide the corporate debtor an opportunity to revise the base resolution plan prior to its approval or invitation of prospective resolution applicants, as the case may be.

•The committee of creditors may approve the base resolution plan for submission to the Adjudicating Authority if it does not impair any claims owed by the corporate debtor to the operational creditors and conforms to the requirements of section 30(1) & (2) of the Code.

•Where – (a) the committee of creditors does not approve the base resolution plan under subsection (4); or (b) the base resolution plan impairs any claims owed by the corporate debtor to the operational creditors, the resolution professional shall invite prospective resolution applicants to submit a resolution plan or plans, to compete with the base resolution plan, in such manner as may be specified.

•The committee of creditors shall evaluate the resolution plans presented by the resolution professional and select either BRP or a resolution plan which is significantly better than BRP. The resolution plan approved by the committee of creditors is submitted to the Adjudicating Authority by the Resolution Professional.

•The Adjudicating Authority shall, before passing an order for approval of a resolution plan under this sub-section, satisfy itself that the resolution plan has provisions for its effective implementation.

Benefits of pre-pack insolvency resolution process :

•It consolidates the benefit of both formal and informal proceedings of resolution, thus broadening the options for stakeholders.

•It enables faster resolution as the corporate debtor can prepare a settlement plan or resolution plan with the creditors before going to NCLT.

•Reduced burden on NCLT due to out of court settlements.

•With the suspension of CIRP until March 2021, pre-pack has come as a relief to promoters and corporate debtors.

•It allows the corporate debtor retain control till a settlement is reached with the creditors.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(d) (Syllabus 2022).

Section 54N of the Insolvency & Bankruptcy Code dealing with termination of pre-packaged insolvency resolution process. It provides that:

1.Where the resolution professional files an application with the Adjudicating Authority, -

a)under the proviso to sub-section (12) of section 54K; or

b)under sub-section (3) of section 54D,

the Adjudicating Authority shall, within thirty days of the date of such application, by an order, -

i)terminate the pre-packaged insolvency resolution process; and

ii)provide for the manner of continuation of proceedings initiated for avoidance of transactions under Chapter III or proceedings initiated under section 66 and section 67A, if any.

2.Where the resolution professional, at any time after the pre-packaged insolvency commencement date, but before the approval of resolution plan under sub-section (4) or sub-section (12), as the case may be, of section 54K, intimates the Adjudicating Authority of the decision of the committee of creditors, approved by a vote of not less than sixty-six per cent of the voting shares, to terminate the pre-packaged insolvency resolution process, the Adjudicating Authority shall pass an order under sub-section (1).

3.Where the Adjudicating Authority passes an order under sub-section (1), the corporate debtor shall bear the pre-packaged insolvency resolution process costs, if any.

4.Notwithstanding anything to the contrary contained in this section, where the Adjudicating Authority has passed an order under sub-section (2) of section 54J and the prepackaged insolvency resolution process is required to be terminated under sub-section (1), the Adjudicating Authority shall pass an order –

(a)of liquidation in respect of the corporate debtor as referred to in sub-clauses (i), (ii) and

(iii)of clause (b) of sub-section (1) of section 33; and

(b)declare that the pre-packaged insolvency resolution process costs, if any, shall be included as part of the liquidation costs for the purposes of liquidation of the corporate debtor.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4(c) (Syllabus 2017).

Section 54H of the Insolvency & Bankruptcy Code, 2016 provides following provisions with respect to the management of affairs of corporate debtor during the pre-packaged insolvency resolution process period-

a)the management of the affairs of the corporate debtor shall continue to vest in the Board of Directors or the partners, as the case may be of the corporate debtor, subject to such conditions as may be specified:

b)the Board of Directors or the partners, as the case may be, of the corporate debtor, shall make every endeavor to protect and preserve the value of the property of the corporate debtor, and manage its operations as a going concern; and

c)the promoters, members, personnel and partners, as the case may be, of the corporate debtor, shall exercise and discharge their contractual or statutory rights and obligations in relation to the corporate debtor, subject to the provisions of this chapter and such other conditions and restrictions as may be prescribed.

Section 54J of the Insolvency & Bankruptcy Code, 2016 prescribe the following provisions in respect to power of CoC in vesting management of corporate debtor with resolution professional:

(1)Where the committee of creditors, at any time during the pre-packaged insolvency

resolution process period, by a vote of not less than sixty-six per cent of the voting shares, resolves to vest the management of the corporate debtor with the resolution professional, the resolution professional shall make an application for this purpose to the Adjudicating Authority, in such form and manner as may be specified.

(2)On an application made under sub-section (1), if the Adjudicating Authority is of

the opinion that during the pre-packaged insolvency resolution process—

(a)the affairs of the corporate debtor have been conducted in a fraudulent

manner; or

(b)there has been gross mismanagement of the affairs of the corporate debtor,

It shall pass an order vesting the management of the corporate debtor with the resolution professional.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 6A(i) (Syllabus 2017).

According to the Section 54F of the Insolvency and Bankruptcy Code, the resolution professional shall perform the following duties, namely: —

(a)confirm the list of claims submitted by the corporate debtor under section 54G, in such manner as may

be specified;

(b)inform creditors regarding their claims as confirmed under clause (a), in such manner as may be

specified;

(c)maintain an updated list of claims, in such manner as may be specified;

(d)monitor management of the affairs of the corporate debtor;

(e)inform the committee of creditors in the event of breach of any of the obligations of the Board of Directors

or partners, as the case may be, of the corporate debtor, under the provisions of this Chapter and the rules and regulations made thereunder;

(f)constitute the committee of creditors and convene and attend all its meetings;

(g)prepare the information memorandum on the basis of the preliminary information memorandum

submitted under section 54G and any other relevant information, in such form and manner as may be specified;

(h)file applications for avoidance of transactions under Chapter III or fraudulent or wrongful trading under

Chapter VI, if any; and

(i)such other duties as may be specified.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 6A(i) (Syllabus 2017).

(1)Where the resolution professional files an application with the Adjudicating Authority. -

(a)under the proviso to sub-section (12) of section 54K; or

(b)under sub-section (3) of section 54D, the Adjudicating Authority shall, within thirty days of the date of such application, by an order, -

I.terminate the pre-packaged insolvency resolution process: and

II. provide for the manner of continuation of proceedings initiated for avoidance of transactions under Chapter III or proceedings initiated under section 66 and section 67A, if any.

(2)Where the resolution professional, at any time after the pre-packaged insolvency commencement date, but before the approval of resolution plan under sub-section

(4)or sub-section (12), as the case may be, of section 54K. intimates the

Adjudicating Authority of the decision of the committee of creditors, approved by a vote of sixty-six per cent of the voting shares, to terminate the pre-packaged insolvency resolution process, the Adjudicating Authority shall pass an order under sub-section (1).

(3)Where the Adjudicating Authority passes an order under sub-section (1), the corporate debtor shall bear the pre-packaged insolvency resolution process costs, if any.

Considering the above provisions, it is possible to terminate the pre-packaged insolvency resolution process under Insolvency and Bankruptcy Code, 2016 in the manner stated above.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 6A(ii) (Syllabus 2017).

Corporate Debtors eligible for Prepacked Insolvency Resolution Professional (PPIRP) provided under Section 54-A of Insolvency & Bankruptcy Code, 2016. It states that:

(1)Application for initiation of PPIRP may be made by corporate debtors classified as micro, small and medium enterprises under sub section (1) of Section 7 of the MSME Development Act 2006.

(2)Without prejudice to sub section (1) above , an application for initiation of PPIRP may be made by Corporate Debtors who commits a default subject to the following conditions -

(a)It has not undergone PPIRP resolution or completed insolvency resolution process during period of three years preceding the initiation date

(b)It is not undergoing a corporate insolvency resolution process

(c)No order requirements related to liquidation is passed under section 33

(d)Eligible to submit resolution plan under section 29A

(e)The financial creditors of the Corporate Debtors not being its related parties

(f)Majority of the directors/partners of the Corporate Debtor shall file declaration that

— they will file application for PPIRP within 90 days

— that the process is not being initiated to defraud any person

— the name of Insolvency Professional to be appointed as a resolution professional.

(h)The members of corporate debtors have passed a special resolution approving the filing of an application for initiating PPIRP.

(3)Approval from creditors not less than 66% of value of financial debt.

(4)Prior to seeking approval from financial creditors, declaration by the majority of the directors or partners of the corporate debtor.

(5)Base resolution plan under Section 54K.

(6)Such other information and documents as may be specified.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 6A(ii) (Syllabus 2017).