Pre-Packaged Insolvency Resolution Process

i.Cost-effective and speedier: Pre-Packaged Insolvency Resolution Process (PPIRP) may be preferred because it combines the benefits of informal and formal processes. It helps resolve corporate distress, swiftly and cost-effectively as it minimizes state intervention and avoids the stigma of formal insolvency.

ii.Role of Corporate Debtor (CD) in the Resolution Process: The best people to solve a company’s money problems are the people who run the company. The company’s management has a close understanding of the business and is in the best position to determine the process of recovery. Their voluntary initiation of the pre-pack process, with stakeholder consent also mitigates the risk of liquidation.

iii.Management with CD: In CIRP, the RP takes ownership of the company. However, it is extremely difficult for the RP to effectively manage a company that they are unfamiliar with.

In contrast, under the PPIRP, management stays with the CD. This means there will be little disruption to the company’s regular operations, thereby lowering the chance of job losses.

iv.Burden of NCLT reduced: Approval will happen quicker because there isn’t likely to be an issue with the resolution plan as Financial Creditors and Corporate debtors have already reached an informal understanding.

v.Preliminary Work: PPIRP commences only upon meeting specific prerequisites: obtaining approval from at least sixty-six per cent of Financial Creditors for the proposal and confirming the name RP; passing of a special resolution with approval of 75% of members of the company; drafting a Base Resolution Plan by the CD; and confirming the RP’s name through approval from both parties. However, there are fewer preliminary steps involved before initiating a CIRP which extends the timeline.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(a) (Syllabus 2017).

Basis CIRP PPIRP

Legal Framework More in Legal Framework More in Legal Framework More in statute and less in statute and less in statute and less in Threshold for initiating the Default above INR 1 Crore Default above INR 10 Lakhs process Initiation by Financial Creditor, Operational Corporate Debtor with consent

Creditor or Corporate Debtor of majority of unrelated FCs

Management of Corporate IP in possession with creditor in Debtor in possession with Debtor Control creditor in control Invitation and collation of IRP to invite and collate the Corporate Debtor to submit list claim claims of claims to RP and Resolution

Professional also to invite and collate the claims

Information Memorandum Prepared by Resolution Draft prepared by Corporate

Professional Debtor and finalised by

Resolution Professional

Process Resolution Cost Includes cost of running the Doesn’t include the cost of

operations of the corporate running the operations of the debtor corporate debtor

Swiss Challenge May/not to be followed while Swiss Challenge is followed

calling resolution plan while calling the resolution plan

Right of promoter to offer If eligible under Section 29A Promoters have first right to resolution plan and promoter is at par with offer resolution plan subject to

other resolution applicants eligibility under Section 29A

Basis CIRP PPIRP

Early closure of the process By withdrawal under Section Suo moto by CoC or with

12A or at the request of approval of 66% of voting share applicant of members of CoC present

and voting

Consequence of the failure of Liquidation Closure or termination the process Role of RP and Adjudicating Relatively more Relatively less Authority Timeline of the process 180 days followed by 90 120 days

days extension subject to Adjudicating Authority approval

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(b) (Syllabus 2017).

Section 11A of the Insolvency and Bankruptcy Code, 2016 provides for disposal of applications under section 54C and under section 7 or section 9 or section 10 of the Code.

Adjudicating Authority shall dispose of the respective application under the different scenarios in the following manner:

(a)Where an application filed under Section 54C (to initiate PPIRP) is pending, the Adjudicating Authority shall pass an order to admit or reject such application, before considering an application filed under Section 7 or Section 9 or Section 10 during the pendency of such application under Section 54 C, in respect of the same Corporate Debtor. Accordingly, the Adjudicating Authority shall dispose of the application of the corporate debtor made on 1st March, 2024 for initiating PPIRP.

(b)Where an application under Section 54 C is filed within 14 days of filing of any application under Section 7 or Section 9 or Section 10, which is pending, in respect of the same corporate debtor, then, notwithstanding anything contained in Section 7, 9 and 10, the Adjudicating Authority shall first dispose-off the application under Section 54 C.

Hence, under this scenario, an application made by the Corporate Debtor on 10th March, 2024 for initiating PPIRP shall first be disposed-off by the Adjudicating Authority, albeit the Operational Creditor has filed his application prior to that application which is pending but period of 14 days has not expired.

(c)Where an application under Section 54C is filed after 14 days of filing of any application under Section 7 or Section 9 or Section 10, which is pending, in respect of the same corporate debtor, the Adjudicating Authority shall first dispose-off the application under Section 7, 9 or

10.As the application for initiating PPIRP under Section 54 C has been made on 20th March, 2024 i.e., after 14 days of the application filed by the Financial Creditor, the Adjudicating Authority shall first dispose-off the application of Financial Creditor for initiating CIRP.

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

Management of affairs of corporate debtor by interim resolution professional (In case of CIRP)

Section 17(1)(a) of the Insolvency and Bankruptcy Code, 2016 provides that from the date of appointment of the interim resolution professional the management of the affairs of the corporate debtor shall vest in the interim resolution professional.

Section 23 of the Code provides for Resolution professional to conduct corporate insolvency resolution process. Subject to section 27(1), the resolution professional shall conduct the entire corporate insolvency resolution process and manage the operations of the corporate debtor during the corporate insolvency resolution process period: Provided that the resolution professional shall continue to manage the operations of the corporate debtor after the expiry of the corporate insolvency resolution process period, until an order approving the resolution plan under sub-section

(1)of section 31 or appointing a liquidator under section 34 is passed by the Adjudicating Authority.

Management of affairs of corporate debtor (In case of PPIRP)

Section 54H of the Insolvency and Bankruptcy Code, 2016 provides that 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 endeavour 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 Chapter III and such other conditions and restrictions as may be prescribed.

Vesting management of corporate debtor with resolution professional Section 54J of the Insolvency and Bankruptcy Code, 2016 provides that –

(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.

(3)Notwithstanding anything to the contrary contained in Chapter III, the provisions of—

(a)sub-sections (2) and (2A) of section 14;

(b)section 17;

(c)clauses (e) to (g) of section 18;

(d)sections 19 and 20;

(e)sub-section (1) of section 25;

(f)clauses (a) to (c) and clause (k) of sub-section (2) of section 25; and

(g)section 28, shall, mutatis mutandis apply, to the proceedings under this Chapter, from the date of the order under sub-section (2), until the pre-packaged insolvency resolution process period comes to an end.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 3(b) (Syllabus 2022).

(i)(D) Not more than ₹ 100 lakh

(ii)(D) ₹ 10 Lakh

(iii)(A) Optional

(iv)(A) Form 1

(v)(D) The company shall convene a meeting of operational creditors who are not related parties of the corporate debtor

(vi)(D) All the above

(vii)(B) Approving the filing of an application for initiating PPIRP

(viii)(A) The Corporate Debtor

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2(a) (Syllabus 2022).

As per section 54A of the Insolvency and Bankruptcy Code, 2016, 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. MSME thresholds are as under:

Class Capital Investment in Cap in Turnover (Crore) Applicability of Pre-pack

Plant and Machinery or Equipment (Crore)

Micro Enterprise 1 5 Yes Small Enterprise 10 50 Yes Medium Enterprise 50 250 Yes Super Limited will be treated as medium enterprise since its turnover and capital investment in plant and machinery is less than Rs 250 crore and Rs 50 crore respectively.

Without prejudice to sub-section (1), an application for initiating pre-packaged insolvency resolution process may be made in respect of a corporate debtor, who commits a default referred to in section 4, subject to the following condition:

-it is eligible to submit a resolution plan under section 29A of the Insolvency and Bankruptcy Code, 2016.

Section 29A of the Insolvency and Bankruptcy Code, 2016 states that a person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person:

-at the time of submission of the resolution plan has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 or the guidelines of a financial sector regulator issued under any other law for the time being in force, and at least a period of one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor.

Since the account of Duper Limited which is wholly owned subsidiary of Super Limited and under the control of Rohan is also classified as non-performing asset, Super Limited will not be eligible for pre-packaged insolvency resolution process irrespective of the fact that Super Limited is a medium enterprise as per section 54A of the Insolvency and Bankruptcy Code, 2016.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 3(ii) (Syllabus 2017).

Pre-requisites for initiation of Pre-packed Insolvency Resolution Process:

l PPIRP may be initiated only by a Corporate Debtor which is an MSME under Section 7(1) of the MSME Development Act, 2006.

l According to Form-1 specified in the Insolvency and Bankruptcy (PPIRP) Rules, 2021, only MSMEs Registered as Companies or Limited Liability Partnerships have the eligibility to commence PPIRP.

l In order to prove the status of Corporate Debtor as an MSME, the application for PPIRP must provide either a Current Udyam Registration Certificate or documentation showing investment in Plant and Machinery or Equipment, along with turnover details.

l Before initiating a PPIRP, a Corporate Debtor is required to fulfil certain requirements which include eligibility criteria such as being an MSME with a minimum default amount of at least ₹ 10 Lakhs, and eligible to submit resolution plan under Section 29A of the Insolvency and Bankruptcy Code (IBC).

l Additionally, the Corporate Debtor cannot initiate a PPIRP if it has undergone CIRP or PPIRP within the last three years, if it is currently undergoing CIRP, or if a liquidation order has been issued against it under section 33 of the Code.

Furthermore, before beginning the Pre-pack Process, the Corporate Debtor must:

i.Choose Resolution Professional: The Corporate Debtor convenes a meeting of its unrelated financial creditors to propose and approve the appointment of an insolvency professional as the RP.

ii.Declaration by majority of the directors/partners: Majority Partners or Directors of the debtor must make a declaration specifying the application timeline (max 90 days), PPIRP is not initiated to defraud creditors and the name of proposed insolvency professional as resolution professional by Financial Creditors in their meeting.

iii.Special Resolution: Additionally, members must pass a Special Resolution (patterns by 3/4th majority in case of LLP) to approve the initiation of PPIRP.

iv.Obtain Creditor Approval: Unrelated Financial Creditors (FCs) must approve filing of application of initiating PPIRP by a 66% majority at a meeting of the Unrelated Financial Creditors convened by the CD as per Section 54A(3) of the Code v. In case there are no Unrelated Financial Creditors (UFCs), a meeting of Unrelated Operational Creditors (UOCs) (10 largest Operational Creditors by value and one representative of workmen and employee each) may be convened where UOCs perform the duties and functions of the UFCs according to the Regulations.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(c) (Syllabus 2017).

As per section 54C of the Insolvency and Bankruptcy Code, 2016, the corporate applicant shall, along with the application, furnish:

a)the declaration, special resolution or resolution, as the case may be, and the approval of financial creditors for initiating pre-packaged insolvency resolution process in terms of section 54A;

b)the name and written consent, in such form as may be specified, of the insolvency professional proposed to be appointed as resolution professional, as approved under clause (e) of sub-section (2) of section 54A, and his report as referred to in clause (a) of sub-section (1) of section 54B;

c)a declaration regarding the existence of any transactions of the corporate debtor that may be within the scope of provisions in respect of avoidance of transactions under Chapter III or fraudulent or wrongful trading under Chapter VI, in such form as may be specified;

d)information relating to books of account of the corporate debtor and such other documents relating to such period as may be specified.

Accordingly, the contention of Rohan is not correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 3(iv) (Syllabus 2017).

As per section 54D of the Insolvency and Bankruptcy Code, 2016:

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

-Without prejudice to sub-section (1), the resolution professional shall submit the resolution plan, as approved by the committee of creditors, to the Adjudicating Authority under sub-section (4) or sub-section (12), as the case may be, of section 54K, within a period of ninety days from the pre-packaged insolvency commencement date.

Considering the above, the contention of one of the lenders is legally not correct that it may take years to complete the process.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 3(iii) (Syllabus 2017).