Pre-Packaged Insolvency Resolution Process

What is Pre-Packaged Insolvency Resolution Process?

The Pre-Packaged Insolvency Resolution Process (PPIRP) was introduced to provide an efficient and alternative insolvency mechanism for Micro, Small, and Medium Enterprises (MSMEs), which plays crucial role in India's economy. The COVID-19 pandemic severely affected MSMEs, exposing them to financial stress due to disrupted operations. Recognizing their unique business structures and simpler governance models, PPIRP was designed as a quicker, cost-effective, and value-maximizing process that minimizes disruption and helps preserve jobs.

PPIRP, officially announced through the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, on 4th April 2021, enables resolution based on trust and cooperation between debtors and creditors, allowing the company to remain under the control of existing management during the process. It is available as an alternate option, should the stakeholders like to use it. It is available for resolving stress where default is at least 1 crore rupees for which CIRP is available, it is also available in respect of defaults where default is at least 10 lakhs, and for defaults occurring between March 25, 2020, and March 24, 2021.

Unlike the Corporate Insolvency Resolution Process (CIRP), PPIRP combines the advantages of both formal and informal mechanisms. It permits debtor-in-possession with creditor oversight, ensuring transparency and safeguarding stakeholder rights. Under Section 29A, the process involves submission of a Base Resolution Plan (BRP) by the debtor, which is evaluated for value maximization. While both CIRP and PPIRP aim at resolution, PPIRP provides a more flexible, timely, and less disruptive option for MSMEs.

Official definition of Pre-Packaged Insolvency Resolution Process

PPIRP as defined in legislation

The Pre-Packaged Insolvency Resolution Process (PPIRP) is governed by a structured legal framework established under the Insolvency and Bankruptcy Code (IBC). The provisions for PPIRP outlined in:

1. The Insolvency and Bankruptcy Code, 2016, as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021
2. The Insolvency and Bankruptcy (Pre-Packaged Insolvency Resolution Process) Rules, 2021
3. The Insolvency and Bankruptcy Board of India (Pre-Packaged Insolvency Resolution Process) Regulations, 2021

Together, these instruments provide the procedural and regulatory framework for initiating, conducting and resolving insolvency cases under PPIRP mechanism.

Legal Provisions relating to PPIRP

The legal provisions for the Pre-Packaged Insolvency Resolution Process (PPIRP) in India are primarily contained within Chapter III-A of the Insolvency and Bankruptcy Code (IBC), 2016, specifically Sections 54A to 54P.

Key Legal Provisions and Requirements

Eligibility for PPIRP (Section 54A)

A Corporate Debtor (CD) classified as a Micro, Small or Medium Enterprise (MSME) under Section 7(1) of the Micro Small and Medium Enterprises Development Act, 2006 is eligible to initiate a Pre-Packaged Insolvency Resolution Process (PPIRP) if it meets the following conditions:

1. The CD has committed a default of at least 10 lakhs
2. The CD is eligible to submit a resolution plan under Section 29A of the Insolvency and Bankruptcy Code
3. The CD has not undergone a PPIRP during the 3 years preceding the initiation date
4. The CD has not completed a Corporate Insolvency Resolution Process (CIRP) during the 3 years preceding the initiation date
5. The CD is not undergoing the CIRP
6. The CD is not required to be liquidated under an order passed under Section 33 of the Insolvency and Bankruptcy Code

To establish MSME status, the application must include a valid and updated UDYAM REGISTRATION CERTIFICATE or proof of investment and turnover in accordance with Notification No. 2119(E) dated 26th June 2020, issued by the Ministry of MSMEs.

Duties of the Insolvency Professional Before PPIRP (Section 54B)

The proposed Resolution Professional (RP) must undertake specific duties before the PPIRP begins:

1. Eligibility Verification
2. Report Submission

The RP's duties cease if the corporate debtor fails to file a PPIRP application within the declared timeline or if the application is admitted or rejected. The RP's fees for these duties are borne as specified and become part of the PPIRP costs if the application is admitted.

Application to Initiate PPIRP (Section 54C)

To begin PPIRP, eligible corporate debtor (CD) must file an application with the Adjudicating Authority (AA). The application must include:

1. A declaration, special resolution, and financial creditor approvals
2. Consent and a compliance report from the proposed RP
3. Declarations regarding potential avoidance transactions or fraudulent trading
4. Financial records and other relevant documents

The AA has 14 days to admit or reject the application. If the application is incomplete, the debtor is given 7 days to rectify defects. Once admitted, the PPIRP officially begins.

Time Limit for Completion (Section 54D)

PPIRP must be completed within 120 days of its commencement date. The RP is required to submit the resolution plan approved by the Committee of Creditors (CoC) to the AA within 90 days. If no resolution plan is approved the RP must file an application to terminate the PPIRP on the following day.

Declaration of Moratorium and Public Announcement (Section 54E)

Upon commencement, the AA declares a moratorium, providing legal protection against actions such as debt recovery and asset seizure. The moratorium remains in effect until the PPIRP concludes. The RP is appointed to oversee the process and must make a public announcement about the initiation of PPIRP.

Duties and Powers of the Resolution Professional (Section 54F)

The RP's role inter alia includes:

1. Claims Management
2. Oversight
3. Documentation
4. Constituting the committee of creditors and convene and attend its meetings
5. Access to Records of financial and operational data to assess the corporate debtor's financial position

The RP's is supported by financial institutions, corporate personnel and stakeholders. Fees and expenses are determined by the CoC and included in the PPIRP costs.

Submission of Claims and Information (Section 54G)

The corporate debtor (CD) must submit a list of claims and a preliminary information memorandum to the RP within 2 days of PPIRP commencement. Promoters, directors, or partners are liable for any omissions or misleading information in these submissions, unless they can prove lack of knowledge or consent. Affected parties may seek compensation through legal recourse.

Management of Corporate Debtor (Section 54H)

During PPIRP, the management of CD remains with its Board of Directors or partners. They must preserve the debtor's value, operate the business as a going concern, and comply with all legal obligations under the PPIRP framework.

Formation of Committee of Creditors (Section 54-I)

The RP must constitute the CoC within 7 days of PPIRP commencement, based on confirmed claims. The CoC composition can be updated as claims are revised, but past decisions remain valid. The first CoC meeting must be held within 7 days of its formation.

Transfer of Management to RP (Section 54J)

The CoC may resolve to transfer the debtor's management to the RP if there is evidence of fraud or gross mismanagement. The AA can approve this transfer, and certain insolvency provisions then apply to the RP's management.

Consideration and Approval of Resolution Plan (Section 54K)

The corporate debtor must submit a base resolution plan to the RP within 2 days of commencement. The CoC evaluates the plan and may allow revisions. If the plan is not approved or impairs claims, the RP invites competing plans. The CoC must approve a plan with a 66% vote before submission of the Adjudicating Authority (AA).

Approval or Rejection of Resolution Plan (Section 54L)

The AA must approve a resolution plan within 30 days if it meets all legal requirements and includes provisions for effective implementation. If the plan fails to comply, the AA may reject it and terminate the PPIRP. In cases where the management remains unchanged, and the plan does not involve a non-promoter, the AA may order liquidation.

Appeal Against Resolution Plan Approval (Section 54M)

If the AA approves a resolution plan under Section 54L, any appeal against this decision can be made only on specific grounds as outlined in Section 61(3) of the IBC. These grounds include:

1. Violation of legal provisions
2. Material irregularities in the RP's exercise of powers
3. Failure to provide for the debts owed to operational creditors as required under Section 30(2)
4. Contraventions of any other provisions of the IBC

This ensures that appeals are limited to substantive issues, maintaining the efficiency of the PPIRP framework.

Termination of PPIRP (Section 54N)

PPIRP can be terminated under specific circumstances:

1. If the RP files an application under Section 54D(3) (due to failure to approve a resolution plan within 90 days) or Section 54K(12) (if the CoC does not approve the plan)
2. If the CoC resolves with a 66% majority to terminate the PPIRP before resolution plan approval.

The AA must pass an order terminating the PPIRP within 30 days of the RP's application or the CoC's resolution.

Transition to CIRP (Section 54-O)

If the CoC resolves to initiate CIRP instead of continuing with PPIRP, the RP informs the AA. The AA terminates the PPIRP and initiates CIRP, appointing an interim RP. Ongoing proceedings under avoidance or fraudulent trading provisions continue during CIRP.

Application of Other IBC Provisions (Section 54P)

Relevant provisions from Chapters II, III, VI, and VII of the IBC apply to PPIRP with necessary modifications. For example, references to "insolvency commencement date" are replaced with "pre-packaged insolvency commencement date," and terms like "CIRP" are replaced with "PPIRP". These adjustments ensure procedural consistency while accommodating the unique features of PPIRP.

Regulatory Framework under RBI Guidelines

Requires bankers to classify stressed accounts as special mention accounts (SMA). Delaying pre-pack initiation until SMA-2 classification may lead to CIRP, making pre-pack ineffective. Pre-pack should address stress before default, as early initiation reduces liquidation risk. However, using stress as a trigger can be misused and lead to litigation. Default is an objective insolvency test and easier to determine. The subcommittee recommends default as the basis for pre-pack initiation.

Process Flow of PPIRP

The flowchart summaries the typical process of a Pre-Packaged Insolvency Resolution Process (PPIRP), covering pre-admission requirements, commencements, constitution of the Committee of Creditors (CoC), submission of the Base Resolution Plan (BRP), invitation and evaluation of the Best Alternative Plan (BAP) and Approval or rejection by the CoC.

Source: IBBI (Information Brochure: PPIRP)

Forms Required under PPIRP

The Insolvency and Bankruptcy Board of India (IBBI) has prescribed a set of statutory forms to be used during different stages of the Pre-Packaged Insolvency Resolution Process (PPIRP). These forms, drawn from the PPIRP rules and Regulations, ensure standardisation and compliance throughout the process.

FORM	SOURCE	DESCRIPTION
Form 1	Rules	Application by Corporate Applicant to initiative PPIRP
Form P1	Regulations	Written consent by IP to act as RP / IRP
Form P2		List of creditors to be provided by the applicant
Form P3		Approval of terms of appointment of RP, by UFCs
Form P4		Approval for filing application to initiate PPIRP, by UFCs
Form P5		Written consent by IP to act as AR
Form P6		Declaration by majority of directors / partners
Form P7		Declaration regarding existence of avoidance transaction(s)
Form P8		Report by the IP proposed to be appointed as the RP
Form P9		Public announcement by the RP
Form P10		List of claims by the CD
Form P11		Brief particulars of the invitation for resolution plans
Form P12		Compliance certificate by the RP
Form P13		Application for termination of PPIRP

Source: IBBI (Information Brochure: PPIRP)

Timeline of PPIRP Process

The PPIRP is required to be completed within a period of 120 days from its commencement date. The RP shall either file the resolution plan for approval or an application for termination of PPIRP, with the AA within 90 days from the PPIRP commencement date. A model timeline along-with the activities to be undertaken during the process is as under:

	Section of the Code / Regulation No.	Description of Activity	Norm	Timeline
	Section 54C	Commencement of PPIRP and appointment of RP	--­­---	T
	Sections 54G and 54K	Submission of list of claims, preliminary information memo­ randum and BRP	Within  2  days  from  commencement  of PPIRP	T+2
	Section 54E / Regulation 19	Publication of public announcement	Within 2 days from commencement of PPIRP	T+2
	Regulation 38	Appointment of registered valuers	Within 3 days from appointment of RP	T+3
	Section 54I	Constitution of CoC	Within  7  days  from  commencement  of PPIRP	T+7
	Section 54I	First Meeting of the CoC	Within 7 days from constitution of CoC	T+14
	Regulation 43	Submission of IM	Within 14 days from commencement of PPIRP	T+14
	Regulation 43	Publication for invitation for resolution plan	Within 21 days from commencement of PPIRP	T+21
	Regulation 43	Receipt of resolution plans	At least 15 days from publication for IFRP	T+36
	Regulation 47 & 48	Evaluation and approval of resolution plan	Within 89 days from commencement of PPIRP	T+89
	Regulation 41	RP to form opinion on avoidance transactions	Within 30 days from commencement of PPIRP	T+30
		RP to make determination on avoidance transactions	Within 45 days from commencement of PPIRP	T+45
		RP to file application to AA for appropriate relief	Within 60 days from commencement of PPIRP	T+60
	Section 54D / Regulation 48	Submission of CoC approved resolution plan / application for termination of PPIRP	Within 90 days from commencement of PPIRP	T+90
	Section 54L	Approval of resolution plan / order for termination of PPIRP	Within 30 days of application under section 54D	T+120

Source: IBBI (Information Brochure: PPIRP)

Comparative International Framework

The concept of "pre-packs" draws inspiration from practices in other jurisdictions like the UK and USA, where they have evolved through market practice and are governed by different legal frameworks or practitioner guidelines.

For example:

• In the UK, pre-packs often involve the sale of a business or assets negotiated before the formal appointment of an administrator.
• In the USA (under Chapter 11), companies can pre-negotiate a restructuring plan with key creditors before filing for bankruptcy court approval.

While pre-pack frameworks in the UK and USA have matured over years of practice, India's PPIRP remains a relatively recent innovation, still evolving through regulatory refinements and case-based learning. The early implementation of PPIRP has provided useful insights into its practical functioning and acceptance among stakeholders.

Implementation Status and Case Analysis

As per the information available with IBBI, 14 applications have been admitted as on March 31, 2025, out of which one has been withdrawn and resolution plans has been approved in eight cases, namely, Amrit India Limited, Sudal Industries Limited, Shree Rajasthan Syntex Limited, Enn Tee International Limited, GCCL Infrastructure and Projects Limited, Mudraa Lifespaces Private Limited, Garodia Chemicals Limited and Kvir Towers Private Limited.

The table illustrates ongoing cases:

Sl.	Name of the CD	Date of admission	Name of the NCLT Bench
1.	Kethos Tiles Private Limited	04-01-24	Ahmedabad
2.	Shreemati Fashions Private Limited	05-01-24	Kolkata
3.	Kratos Energy & Infrastructure Limited	01-02-24	Mumbai
4.	Rg Residency Private Limited	20-02-24	New Delhi
5.	Vedik Ispat Private Limited	05-02-25	Bengaluru

Source: IBBI (Quarterly Newsletter, January - March, 2025 - Vol. 34

Challenges in Implementing PPIRP

Despite being envisioned as a faster and less disruptive alternative to CIRP, the PPIRP framework has not yet found widespread acceptance among MSMEs or creditors. The hesitation is not because the model itself is flawed, but because the surrounding ecosystem has not fully matured.

• A common thread across the MSME landscape is simply not knowing what PPIRP is or how it works. Many perceive it as "new, untested and slightly intimidating". This is not surprising as MSMEs already struggle with compliance and financial literacy, a process that mixes negotiation, insolvency laws and valuation appears far removed from their comfort zones.
• For creditors as well as debtors, valuation remains one of the puzzling parts of PPIRP. There are persistent doubts around:
  • How cash flows are projected
  • How risk is quantified
  • How valuations compare with peers
  • Whether promoters influence the numbers

This uncertainty often translates into reluctance from banks to approve the base resolution plan, even if the business is otherwise salvageable.

• PPIRP assumes a certain level of managerial discipline like structured record-keeping, transparent dealings and the ability to engage with stakeholders objectively. Many MSMEs lack this capacity. Concerns about promoter integrity, limited bandwidth to run the business while navigating insolvency and weak stakeholder communication all play a role in reducing confidence in the process.
• A recurring concern among bankers is the risk of being questioned later for agreeing to haircuts. Many bank officials believe PPIRP exposes them to allegation risk because the resolution plan is pre-negotiated. This has made lenders conservative, preferring CIRP where the onus shifts to the CoC and the judiciary.
• For smaller loans, banks often prefer one-time settlements (OTS), largely because, it is faster, avoids tribunal involvement and the government's guarantee schemes already secure a large portion of MSME exposure. This preference naturally limits PPIRP's usage.

• Some stakeholders fear that PPIRP allows the same promoters to continue running the business even after default. While the Code has safeguards, the perception persists that "Pre-packed" arrangements could be tilted in favour of incumbents, especially in closely held MSMEs.

Way Forward

• Awareness campaigns should focus on:

1. MSME associations
2. Local bank branches
3. Regional IP networks

Workshops that walk through actual case files (like Amrit India Limited or Sree Rajasthan Syntex Limited) can address many misconceptions.

• The valuation backbone needs to be strengthen through:

1. Standard templates for MSME valuations
2. Mandatory training in discounted cash flows, relative valuation and risk modelling
3. Independent valuation panels for PPIRP cases

• PPIRP requires promoters to engage professionally and transparently. Capacity building efforts must include:

1. Basic financial planning
2. Stakeholder communication
3. Understanding their duties under PPIRP
4. Access to fractional CFOs or insolvency specialists

• The process needs to be more transparent and less intimidating. A few steps that could help in these directions are:

1. A simple disclosure checklist for MSMEs
2. Clear timelines for each stage
3. Simpler guidance notes for banks clarifying their liability concerns

• PPIRP can be rolled out first in:

1. Sectors with high survival potential like manufacturing, engineering services
2. States with stronger IP networks
3. Cluster based pilot projects can provide immediate feedback loops

• Bankers need assurance that approving a PPIRP plan will not lead to retrospective scrutiny. Regulators can issue clear circulars, guidelines on acceptable valuation ranges and norms for CoC decisions. This alone can significantly increase lender participation.