The Prepackaged Insolvency Resolution Process, referred to as PIRP, is an alternative available to the Corporate Insolvency Resolution Process, referred to as CIRP, available under Insolvency Bankruptcy Code.   It was introduced by the Insolvency and Bankruptcy Code (Amendment) Ordinance 2021 for the Micro, Small and Medium Enterprises, referred to as MSME’s. This is an alternative process available only to MSME’s, instead of the Corporate Insolvency Resolution Process, which can be financially draining, extremely time consuming along with litigation involved. This particular structure has been devised primarily for the MSME’s for providing financial relief, it is also quicker, more cost effective & overall seems to be less time consuming, considering the limited time available for completing the entirety of the process. Also, the business is not disrupted to a great extent under this process.


The structure for PIRP has been introduced and made in such a manner, that Chapter III has been inserted in Insolvency and Bankruptcy Code, the new section pertaining to PIRP are from Section 54A to Section 54P, along with Section 67A for prosecution of PIRP & Section 77A pertaining to Penalty. Also, the Regulations introduced provide for 14 forms from P1 to P14, even for applications which are to be submitted to the Adjudicating Authority.


Protection Provided under PIRP


CIRP cannot be filed in a case where the company is going through the PIRP process. The financial creditors or the operational creditors are not entitled to file an application for CIRP and no such application can be admitted by adjudicating authority for initiating CIRP of the corporate Debtor.

Also, in a case when the application is filed by the Corporate Debtor to avoid filing of application under Section 7 or Section 9 or in certain circumstances Section 10, for the initiation of CIRP. The ordinance has provided that no PIRP can be initiated within a period of 3 years of undergoing one PIRP. Irrespective of if it is accepted or not, or if the PIRP was terminated. Even in the case where a CIRP has been completed, PIRP cannot be initiated within 3 years. Therefore, the corporate Debtor is to cautiously use the opportunity to file PIRP, only in cases where relief in financial stress of the Company is required. This protection was provided to avoid repeated attempts of initiating PIRP by the corporate Debtor/ promoter.


Priority of Applications[1]


The clear analysis of priority of applications is provided in Section 11 A of the code. The Application for PIRP is to be filed under Section 54C of IBC and the application for initiation for CIRP  is to be filed under section 7, Section 9 & in certain circumstances under Section 10 of the code. Application for the initiation of PIRP will only be considered until disposal of all applications under section 7/9/10, there should be no existing application before the adjudicating authority.

If an application is filed under Section 54c for PIRP and the same is pending, despite which an application is filed under Section 7/9/10, then the adjudicating authority will dispose of the application for PIRP before any other application is taken up.

Although the Corporate Debtor can file an application for PIRP within 14 days of filing an application for CIRP, then the application for PIRP will be disposed of by the adjudicating authority prior to the application for initiating CIRP. If the PIRP application is filed after 14 days, in this case the adjudicating authority will dispose of the application under Section 7/9/10, then the PIRP application will be taken up.

Therefore, if any PIRP application is pending, no application for initiating CIRP can be accepted by the adjudicating authority. If a CIRP application is pending, within 14 days PIRP application can be filled and will get preference. And if the CIRP application is pending and PIRP application is filed after 14 days, then application for initiating CIRP will be attended and disposed off prior to the other application being taken up.


If the PIRP fails, the company can go under, that is the Resolution Plan is contravened and the Resolution Professional will be appointed as liquidator, subject to his consent.

Also, if PIRP fails, the company can be continued to be operated by the Corporate Debtor, that is the same promoters and directors. The structure of PIRP allows the promoters, in case where PIRP fails to continue to operate the company, they can also try methods outside the structure of IBC like forming some kind of partnership or bringing in some assets.


Eligibility Criteria For PIRP


Only if the Corporate Debtor is eligible and entitled to, the PIRP can be initiated. Firstly, to be eligible for PIRP, the Corporate Debtor must be classified as MSME under the Micro, Small and Medium Enterprises Development Act 2006. To be eligible under this, a new criterion was provided via notification dated 1st June 2020 which is applicable from 1st July 2020. These particular limits are the new definition for MSME.

Also, for eligibility for initiating PIRP, the minimum default amount committed by the Corporate Debtor must be of 10 lakhs, as provided by Section 4 of the code. This amount can be a single default amount or it can be an operational creditor default or otherwise. It can be up to one crore rupees and not more via any notification by the Central Government. Any default committed by the Corporate Debtor is the first requirement for PIRP to commence.  Also, Corporate Debtor, which has undergone PIRP or completed CIRP during a period of last 3 years is not eligible. Any company under CIRP or under liquidation cannot file a PIRP application. The Corporate Debtor must be eligible under the clauses of Section 29 A of the code. The Corporate Debtor must not be undischarged insolvent or a willful defaulter. The corporate Debtor must not be convicted with offence punishable with imprisonment and should not be prohibited by SEBI for trading in securities.


Process prior to initiation of PIRP[2]


The Base Resolution Plan on the basis of the updated financial information is to be put together and produced to the Financial Creditor by the Corporate Debtor. It is a resolution plan to alleviate the company of the financial stress and the same has to be prepared by the Corporate Debtor. It is a requirement before starting the process of PIRP and all the essentials and conditions regarding the same are provided under Section 54 K of the code. It is to be accompanied by a Declaration by the bulk of the Directors along with a Special Resolution and the other required documents like up to date and recent financial statements to be submitted and shared to the financial creditors. Thereafter, the intention of the corporate debtor to initiate the PIRP is made to all the financial creditors. The applicant also has a right under the regulations to convene a meeting of the financial creditors for which regulations are provided. Notice regarding the same with all the required details like the time, date, the place of meeting along with the default amount and the list of all the financial creditors is to be provided and is given in form P2. This notice by the applicant to the financial creditors for attending the meeting, where the PIRP process will be discussed, is to be sent 5 days prior. In these meetings, changes according to the financial creditors can be told to the corporate Debtor. Regulation 14 provides that any financial creditor with not less than 10% of the voting share can propose an insolvency professional to be appointed as the Resolution Professional.


Analysis between PIRP and CIRP


Legal Framework: The legality of both the processes comes from a difference. In CIRP, it relies heavily on statutes than on regulation. Whereas, in PIRP the same rallies on regulation as statutes.


Time Limit: Both the processes aim at settling matters swiftly. For this, there is a time limit placed on the process and everyone has to adhere to it. In the CIRP, the process must be completed in 180 days. An extension of 90 days will be given after that if needed, further extensions can also be given on the condition that the whole process concludes within 330 days from the beginning of the insolvency date. Whereas in PIRP it is a bit stricter as here only 120 days are given in total which is divided as 90 days for filing the resolution to the AA  and 30 days for AA to approve it.

Default limit: In CIRP the limit is above Rs. 1 Cr. This is excluding the Covid-19 default. In the case of PIRP, the pre and post-default stress, including the covid-19 default in a phased manner, if required.


Termination: In the situation where the process opted for is not able to complete its task, there are plans in place to resolve the matter instead. For CIRP if the process fails to be completed in the given time period, then an application is filled in front of the adjudicating authority for liquidation. While in PIRP, the process is unable to give any results, an application has to be filed for termination of proceedings.


Moratorium: At the beginning of the PIRP, the adjudicating authority along with the order of admission-

Declare a moratorium for the purposes referred to in subsection (1) read with subsection (3) of section 14, according to which:

  • A resolution professional shall be appointed.
  • A public announcement of the beginning of PIRP has to be made in the specified way and format, immediately after their appointment.

The moratorium declared under the PIRP is more limited than that of CIRP.


Claim Collection: In CIRP, the resolution professional shall make a public announcement inviting the claims from creditors, and they have to fill within the date mentioned in the announcement. They then shall collect all these claims and on the basis of this information, they shall create a committee of creditors.

In the case of PIRP, all this info has to be provided by the corporate debtor. This has to be done within 2 days of the beginning of the process. The debtor has to give out information in the format stated in the Form P10. They have to provide the list of claims along with details of creditors making the claim and their security interests and guarantees if there are any. The resolution professional shall verify and finalize the list of claims. They shall update this list according to the requirement.

Information Memorandum: In CIRP, the resolution professional needs to make the memorandum in the way and form specified by the Board. It must have all the relevant information in it as it will be used to make the resolution plan. The resolution professional needs to provide the applicant with all the relevant information in both physical and electronic form, given the fact that the professional follow these rules –

  1. To comply with provisions of law for the time being in force relating to confidentiality and insider trading.
  2. To protect the intellectual property of the corporate debtor it may have access to.
  3. Not to share this information with third parties unless it complies with the above two clauses.

[4]           In the case of PIRP, the corporate debtor has to give a report consisting of all the relevant information to the professional. This has to be done within 2 days of commencement of the process.

Where any person that has sustained any loss as they did not any give any information in the report or gave wrong information are-

  1. Promotor or director or partner to the corporate debtor who at the time of submission of the preliminary report to the resolution professional.
  2. Has authorized the preliminary information by the corporate debtor.

They are liable to pay compensation to people who have suffered the damages.

The professional has to finalize the information and submit it to a committee within fourteen days of the beginning of the PIRP. During that time, they may not disclose this information to gain undue influence over people.


Appointment of resolution professional: This appointment is an important aspect for both the processes but it is a bit more complicated in CIRP than PIRP. The resolution professional is appointed by a suggestion on both financial creditors as well as corporate debtors. In case there is an optional creditor, they have the power to appoint an interim resolution professional. Now, even if they don’t do it then finally the adjudicating authority will appoint one which will be replaced by one finalized by the committee of creditors.

In the case of PIRP, the professional is simply appointed by an unrelated financial creditor.

Management: During the process, there are rules for appointing people to look after debtors (corporate debtors) and their activities. In the PIRP, a resolution professional is appointed to look after their all activities, the professional is in the possession of their assets and the creditors are in control of it.

In the case of CIRP, there is more agency to corporate debtors as they have to look after their own actions, only creditors are places who are in control.


Resolution plan: This part is a bit more elaborate in PIRP than CIRP. Invitation to a resolution plan is a public process in CIRP. Now, in PIRP the first right is reserved for the promoters. The particulars of the invitation of the resolution plan have to be published in a brief manner by the resolution professional, according to Form P11. This has to be done within 21 days of the beginning of the PIRP.


Cooling Off: This is basically the time period a company or individual has to wait before initiating another process. In PIRP, it is a longer cool down period. One has to wait for 3 years before they are allowed to file another application. While CIRP is much more lenient, one has to only wait for 12 months before filling the second application.




Although the Ordinance which has provided the Prepackaged Insolvency Resolution Process for MSME’s was introduced on 4th April 2021, it has been a part for insolvency resolution in other nations. PIRP has reduced the stress on the NCLT but has also provided for resolution process which allows the company to continue if it fails and to not go into liquidation. This does not keep the promoters under any fear and the company is also not heavily disrupted which allows for better security of jobs to the company’s employees. Also, PIRP is a faster than the traditional approach to insolvency, and it allows for limited litigation costs. The Corporate Debtor will have a better outcome at reclaiming and recovering from this process.

The Resolution Professional will not be responsible for taking the management and control of the company in PIRP. Therefore, he will also not be responsible for taking control and possession of the assets of the company. Overall, PIRP allows for a more consensual approach to resolving the financial stress of the company

[1] Section 11 A, The Insolvency & Bankruptcy Code (Amendment) Ordinance, 2021.

[2] Section 54 K, The Insolvency & Bankruptcy Code (Amendment) Ordinance 2021.

[3] Mr. M. Govindarajan, Corporate Insolvency Resolution Process Versus Prepacked Insolvency Resolution Process,Tax mangament India. com, June 19 2021,

[4] Mr. M. Govindarajan, Corporate Insolvency Resolution Process Versus Prepacked Insolvency Resolution Process,Tax mangament India. com, June 19 2021,

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