Pre-Packaged Insolvency Resolution Process (PPIRP) under IBC, 2016 | Supreme Court Principles Explained

• 17 Jan 2026

Pre-Packaged Insolency Resolution Process (PPIRP) under IBC, 2016

A Detailed Legal & Practical Guide

Blog by:
Jayprakash B. Somani
Advocate, Supreme Court of India & Insolvency Professional
Cell: PA 9322188701
Website: www.jayprakashsomani.com

1. Introduction to Pre-Pack Insolvency

The Pre-Packaged Insolvency Resolution Process (PPIRP) was introduced in India through the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, later enacted into law, to provide a hybrid insolvency framework combining out-of-court restructuring with in-court approval.

The PPIRP mechanism aims to:

• Enable speedy resolution

• Reduce insolvency costs

• Preserve business continuity

• Provide flexibility to MSMEs

• Minimise value erosion

PPIRP is primarily designed for Micro, Small and Medium Enterprises (MSMEs).

2. Statutory Framework

Governing Provisions:

• IBC Sections: 54A to 54P (Chapter III-A, Part II)

• Regulations: IBBI (Pre-Packaged Insolvency Resolution Process) Regulations, 2021

• Adjudicating Authority: National Company Law Tribunal (NCLT)

3. Applicability & Eligibility (Section 54A)

PPIRP is applicable only to MSME corporate debtors.

Eligibility Conditions:

• Corporate debtor must qualify as an MSME

• Default amount between ?10 lakh to ?1 crore (as notified)

• Corporate debtor must not be undergoing CIRP or liquidation

• No PPIRP or CIRP completed in the preceding three years

• Corporate debtor must not be classified as a wilful defaulter

Key Feature:
Only the corporate debtor can initiate PPIRP. Creditors cannot force initiation.

4. Pre-Initiation Requirements (Sections 54A–54C)

Before filing an application before the NCLT, the corporate debtor must obtain:

• Approval of 66% of unrelated financial creditors

• Declaration of default

• Special resolution of shareholders (75%)

• Consent and name of the proposed Resolution Professional

This ensures creditor consensus before judicial involvement.

5. Initiation of PPIRP (Section 54C)

• Application is filed before the NCLT

• NCLT must admit or reject the application within 14 days

• Upon admission:

  • PPIRP commences

  • Moratorium under Section 14 (in modified form) applies

  • Resolution Professional is appointed

6. Control of Management – “Debtor in Possession” Model

Unique Feature of PPIRP:
Unlike CIRP, management remains with the existing promoters.

• Corporate debtor continues business operations

• Resolution Professional supervises and monitors

• Creditors exercise control through the Committee of Creditors (CoC)

Exception – Section 54J:
If fraud or gross mismanagement is detected, NCLT may:

• Transfer control to the Resolution Professional, or

• Convert PPIRP into a full-fledged CIRP

7. Role & Powers of Resolution Professional (Sections 54F–54H)

The Resolution Professional is required to:

• Conduct and manage the PPIRP

• Monitor the affairs of the corporate debtor

• Ensure compliance with the IBC and regulations

• Invite resolution plans where required

• Convene and conduct CoC meetings

• Submit statutory reports to the NCLT

The Resolution Professional does not displace management unless directed by the NCLT.

8. Committee of Creditors (CoC)

• Constituted by the Resolution Professional

• Comprises only financial creditors

• Key decisions require 66% voting share

Judicial Principle (General IBC Law):
Swiss Ribbons Pvt. Ltd. v. Union of India (2019)
The creditor-driven process is the backbone of the IBC.

9. Base Resolution Plan (Section 54K)

A distinguishing feature of PPIRP is the submission of a Base Resolution Plan by the corporate debtor.

The plan must:

• Comply with Section 30(2) of the IBC

• Provide payment to operational creditors

• Be evaluated first by the CoC

10. Swiss Challenge Mechanism (Section 54K)

If the Base Resolution Plan:

• Impairs the claims of operational creditors, or

• Is rejected by the CoC

The Resolution Professional invites competing resolution plans.

Swiss Challenge Process:

• Promoter’s plan competes with third-party plans

• Best plan is selected by the CoC

• Promoter is given an opportunity to improve the plan

This mechanism ensures transparency and value maximisation.

11. Approval of Resolution Plan (Section 54L)

• Resolution plan must be approved by 66% of CoC voting share

• Approved plan is submitted to the NCLT

• NCLT examines:

  • Legal compliance

  • Fair treatment of all stakeholders

Once approved, the plan becomes binding on all stakeholders.

12. Time Limits in PPIRP (Section 54D)

PPIRP is significantly faster than CIRP, which can extend up to 330 days.

13. Failure of PPIRP (Section 54O)

PPIRP may fail if:

• No resolution plan is approved

• Fraud or gross mismanagement is established

• CoC resolves to terminate the process

In such cases, NCLT may either:

• Terminate PPIRP, or

• Convert it into CIRP

14. Avoidance Transactions (Section 54J read with Sections 43–51)

The Resolution Professional may initiate proceedings against:

• Preferential transactions

• Undervalued transactions

• Extortionate credit transactions

• Fraudulent transactions

Key Judicial Principle:
Anuj Jain v. Axis Bank (2020)
Preferential transactions are subject to strict judicial scrutiny.

15. PPIRP vs CIRP – Key Differences

16. Judicial Approach & Case Law

While the Supreme Court has not yet delivered extensive rulings exclusively on PPIRP, established IBC principles apply:

• Essar Steel – Commercial wisdom of CoC is supreme

• K. Sashidhar – Courts cannot interfere with creditor decisions

• Swiss Ribbons – Resolution is preferred over liquidation

NCLAT decisions emphasise:

• Strict adherence to timelines

• Transparency in Swiss Challenge process

• Protection of operational creditors

17. Practical Advantages of PPIRP

• Minimal disruption to business operations

• Lower insolvency stigma

• Faster resolution

• Promoter participation permitted

• Highly suitable for MSMEs

18. Challenges & Limitations

• Applicable only to MSMEs

• Risk of promoter abuse (addressed through safeguards)

• Requires prior creditor consensus

• Jurisprudence is still evolving

19. Conclusion

The Pre-Packaged Insolvency Resolution Process represents a significant evolution in Indian insolvency law. It offers a balanced, efficient, and flexible framework tailored for MSMEs. By combining consensual restructuring with judicial oversight, PPIRP ensures speed, value preservation, and creditor confidence, while remaining aligned with the core principles of transparency and fairness under the Insolvency and Bankruptcy Code, 2016.