Pre-Packaged Insolvency for MSMEs: How India's PPIRP Works, Why It Is Underused, and What Needs to Change
Pre-Packaged Insolvency for MSMEs: How India's PPIRP Works, Why It Is Underused, and What Needs to Change
Pre-Packaged Insolvency for MSMEs: How India's PPIRP Works, Why It Is Underused, and What Needs to Change
Pre-Packaged Insolvency for MSMEs: How India's PPIRP Works, Why It Is Underused, and What Needs to Change
► "PPIRP sits at the pivot between innovation and obsolescence, a framework with genuine rescue potential, held back by structural barriers that the legislature must now urgently address."
What Is Pre-Packaged Insolvency Resolution and Why Did India Create It for MSMEs?
Pre-packaged insolvency resolution process (PPIRP) became a more specific resolution to the stressed Micro, Small, and Medium Enterprises (MSMEs) in India through the Insolvency and Bankruptcy Code (IBC), 2016. In the midst of economic shocks such as COVID-19 with the MSMEs (30% GDP and 45 million jobs) undergoing liquidity crunches, PPIRP was to ensure that these businesses could be speedily revived without the slings and cranks of conventional Corporate Insolvency Resolution Process (CIRP). It was instituted in 2021 through an amendment, combining pre-negotiated plans with judicial checks, and is controversial: both an excellent boost to quick rescues and a structural failure due to its poor uptake, creditor protections, and the MSME eligibility barrier.
This is reflected in the track record at PPIRP as of April 2026, with only approximately 20 admissions since inception and only 56 successful resolutions and average recoveries ranging between 15-20 out of the current 500 cases, according to IBBI data. Early success in capturing operations in areas such as manufacturing and realty retained operations, but as the gaps persisted in the form of the 100% unrelated creditor consent barrier and non-inclusion of unregistered MSMEs, calls to reform have emerged, putting PPIRP in the pivot between innovation and obsolescence.
What Is the Legal Definition and Statutory Framework of PPIRP Under the IBC?
PPIRP was introduced under IBC (Second Amendment) Act, 2021 (in force since September 2021) under Sections 54A to 54P whereby any eligible MSME can submit a base resolution plan prior to admission under NCLT.
The table below sets out the key structural elements of the PPIRP framework.
Element
Detail
Significance
Governing provisions
Sections 54A to 54P, IBC 2016 as inserted by IBC (Second Amendment) Act, 2021
Dedicated statutory framework distinct from CIRP
Eligibility
MSMEs registered under the MSMED Act, 2006; default not exceeding Rs 1 crore
Excludes approximately 90% of informal/unregistered MSMEs; limits use to early-stage distress
Prior CIRP bar
Entity must not have undergone CIRP under Sections 7, 9, or 10 within the last 3 years
Prevents serial filers from exploiting the framework
Model
Debtor-in-possession; promoters retain management control throughout
Contrasts with creditor-takeover model of CIRP; minimises business disruption
Base plan requirement
Must have 100% consent of unrelated financial creditors before filing; operational creditors must receive liquidation value under Section 53 waterfall
High threshold to prevent sweetheart deals
Admission timeline
NCLT must admit or reject within 7 days of filing
Designed for speed; far faster than CIRP admission
Moratorium
Section 54B provides moratorium on all creditor actions upon admission
Provides breathing space for resolution
Resolution period
90 days extendable by 30 days on NCLT order; total maximum 120 days
Significantly shorter than CIRP's 330-day average
CoC approval threshold
66% voting share by value
Lower than CIRP to enable faster decision-making
Swiss challenge auction
Optional; allows superior bids to compete against the base plan
Maximises value through competitive bidding
Binding effect
Approved plan binding on all stakeholders under Section 54L; NCLT order within 21 days
Finality within 120 days total
How Does PPIRP Actually Work Step by Step, A Plain-Language Illustration
Take the case of a hypothetical MSME, SteelFab Ltd., a metal fabricator in Gujarat with a default of 80 lakh: 60 lakh to a bank (financial creditor) and 20 lakh to suppliers (operational creditors).
The promoter prepares a ready-to-wear base plan: injecting 50 lakh in fresh equity, offering the bank a 70% haircut paid through asset sale to an unrelated person, and paying suppliers 100% liquidation value of Rs 15 lakh. Before filing, the promoter negotiates 100% bank consent. The combined application is admitted by NCLT; the Resolution Professional checks the plan, invites challenges, and runs an optional Swiss auction that produces a superior bid. The plan is approved in 95 days. The business survives with the promoter continuing to manage operations, jobs are retained, and suppliers are paid, outcomes that would not have been achievable in a conventional CIRP where creditor takeover and a two-year time lag would likely have destroyed whatever enterprise value remained.
What Do Landmark Cases Tell Us About How PPIRP Operates in Practice?
The table below summarises the three most significant PPIRP judicial decisions and their contribution to the framework.
Case
Forum and Year
Facts
Key Holding
GCCL Infrastructure & Projects Ltd. v. Guardian Finance
NCLT Ahmedabad, CP(IBPP) No. 01/AHM/2021, September 14, 2021
First-ever PPIRP admission; real estate MSME with Rs 54 lakh dues; 100% unrelated financial creditor consent obtained
First PPIRP admission in India; confirmed rapid 7-day entry, debtor-in-possession control, and operational continuity as intended by the framework
Krishh Realtech Pvt. Ltd.
NCLT Delhi CP(IBPP) No. 152/ND/2022 and NCLAT CA(AT)(Ins) Nos. 1008-1009/2022, December 2022
Creditors and objectors challenged the base plan's unrelated creditor consent on grounds of mala fides; debtor voluntarily withdrew before scrutiny concluded
NCLAT ruled that pre-admission hearings do not violate natural justice under Section 424 of the Companies Act; clarified the balance between speed and anti-collusion safeguards
Kratos Energy and Infrastructure Ltd.
NCLT Mumbai, IA No. 2207/2024 in CP(IBPP) No. 03/MB/2023, July 28, 2025
Energy infrastructure MSME; plan approved with successful Swiss challenge auction
Demonstrates that the Swiss challenge mechanism can deliver genuinely competitive outcomes; plan delivered better recoveries to operational creditors with fresh promoter capital injected
These decisions collectively assert the role of judicial discretion and confirm that PPIRP's procedural rigour is enforceable, while also revealing the tensions between speed, transparency, and anti-abuse protections that continue to shape the framework.
What Has PPIRP Actually Achieved Since 2021, Successes, Numbers, and Notable Wins
With less than 13-20 physiologically demonstrated plan approaches yielding an average tactical recovery in the small 10-20% plateau, pathetically lower than CIRP norms in a couple of sectors, Pre-packaged Insolvency Resolution Process (PPIRP) has produced decidedly mixed results since its inception in September 2021, with IBBI data as of early 2026 confirming a stark gap between potential and performance.
Notable successes include Ramakrishna Forgings (NCLT Kolkata, approved 2024), which maintained enterprise value through promoter-run continuity, retained over 200 jobs, and facilitated a rapid infusion of assets to stabilise operations amid steel industry volatility. Comparable successes in textiles and auto components preserved supply chains that would otherwise have been destroyed under CIRP.
The table below summarises PPIRP performance as of early 2026.
Metric
Data (IBBI, early 2026)
Total admissions since September 2021
Approximately 20
Successful resolutions
5 to 6 approved plans
Average recovery percentage
15% to 20%
Pending or withdrawn filings
Approximately 80% of total filings
Average actual duration
100+ days despite 120-day statutory cap
Total cases before PPIRP tribunals
Approximately 500
What Are the Persistent Challenges That Are Preventing PPIRP From Achieving Its Potential?
Low Take-Up Due to Eligibility Gaps
PPIRP is limited to formally registered MSMEs under the MSMED Act, 2006, leaving almost 90% of informal and unregistered units that make up the industry outside the framework. The Rs 1 crore default limit is a further restriction: it excludes mid-tier distressed entities on the verge of higher debts, compelling many to consider more expensive and more disruptive alternatives.
Creditor Hesitancy and the 100% Consent Problem
Achieving unanimity with unrelated financial creditors remains an enormous structural challenge. The holdout risk it creates can freeze negotiations entirely. The obligation to protect operational creditors at liquidation value artificially inflates base plans, frightening banks that may fear accepting a haircut without any competitive offer having emerged through the Swiss challenge process.
Swiss Challenge Weaknesses
The discretionary nature of the Swiss challenge process attracts fewer participants, marketing periods are often insufficient to attract genuine contenders, and the continuation of the promoter after resolution creates perceptions of collusion or underpricing that undermine financial stakeholder confidence.
Money and Time Costs
Although the statutory cap is 120 days, practical timelines average over 100 days due to delays in verification and hearings. Resolution Professional charges, compliance costs, and legal expenses are disproportionate to expected cost savings for cash-strapped MSMEs.
Practically, during the economic slowdown of 2025 due to global supply disruptions and tight credit, only the fewest of the MSMEs adopted PPIRP, opting instead for informal workouts, lender moratoriums, or complete liquidations. Detractors have claimed it to be a structural failure as 80% of filings were left pending or withdrawn according to IBBI data.
However, when in place, the compressed timeline of PPIRP compared to CIRP's arduous 330-day average does sustain businesses, retain suppliers, and maintain sales, making it an apparently underutilised but genuinely valuable bridge to recovery rather than a mechanism for breakdown.
What Reforms Would Make PPIRP Work Better for India's 45 Million MSME Jobs?
Specific reforms can provide a way out. The table below sets out the principal reform proposals and their rationale.
Reform Proposal
Current Position
Proposed Change
Expected Impact
Raise default threshold
Rs 1 crore
Rs 10 crore
Enables mid-sized MSMEs in deeper distress to access PPIRP
Reduce unrelated FC consent threshold
100% consent required
66% consent with opt-outs
Removes the most significant structural barrier to use
Streamline registration requirement
Mandatory MSMED Act registration
Self-certification or presumptive Udyam inclusion
Opens PPIRP to the 90% of informal and unregistered MSMEs currently excluded
Operational creditor protection reform
Liquidation value only
Fair-value gains sharing
Removes artificial inflation of base plans; makes banks more willing to engage
Mandatory Swiss challenge auctions
Optional
Mandatory 30-day auctions with promoter equity limits
Removes collusion perception; maximises competitive bidding
Expedited NCLAT appeals
Standard appellate timelines
Fast-track NCLAT jurisdiction for PPIRP matters
Reduces uncertainty and delays that discourage creditor participation
Annual outcome audits
No systematic review
IBBI-mandated annual audit of PPIRP outcomes
Creates accountability and enables evidence-based reform
Together with RP training programmes and tax exemptions on approved resolution plans, these reforms could transform PPIRP into a robust lifeline, prompting a threefold increase in the number of resolutions and protecting the 45 million jobs dependent on India's MSME ecosystem.
Conclusion: PPIRP Is a Framework Worth Saving, But Only If India Acts on Its Structural Failures
PPIRP represents a radical and genuinely innovative change in the Indian insolvency framework, empowering debtor-in-possession control and limiting the process to 120 days to deliver rapid, value-saving solutions. The success of GCCL Infrastructure, where pre-determined alignment with creditors allowed seamless admission, RP management, and plan authorisation without management displacement, demonstrates what the framework can achieve when it works as intended. This promoter-based strategy not only maintains operational continuity but ensures job safety, supply chain preservation, and stakeholder protection within MSME ecosystems.
Yet extensive barriers to adoption, mandatory MSMED registration that excludes 90% of informal players, the 100% unrelated financial creditor veto threshold, elevated withdrawal rates of 80% of filings, artificially inflated base plans, thin Swiss challenge participation, and disproportionate RP costs, highlight a framework that is more theoretical than transformative in its current form.
The path forward is clear. Increase the default threshold to Rs 10 crore with a 66% consent requirement, streamline registration, recalibrate creditor consents, mandate strong 30-day Swiss auctions with promoter equity limits, and implement expedited NCLAT appeals alongside annual outcome audits. These reforms may transform PPIRP into the strong lifeline India's MSMEs urgently need, and rescue the 45 million jobs that depend on getting this right.
Frequently Asked Questions (FAQs) on Pre-Packaged Insolvency Resolution for MSMEs
1. What is PPIRP and how is it different from CIRP under the IBC? PPIRP or Pre-Packaged Insolvency Resolution Process is a fast-track insolvency mechanism introduced specifically for MSMEs through Sections 54A to 54P of the IBC, inserted by the IBC (Second Amendment) Act, 2021. Unlike CIRP, PPIRP uses a debtor-in-possession model where promoters retain management control, requires a pre-negotiated base resolution plan before admission, and operates within a maximum of 120 days compared to CIRP's 330-day average.
2. Who is eligible for PPIRP under the IBC? Only MSMEs that are registered under the MSMED Act, 2006 and have a default not exceeding Rs 1 crore are eligible. The entity must not have undergone a CIRP under Sections 7, 9, or 10 within the preceding three years.
3. What is the 100% unrelated financial creditor consent requirement and why is it controversial? Before filing under PPIRP, the debtor must obtain the consent of 100% of unrelated financial creditors to the base resolution plan. This is designed to prevent collusive deals between promoters and friendly creditors, but it creates a severe holdout risk that makes negotiations extremely difficult and is identified as the most significant structural barrier to PPIRP adoption.
4. What is the Swiss challenge mechanism in PPIRP? The Swiss challenge is an optional competitive bidding process where the base plan is made public and third parties may submit superior bids. If a superior bid is received, the original plan proponent has the right to match it. It is designed to maximise value but has been criticised for low participation due to its optional nature and insufficient marketing periods.
5. What happened in the GCCL Infrastructure case? GCCL Infrastructure & Projects Ltd. v. Guardian Finance was the first-ever PPIRP admission in India, admitted by NCLT Ahmedabad on September 14, 2021. A real estate MSME with Rs 54 lakh in dues obtained 100% unrelated financial creditor consent for its base plan and was admitted within 7 days, confirming the framework's design for rapid, debtor-controlled resolution.
6. Why do 80% of PPIRP filings end in withdrawal or pendency? The combination of the 100% unrelated financial creditor consent requirement, the exclusion of unregistered MSMEs, disproportionate RP and compliance costs, and insufficient Swiss challenge participation means that many filings cannot overcome these structural barriers. During economic downturns, MSMEs often prefer informal workouts or direct liquidation rather than face these obstacles.
7. What are the key reforms needed to improve PPIRP? The most important reforms are: raising the default threshold from Rs 1 crore to Rs 10 crore; reducing the unrelated FC consent requirement from 100% to 66%; streamlining the registration requirement through self-certification; making Swiss challenge auctions mandatory with a 30-day minimum; and implementing expedited NCLAT appeals and annual outcome audits.
8. How does PPIRP protect operational creditors such as suppliers and vendors? Under PPIRP, operational creditors must receive at least their liquidation value under the Section 53 waterfall priority in the base resolution plan. While this protects them from receiving less than they would in liquidation, it also artificially inflates base plans because the promoter must guarantee this floor regardless of the overall recovery available.
Key Takeaways
PPIRP was introduced through the IBC (Second Amendment) Act, 2021 under Sections 54A to 54P as a debtor-in-possession, fast-track insolvency mechanism specifically designed for MSMEs, operational from September 2021.
The maximum duration of PPIRP is 120 days compared to CIRP's 330-day average, and CoC approval requires 66% voting share by value compared to the 75% threshold in CIRP.
Eligibility is restricted to MSMEs registered under the MSMED Act, 2006 with defaults not exceeding Rs 1 crore, excluding approximately 90% of informal and unregistered MSMEs and limiting access to early-stage distress rather than deeper financial crises.
The 100% unrelated financial creditor consent requirement for the base plan is the single most significant structural barrier to PPIRP adoption, creating holdout risks that freeze negotiations.
As of early 2026, IBBI data shows only approximately 20 admissions, 5 to 6 successful plan approvals, average recoveries of 15-20%, and 80% of filings pending or withdrawn — a stark gap between PPIRP's potential and its performance.
GCCL Infrastructure & Projects Ltd., the first PPIRP admission in India (NCLT Ahmedabad, September 2021), demonstrated that the framework can deliver seamless, rapid, promoter-controlled resolution when creditor alignment is achieved pre-filing.
NCLAT in Krishh Realtech (2022) confirmed that pre-admission hearings under PPIRP do not violate natural justice, striking a balance between speed and anti-collusion safeguards.
The key reforms needed are: raising the default threshold to Rs 10 crore, reducing the unrelated FC consent requirement to 66%, streamlining MSMED registration, mandating 30-day Swiss challenge auctions, and implementing expedited NCLAT appeals.
MSMEs contribute 30% of India's GDP and support 45 million jobs; a functional PPIRP is not merely an insolvency law improvement but a macroeconomic necessity.
PPIRP remains a framework worth saving — but only if structural reforms address the eligibility gaps, creditor consent barriers, and cost disproportionality that are preventing it from functioning as the transformative rescue mechanism it was designed to be.
References
Insolvency and Bankruptcy Code, 2016: The primary legislation governing corporate insolvency in India, under which PPIRP operates through Sections 54A to 54P as inserted by the IBC (Second Amendment) Act, 2021.
IBC (Second Amendment) Act, 2021: Operationalised PPIRP from September 2021; requires MSMED registration; prescribes 100% unrelated FC consent; mandates NCLT admission within 7 days.
IBBI (Pre-Packaged Insolvency Resolution Process) Regulations, 2021: Govern base plan disclosures, RP supervision, creditor votes (66% CoC threshold), optional Swiss challenge auctions, and the Section 54B moratorium.
MSMED Act, 2006: Defines the eligible MSME categories for PPIRP access under Section 54A(2) of the IBC; the registration requirement is a gateway and a structural barrier.
GCCL Infrastructure & Projects Ltd. v. Guardian Finance, NCLT Ahmedabad, CP(IBPP) No. 01/AHM/2021, September 14, 2021: First PPIRP admission in India; confirmed rapid 7-day entry, debtor-in-possession control, and operational continuity.
Krishh Realtech Pvt. Ltd., NCLT Delhi CP(IBPP) No. 152/ND/2022 and NCLAT CA(AT)(Ins) Nos. 1008-1009/2022, December 2022: Confirmed that pre-admission hearings do not violate natural justice under Section 424 of the Companies Act; clarified the balance between speed and collusion safeguards.
Kratos Energy and Infrastructure Ltd., NCLT Mumbai, IA No. 2207/2024 in CP(IBPP) No. 03/MB/2023, July 28, 2025: Demonstrated successful Swiss challenge execution and value maximisation within the 120-day PPIRP framework.
IBBI Newsletters and Annual Reports, 2023-2026: Source data on PPIRP admissions (13-20), plan approvals (5-6), recovery percentages (10-20%), average durations (100+ days), and 80% pendency rate.
Vidhi Centre for Legal Policy Report, 2020: Advocates increasing the default eligibility threshold to Rs 10 crore, mandatory auctions, and promoter equity limits as key structural reforms to improve PPIRP uptake.
IIPI-CAI Report, 2025: Proposes 66% FC approval threshold, blind valuations, RP training programmes, tax exemptions on resolved plans, and Gujarat pilot programmes as mechanisms to increase resolution numbers.
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► "PPIRP sits at the pivot between innovation and obsolescence, a framework with genuine rescue potential, held back by structural barriers that the legislature must now urgently address."
What Is Pre-Packaged Insolvency Resolution and Why Did India Create It for MSMEs?
Pre-packaged insolvency resolution process (PPIRP) became a more specific resolution to the stressed Micro, Small, and Medium Enterprises (MSMEs) in India through the Insolvency and Bankruptcy Code (IBC), 2016. In the midst of economic shocks such as COVID-19 with the MSMEs (30% GDP and 45 million jobs) undergoing liquidity crunches, PPIRP was to ensure that these businesses could be speedily revived without the slings and cranks of conventional Corporate Insolvency Resolution Process (CIRP). It was instituted in 2021 through an amendment, combining pre-negotiated plans with judicial checks, and is controversial: both an excellent boost to quick rescues and a structural failure due to its poor uptake, creditor protections, and the MSME eligibility barrier.
This is reflected in the track record at PPIRP as of April 2026, with only approximately 20 admissions since inception and only 56 successful resolutions and average recoveries ranging between 15-20 out of the current 500 cases, according to IBBI data. Early success in capturing operations in areas such as manufacturing and realty retained operations, but as the gaps persisted in the form of the 100% unrelated creditor consent barrier and non-inclusion of unregistered MSMEs, calls to reform have emerged, putting PPIRP in the pivot between innovation and obsolescence.
What Is the Legal Definition and Statutory Framework of PPIRP Under the IBC?
PPIRP was introduced under IBC (Second Amendment) Act, 2021 (in force since September 2021) under Sections 54A to 54P whereby any eligible MSME can submit a base resolution plan prior to admission under NCLT.
The table below sets out the key structural elements of the PPIRP framework.
Element
Detail
Significance
Governing provisions
Sections 54A to 54P, IBC 2016 as inserted by IBC (Second Amendment) Act, 2021
Dedicated statutory framework distinct from CIRP
Eligibility
MSMEs registered under the MSMED Act, 2006; default not exceeding Rs 1 crore
Excludes approximately 90% of informal/unregistered MSMEs; limits use to early-stage distress
Prior CIRP bar
Entity must not have undergone CIRP under Sections 7, 9, or 10 within the last 3 years
Prevents serial filers from exploiting the framework
Model
Debtor-in-possession; promoters retain management control throughout
Contrasts with creditor-takeover model of CIRP; minimises business disruption
Base plan requirement
Must have 100% consent of unrelated financial creditors before filing; operational creditors must receive liquidation value under Section 53 waterfall
High threshold to prevent sweetheart deals
Admission timeline
NCLT must admit or reject within 7 days of filing
Designed for speed; far faster than CIRP admission
Moratorium
Section 54B provides moratorium on all creditor actions upon admission
Provides breathing space for resolution
Resolution period
90 days extendable by 30 days on NCLT order; total maximum 120 days
Significantly shorter than CIRP's 330-day average
CoC approval threshold
66% voting share by value
Lower than CIRP to enable faster decision-making
Swiss challenge auction
Optional; allows superior bids to compete against the base plan
Maximises value through competitive bidding
Binding effect
Approved plan binding on all stakeholders under Section 54L; NCLT order within 21 days
Finality within 120 days total
How Does PPIRP Actually Work Step by Step, A Plain-Language Illustration
Take the case of a hypothetical MSME, SteelFab Ltd., a metal fabricator in Gujarat with a default of 80 lakh: 60 lakh to a bank (financial creditor) and 20 lakh to suppliers (operational creditors).
The promoter prepares a ready-to-wear base plan: injecting 50 lakh in fresh equity, offering the bank a 70% haircut paid through asset sale to an unrelated person, and paying suppliers 100% liquidation value of Rs 15 lakh. Before filing, the promoter negotiates 100% bank consent. The combined application is admitted by NCLT; the Resolution Professional checks the plan, invites challenges, and runs an optional Swiss auction that produces a superior bid. The plan is approved in 95 days. The business survives with the promoter continuing to manage operations, jobs are retained, and suppliers are paid, outcomes that would not have been achievable in a conventional CIRP where creditor takeover and a two-year time lag would likely have destroyed whatever enterprise value remained.
What Do Landmark Cases Tell Us About How PPIRP Operates in Practice?
The table below summarises the three most significant PPIRP judicial decisions and their contribution to the framework.
Case
Forum and Year
Facts
Key Holding
GCCL Infrastructure & Projects Ltd. v. Guardian Finance
NCLT Ahmedabad, CP(IBPP) No. 01/AHM/2021, September 14, 2021
First-ever PPIRP admission; real estate MSME with Rs 54 lakh dues; 100% unrelated financial creditor consent obtained
First PPIRP admission in India; confirmed rapid 7-day entry, debtor-in-possession control, and operational continuity as intended by the framework
Krishh Realtech Pvt. Ltd.
NCLT Delhi CP(IBPP) No. 152/ND/2022 and NCLAT CA(AT)(Ins) Nos. 1008-1009/2022, December 2022
Creditors and objectors challenged the base plan's unrelated creditor consent on grounds of mala fides; debtor voluntarily withdrew before scrutiny concluded
NCLAT ruled that pre-admission hearings do not violate natural justice under Section 424 of the Companies Act; clarified the balance between speed and anti-collusion safeguards
Kratos Energy and Infrastructure Ltd.
NCLT Mumbai, IA No. 2207/2024 in CP(IBPP) No. 03/MB/2023, July 28, 2025
Energy infrastructure MSME; plan approved with successful Swiss challenge auction
Demonstrates that the Swiss challenge mechanism can deliver genuinely competitive outcomes; plan delivered better recoveries to operational creditors with fresh promoter capital injected
These decisions collectively assert the role of judicial discretion and confirm that PPIRP's procedural rigour is enforceable, while also revealing the tensions between speed, transparency, and anti-abuse protections that continue to shape the framework.
What Has PPIRP Actually Achieved Since 2021, Successes, Numbers, and Notable Wins
With less than 13-20 physiologically demonstrated plan approaches yielding an average tactical recovery in the small 10-20% plateau, pathetically lower than CIRP norms in a couple of sectors, Pre-packaged Insolvency Resolution Process (PPIRP) has produced decidedly mixed results since its inception in September 2021, with IBBI data as of early 2026 confirming a stark gap between potential and performance.
Notable successes include Ramakrishna Forgings (NCLT Kolkata, approved 2024), which maintained enterprise value through promoter-run continuity, retained over 200 jobs, and facilitated a rapid infusion of assets to stabilise operations amid steel industry volatility. Comparable successes in textiles and auto components preserved supply chains that would otherwise have been destroyed under CIRP.
The table below summarises PPIRP performance as of early 2026.
Metric
Data (IBBI, early 2026)
Total admissions since September 2021
Approximately 20
Successful resolutions
5 to 6 approved plans
Average recovery percentage
15% to 20%
Pending or withdrawn filings
Approximately 80% of total filings
Average actual duration
100+ days despite 120-day statutory cap
Total cases before PPIRP tribunals
Approximately 500
What Are the Persistent Challenges That Are Preventing PPIRP From Achieving Its Potential?
Low Take-Up Due to Eligibility Gaps
PPIRP is limited to formally registered MSMEs under the MSMED Act, 2006, leaving almost 90% of informal and unregistered units that make up the industry outside the framework. The Rs 1 crore default limit is a further restriction: it excludes mid-tier distressed entities on the verge of higher debts, compelling many to consider more expensive and more disruptive alternatives.
Creditor Hesitancy and the 100% Consent Problem
Achieving unanimity with unrelated financial creditors remains an enormous structural challenge. The holdout risk it creates can freeze negotiations entirely. The obligation to protect operational creditors at liquidation value artificially inflates base plans, frightening banks that may fear accepting a haircut without any competitive offer having emerged through the Swiss challenge process.
Swiss Challenge Weaknesses
The discretionary nature of the Swiss challenge process attracts fewer participants, marketing periods are often insufficient to attract genuine contenders, and the continuation of the promoter after resolution creates perceptions of collusion or underpricing that undermine financial stakeholder confidence.
Money and Time Costs
Although the statutory cap is 120 days, practical timelines average over 100 days due to delays in verification and hearings. Resolution Professional charges, compliance costs, and legal expenses are disproportionate to expected cost savings for cash-strapped MSMEs.
Practically, during the economic slowdown of 2025 due to global supply disruptions and tight credit, only the fewest of the MSMEs adopted PPIRP, opting instead for informal workouts, lender moratoriums, or complete liquidations. Detractors have claimed it to be a structural failure as 80% of filings were left pending or withdrawn according to IBBI data.
However, when in place, the compressed timeline of PPIRP compared to CIRP's arduous 330-day average does sustain businesses, retain suppliers, and maintain sales, making it an apparently underutilised but genuinely valuable bridge to recovery rather than a mechanism for breakdown.
What Reforms Would Make PPIRP Work Better for India's 45 Million MSME Jobs?
Specific reforms can provide a way out. The table below sets out the principal reform proposals and their rationale.
Reform Proposal
Current Position
Proposed Change
Expected Impact
Raise default threshold
Rs 1 crore
Rs 10 crore
Enables mid-sized MSMEs in deeper distress to access PPIRP
Reduce unrelated FC consent threshold
100% consent required
66% consent with opt-outs
Removes the most significant structural barrier to use
Streamline registration requirement
Mandatory MSMED Act registration
Self-certification or presumptive Udyam inclusion
Opens PPIRP to the 90% of informal and unregistered MSMEs currently excluded
Operational creditor protection reform
Liquidation value only
Fair-value gains sharing
Removes artificial inflation of base plans; makes banks more willing to engage
Mandatory Swiss challenge auctions
Optional
Mandatory 30-day auctions with promoter equity limits
Removes collusion perception; maximises competitive bidding
Expedited NCLAT appeals
Standard appellate timelines
Fast-track NCLAT jurisdiction for PPIRP matters
Reduces uncertainty and delays that discourage creditor participation
Annual outcome audits
No systematic review
IBBI-mandated annual audit of PPIRP outcomes
Creates accountability and enables evidence-based reform
Together with RP training programmes and tax exemptions on approved resolution plans, these reforms could transform PPIRP into a robust lifeline, prompting a threefold increase in the number of resolutions and protecting the 45 million jobs dependent on India's MSME ecosystem.
Conclusion: PPIRP Is a Framework Worth Saving, But Only If India Acts on Its Structural Failures
PPIRP represents a radical and genuinely innovative change in the Indian insolvency framework, empowering debtor-in-possession control and limiting the process to 120 days to deliver rapid, value-saving solutions. The success of GCCL Infrastructure, where pre-determined alignment with creditors allowed seamless admission, RP management, and plan authorisation without management displacement, demonstrates what the framework can achieve when it works as intended. This promoter-based strategy not only maintains operational continuity but ensures job safety, supply chain preservation, and stakeholder protection within MSME ecosystems.
Yet extensive barriers to adoption, mandatory MSMED registration that excludes 90% of informal players, the 100% unrelated financial creditor veto threshold, elevated withdrawal rates of 80% of filings, artificially inflated base plans, thin Swiss challenge participation, and disproportionate RP costs, highlight a framework that is more theoretical than transformative in its current form.
The path forward is clear. Increase the default threshold to Rs 10 crore with a 66% consent requirement, streamline registration, recalibrate creditor consents, mandate strong 30-day Swiss auctions with promoter equity limits, and implement expedited NCLAT appeals alongside annual outcome audits. These reforms may transform PPIRP into the strong lifeline India's MSMEs urgently need, and rescue the 45 million jobs that depend on getting this right.
Frequently Asked Questions (FAQs) on Pre-Packaged Insolvency Resolution for MSMEs
1. What is PPIRP and how is it different from CIRP under the IBC? PPIRP or Pre-Packaged Insolvency Resolution Process is a fast-track insolvency mechanism introduced specifically for MSMEs through Sections 54A to 54P of the IBC, inserted by the IBC (Second Amendment) Act, 2021. Unlike CIRP, PPIRP uses a debtor-in-possession model where promoters retain management control, requires a pre-negotiated base resolution plan before admission, and operates within a maximum of 120 days compared to CIRP's 330-day average.
2. Who is eligible for PPIRP under the IBC? Only MSMEs that are registered under the MSMED Act, 2006 and have a default not exceeding Rs 1 crore are eligible. The entity must not have undergone a CIRP under Sections 7, 9, or 10 within the preceding three years.
3. What is the 100% unrelated financial creditor consent requirement and why is it controversial? Before filing under PPIRP, the debtor must obtain the consent of 100% of unrelated financial creditors to the base resolution plan. This is designed to prevent collusive deals between promoters and friendly creditors, but it creates a severe holdout risk that makes negotiations extremely difficult and is identified as the most significant structural barrier to PPIRP adoption.
4. What is the Swiss challenge mechanism in PPIRP? The Swiss challenge is an optional competitive bidding process where the base plan is made public and third parties may submit superior bids. If a superior bid is received, the original plan proponent has the right to match it. It is designed to maximise value but has been criticised for low participation due to its optional nature and insufficient marketing periods.
5. What happened in the GCCL Infrastructure case? GCCL Infrastructure & Projects Ltd. v. Guardian Finance was the first-ever PPIRP admission in India, admitted by NCLT Ahmedabad on September 14, 2021. A real estate MSME with Rs 54 lakh in dues obtained 100% unrelated financial creditor consent for its base plan and was admitted within 7 days, confirming the framework's design for rapid, debtor-controlled resolution.
6. Why do 80% of PPIRP filings end in withdrawal or pendency? The combination of the 100% unrelated financial creditor consent requirement, the exclusion of unregistered MSMEs, disproportionate RP and compliance costs, and insufficient Swiss challenge participation means that many filings cannot overcome these structural barriers. During economic downturns, MSMEs often prefer informal workouts or direct liquidation rather than face these obstacles.
7. What are the key reforms needed to improve PPIRP? The most important reforms are: raising the default threshold from Rs 1 crore to Rs 10 crore; reducing the unrelated FC consent requirement from 100% to 66%; streamlining the registration requirement through self-certification; making Swiss challenge auctions mandatory with a 30-day minimum; and implementing expedited NCLAT appeals and annual outcome audits.
8. How does PPIRP protect operational creditors such as suppliers and vendors? Under PPIRP, operational creditors must receive at least their liquidation value under the Section 53 waterfall priority in the base resolution plan. While this protects them from receiving less than they would in liquidation, it also artificially inflates base plans because the promoter must guarantee this floor regardless of the overall recovery available.
Key Takeaways
PPIRP was introduced through the IBC (Second Amendment) Act, 2021 under Sections 54A to 54P as a debtor-in-possession, fast-track insolvency mechanism specifically designed for MSMEs, operational from September 2021.
The maximum duration of PPIRP is 120 days compared to CIRP's 330-day average, and CoC approval requires 66% voting share by value compared to the 75% threshold in CIRP.
Eligibility is restricted to MSMEs registered under the MSMED Act, 2006 with defaults not exceeding Rs 1 crore, excluding approximately 90% of informal and unregistered MSMEs and limiting access to early-stage distress rather than deeper financial crises.
The 100% unrelated financial creditor consent requirement for the base plan is the single most significant structural barrier to PPIRP adoption, creating holdout risks that freeze negotiations.
As of early 2026, IBBI data shows only approximately 20 admissions, 5 to 6 successful plan approvals, average recoveries of 15-20%, and 80% of filings pending or withdrawn — a stark gap between PPIRP's potential and its performance.
GCCL Infrastructure & Projects Ltd., the first PPIRP admission in India (NCLT Ahmedabad, September 2021), demonstrated that the framework can deliver seamless, rapid, promoter-controlled resolution when creditor alignment is achieved pre-filing.
NCLAT in Krishh Realtech (2022) confirmed that pre-admission hearings under PPIRP do not violate natural justice, striking a balance between speed and anti-collusion safeguards.
The key reforms needed are: raising the default threshold to Rs 10 crore, reducing the unrelated FC consent requirement to 66%, streamlining MSMED registration, mandating 30-day Swiss challenge auctions, and implementing expedited NCLAT appeals.
MSMEs contribute 30% of India's GDP and support 45 million jobs; a functional PPIRP is not merely an insolvency law improvement but a macroeconomic necessity.
PPIRP remains a framework worth saving — but only if structural reforms address the eligibility gaps, creditor consent barriers, and cost disproportionality that are preventing it from functioning as the transformative rescue mechanism it was designed to be.
References
Insolvency and Bankruptcy Code, 2016: The primary legislation governing corporate insolvency in India, under which PPIRP operates through Sections 54A to 54P as inserted by the IBC (Second Amendment) Act, 2021.
IBC (Second Amendment) Act, 2021: Operationalised PPIRP from September 2021; requires MSMED registration; prescribes 100% unrelated FC consent; mandates NCLT admission within 7 days.
IBBI (Pre-Packaged Insolvency Resolution Process) Regulations, 2021: Govern base plan disclosures, RP supervision, creditor votes (66% CoC threshold), optional Swiss challenge auctions, and the Section 54B moratorium.
MSMED Act, 2006: Defines the eligible MSME categories for PPIRP access under Section 54A(2) of the IBC; the registration requirement is a gateway and a structural barrier.
GCCL Infrastructure & Projects Ltd. v. Guardian Finance, NCLT Ahmedabad, CP(IBPP) No. 01/AHM/2021, September 14, 2021: First PPIRP admission in India; confirmed rapid 7-day entry, debtor-in-possession control, and operational continuity.
Krishh Realtech Pvt. Ltd., NCLT Delhi CP(IBPP) No. 152/ND/2022 and NCLAT CA(AT)(Ins) Nos. 1008-1009/2022, December 2022: Confirmed that pre-admission hearings do not violate natural justice under Section 424 of the Companies Act; clarified the balance between speed and collusion safeguards.
Kratos Energy and Infrastructure Ltd., NCLT Mumbai, IA No. 2207/2024 in CP(IBPP) No. 03/MB/2023, July 28, 2025: Demonstrated successful Swiss challenge execution and value maximisation within the 120-day PPIRP framework.
IBBI Newsletters and Annual Reports, 2023-2026: Source data on PPIRP admissions (13-20), plan approvals (5-6), recovery percentages (10-20%), average durations (100+ days), and 80% pendency rate.
Vidhi Centre for Legal Policy Report, 2020: Advocates increasing the default eligibility threshold to Rs 10 crore, mandatory auctions, and promoter equity limits as key structural reforms to improve PPIRP uptake.
IIPI-CAI Report, 2025: Proposes 66% FC approval threshold, blind valuations, RP training programmes, tax exemptions on resolved plans, and Gujarat pilot programmes as mechanisms to increase resolution numbers.
Disclaimer
This article is published by CLEAR LAW (clearlaw.online) strictly for educational and informational purposes only. It does not constitute legal advice, legal opinion, or any form of professional counsel, and must not be relied upon as a substitute for consultation with a qualified legal practitioner. Nothing contained herein shall be construed as creating a lawyer-client relationship between the reader and the author, publisher, or CLEAR LAW (clearlaw.online).
All views, interpretations, and conclusions expressed in this article are solely those of the author and represent independent academic analysis. CLEAR LAW (clearlaw.online) does not endorse, verify, or guarantee the accuracy, completeness, or reliability of the content, and expressly disclaims any responsibility for the same.
While reasonable efforts are made to ensure that the information presented is accurate and up to date, no warranties or representations, express or implied, are made regarding its correctness, adequacy, or applicability to any specific factual or legal situation. Laws, regulations, and judicial interpretations are subject to change, and the content may not reflect the most current legal developments.
To the fullest extent permitted by applicable law, CLEAR LAW (clearlaw.online), the author, editors, and publisher disclaim all liability for any direct, indirect, incidental, consequential, or special damages arising out of or in connection with the use of, or reliance upon, this article.
Readers are strongly advised to seek independent legal advice from a qualified professional before making any decisions or taking any action based on the contents of this article. Reliance on any information provided in this article is strictly at the reader's own risk.
By accessing and using this article, the reader expressly agrees to the terms of this disclaimer.
► "PPIRP sits at the pivot between innovation and obsolescence, a framework with genuine rescue potential, held back by structural barriers that the legislature must now urgently address."
What Is Pre-Packaged Insolvency Resolution and Why Did India Create It for MSMEs?
Pre-packaged insolvency resolution process (PPIRP) became a more specific resolution to the stressed Micro, Small, and Medium Enterprises (MSMEs) in India through the Insolvency and Bankruptcy Code (IBC), 2016. In the midst of economic shocks such as COVID-19 with the MSMEs (30% GDP and 45 million jobs) undergoing liquidity crunches, PPIRP was to ensure that these businesses could be speedily revived without the slings and cranks of conventional Corporate Insolvency Resolution Process (CIRP). It was instituted in 2021 through an amendment, combining pre-negotiated plans with judicial checks, and is controversial: both an excellent boost to quick rescues and a structural failure due to its poor uptake, creditor protections, and the MSME eligibility barrier.
This is reflected in the track record at PPIRP as of April 2026, with only approximately 20 admissions since inception and only 56 successful resolutions and average recoveries ranging between 15-20 out of the current 500 cases, according to IBBI data. Early success in capturing operations in areas such as manufacturing and realty retained operations, but as the gaps persisted in the form of the 100% unrelated creditor consent barrier and non-inclusion of unregistered MSMEs, calls to reform have emerged, putting PPIRP in the pivot between innovation and obsolescence.
What Is the Legal Definition and Statutory Framework of PPIRP Under the IBC?
PPIRP was introduced under IBC (Second Amendment) Act, 2021 (in force since September 2021) under Sections 54A to 54P whereby any eligible MSME can submit a base resolution plan prior to admission under NCLT.
The table below sets out the key structural elements of the PPIRP framework.
Element
Detail
Significance
Governing provisions
Sections 54A to 54P, IBC 2016 as inserted by IBC (Second Amendment) Act, 2021
Dedicated statutory framework distinct from CIRP
Eligibility
MSMEs registered under the MSMED Act, 2006; default not exceeding Rs 1 crore
Excludes approximately 90% of informal/unregistered MSMEs; limits use to early-stage distress
Prior CIRP bar
Entity must not have undergone CIRP under Sections 7, 9, or 10 within the last 3 years
Prevents serial filers from exploiting the framework
Model
Debtor-in-possession; promoters retain management control throughout
Contrasts with creditor-takeover model of CIRP; minimises business disruption
Base plan requirement
Must have 100% consent of unrelated financial creditors before filing; operational creditors must receive liquidation value under Section 53 waterfall
High threshold to prevent sweetheart deals
Admission timeline
NCLT must admit or reject within 7 days of filing
Designed for speed; far faster than CIRP admission
Moratorium
Section 54B provides moratorium on all creditor actions upon admission
Provides breathing space for resolution
Resolution period
90 days extendable by 30 days on NCLT order; total maximum 120 days
Significantly shorter than CIRP's 330-day average
CoC approval threshold
66% voting share by value
Lower than CIRP to enable faster decision-making
Swiss challenge auction
Optional; allows superior bids to compete against the base plan
Maximises value through competitive bidding
Binding effect
Approved plan binding on all stakeholders under Section 54L; NCLT order within 21 days
Finality within 120 days total
How Does PPIRP Actually Work Step by Step, A Plain-Language Illustration
Take the case of a hypothetical MSME, SteelFab Ltd., a metal fabricator in Gujarat with a default of 80 lakh: 60 lakh to a bank (financial creditor) and 20 lakh to suppliers (operational creditors).
The promoter prepares a ready-to-wear base plan: injecting 50 lakh in fresh equity, offering the bank a 70% haircut paid through asset sale to an unrelated person, and paying suppliers 100% liquidation value of Rs 15 lakh. Before filing, the promoter negotiates 100% bank consent. The combined application is admitted by NCLT; the Resolution Professional checks the plan, invites challenges, and runs an optional Swiss auction that produces a superior bid. The plan is approved in 95 days. The business survives with the promoter continuing to manage operations, jobs are retained, and suppliers are paid, outcomes that would not have been achievable in a conventional CIRP where creditor takeover and a two-year time lag would likely have destroyed whatever enterprise value remained.
What Do Landmark Cases Tell Us About How PPIRP Operates in Practice?
The table below summarises the three most significant PPIRP judicial decisions and their contribution to the framework.
Case
Forum and Year
Facts
Key Holding
GCCL Infrastructure & Projects Ltd. v. Guardian Finance
NCLT Ahmedabad, CP(IBPP) No. 01/AHM/2021, September 14, 2021
First-ever PPIRP admission; real estate MSME with Rs 54 lakh dues; 100% unrelated financial creditor consent obtained
First PPIRP admission in India; confirmed rapid 7-day entry, debtor-in-possession control, and operational continuity as intended by the framework
Krishh Realtech Pvt. Ltd.
NCLT Delhi CP(IBPP) No. 152/ND/2022 and NCLAT CA(AT)(Ins) Nos. 1008-1009/2022, December 2022
Creditors and objectors challenged the base plan's unrelated creditor consent on grounds of mala fides; debtor voluntarily withdrew before scrutiny concluded
NCLAT ruled that pre-admission hearings do not violate natural justice under Section 424 of the Companies Act; clarified the balance between speed and anti-collusion safeguards
Kratos Energy and Infrastructure Ltd.
NCLT Mumbai, IA No. 2207/2024 in CP(IBPP) No. 03/MB/2023, July 28, 2025
Energy infrastructure MSME; plan approved with successful Swiss challenge auction
Demonstrates that the Swiss challenge mechanism can deliver genuinely competitive outcomes; plan delivered better recoveries to operational creditors with fresh promoter capital injected
These decisions collectively assert the role of judicial discretion and confirm that PPIRP's procedural rigour is enforceable, while also revealing the tensions between speed, transparency, and anti-abuse protections that continue to shape the framework.
What Has PPIRP Actually Achieved Since 2021, Successes, Numbers, and Notable Wins
With less than 13-20 physiologically demonstrated plan approaches yielding an average tactical recovery in the small 10-20% plateau, pathetically lower than CIRP norms in a couple of sectors, Pre-packaged Insolvency Resolution Process (PPIRP) has produced decidedly mixed results since its inception in September 2021, with IBBI data as of early 2026 confirming a stark gap between potential and performance.
Notable successes include Ramakrishna Forgings (NCLT Kolkata, approved 2024), which maintained enterprise value through promoter-run continuity, retained over 200 jobs, and facilitated a rapid infusion of assets to stabilise operations amid steel industry volatility. Comparable successes in textiles and auto components preserved supply chains that would otherwise have been destroyed under CIRP.
The table below summarises PPIRP performance as of early 2026.
Metric
Data (IBBI, early 2026)
Total admissions since September 2021
Approximately 20
Successful resolutions
5 to 6 approved plans
Average recovery percentage
15% to 20%
Pending or withdrawn filings
Approximately 80% of total filings
Average actual duration
100+ days despite 120-day statutory cap
Total cases before PPIRP tribunals
Approximately 500
What Are the Persistent Challenges That Are Preventing PPIRP From Achieving Its Potential?
Low Take-Up Due to Eligibility Gaps
PPIRP is limited to formally registered MSMEs under the MSMED Act, 2006, leaving almost 90% of informal and unregistered units that make up the industry outside the framework. The Rs 1 crore default limit is a further restriction: it excludes mid-tier distressed entities on the verge of higher debts, compelling many to consider more expensive and more disruptive alternatives.
Creditor Hesitancy and the 100% Consent Problem
Achieving unanimity with unrelated financial creditors remains an enormous structural challenge. The holdout risk it creates can freeze negotiations entirely. The obligation to protect operational creditors at liquidation value artificially inflates base plans, frightening banks that may fear accepting a haircut without any competitive offer having emerged through the Swiss challenge process.
Swiss Challenge Weaknesses
The discretionary nature of the Swiss challenge process attracts fewer participants, marketing periods are often insufficient to attract genuine contenders, and the continuation of the promoter after resolution creates perceptions of collusion or underpricing that undermine financial stakeholder confidence.
Money and Time Costs
Although the statutory cap is 120 days, practical timelines average over 100 days due to delays in verification and hearings. Resolution Professional charges, compliance costs, and legal expenses are disproportionate to expected cost savings for cash-strapped MSMEs.
Practically, during the economic slowdown of 2025 due to global supply disruptions and tight credit, only the fewest of the MSMEs adopted PPIRP, opting instead for informal workouts, lender moratoriums, or complete liquidations. Detractors have claimed it to be a structural failure as 80% of filings were left pending or withdrawn according to IBBI data.
However, when in place, the compressed timeline of PPIRP compared to CIRP's arduous 330-day average does sustain businesses, retain suppliers, and maintain sales, making it an apparently underutilised but genuinely valuable bridge to recovery rather than a mechanism for breakdown.
What Reforms Would Make PPIRP Work Better for India's 45 Million MSME Jobs?
Specific reforms can provide a way out. The table below sets out the principal reform proposals and their rationale.
Reform Proposal
Current Position
Proposed Change
Expected Impact
Raise default threshold
Rs 1 crore
Rs 10 crore
Enables mid-sized MSMEs in deeper distress to access PPIRP
Reduce unrelated FC consent threshold
100% consent required
66% consent with opt-outs
Removes the most significant structural barrier to use
Streamline registration requirement
Mandatory MSMED Act registration
Self-certification or presumptive Udyam inclusion
Opens PPIRP to the 90% of informal and unregistered MSMEs currently excluded
Operational creditor protection reform
Liquidation value only
Fair-value gains sharing
Removes artificial inflation of base plans; makes banks more willing to engage
Mandatory Swiss challenge auctions
Optional
Mandatory 30-day auctions with promoter equity limits
Removes collusion perception; maximises competitive bidding
Expedited NCLAT appeals
Standard appellate timelines
Fast-track NCLAT jurisdiction for PPIRP matters
Reduces uncertainty and delays that discourage creditor participation
Annual outcome audits
No systematic review
IBBI-mandated annual audit of PPIRP outcomes
Creates accountability and enables evidence-based reform
Together with RP training programmes and tax exemptions on approved resolution plans, these reforms could transform PPIRP into a robust lifeline, prompting a threefold increase in the number of resolutions and protecting the 45 million jobs dependent on India's MSME ecosystem.
Conclusion: PPIRP Is a Framework Worth Saving, But Only If India Acts on Its Structural Failures
PPIRP represents a radical and genuinely innovative change in the Indian insolvency framework, empowering debtor-in-possession control and limiting the process to 120 days to deliver rapid, value-saving solutions. The success of GCCL Infrastructure, where pre-determined alignment with creditors allowed seamless admission, RP management, and plan authorisation without management displacement, demonstrates what the framework can achieve when it works as intended. This promoter-based strategy not only maintains operational continuity but ensures job safety, supply chain preservation, and stakeholder protection within MSME ecosystems.
Yet extensive barriers to adoption, mandatory MSMED registration that excludes 90% of informal players, the 100% unrelated financial creditor veto threshold, elevated withdrawal rates of 80% of filings, artificially inflated base plans, thin Swiss challenge participation, and disproportionate RP costs, highlight a framework that is more theoretical than transformative in its current form.
The path forward is clear. Increase the default threshold to Rs 10 crore with a 66% consent requirement, streamline registration, recalibrate creditor consents, mandate strong 30-day Swiss auctions with promoter equity limits, and implement expedited NCLAT appeals alongside annual outcome audits. These reforms may transform PPIRP into the strong lifeline India's MSMEs urgently need, and rescue the 45 million jobs that depend on getting this right.
Frequently Asked Questions (FAQs) on Pre-Packaged Insolvency Resolution for MSMEs
1. What is PPIRP and how is it different from CIRP under the IBC? PPIRP or Pre-Packaged Insolvency Resolution Process is a fast-track insolvency mechanism introduced specifically for MSMEs through Sections 54A to 54P of the IBC, inserted by the IBC (Second Amendment) Act, 2021. Unlike CIRP, PPIRP uses a debtor-in-possession model where promoters retain management control, requires a pre-negotiated base resolution plan before admission, and operates within a maximum of 120 days compared to CIRP's 330-day average.
2. Who is eligible for PPIRP under the IBC? Only MSMEs that are registered under the MSMED Act, 2006 and have a default not exceeding Rs 1 crore are eligible. The entity must not have undergone a CIRP under Sections 7, 9, or 10 within the preceding three years.
3. What is the 100% unrelated financial creditor consent requirement and why is it controversial? Before filing under PPIRP, the debtor must obtain the consent of 100% of unrelated financial creditors to the base resolution plan. This is designed to prevent collusive deals between promoters and friendly creditors, but it creates a severe holdout risk that makes negotiations extremely difficult and is identified as the most significant structural barrier to PPIRP adoption.
4. What is the Swiss challenge mechanism in PPIRP? The Swiss challenge is an optional competitive bidding process where the base plan is made public and third parties may submit superior bids. If a superior bid is received, the original plan proponent has the right to match it. It is designed to maximise value but has been criticised for low participation due to its optional nature and insufficient marketing periods.
5. What happened in the GCCL Infrastructure case? GCCL Infrastructure & Projects Ltd. v. Guardian Finance was the first-ever PPIRP admission in India, admitted by NCLT Ahmedabad on September 14, 2021. A real estate MSME with Rs 54 lakh in dues obtained 100% unrelated financial creditor consent for its base plan and was admitted within 7 days, confirming the framework's design for rapid, debtor-controlled resolution.
6. Why do 80% of PPIRP filings end in withdrawal or pendency? The combination of the 100% unrelated financial creditor consent requirement, the exclusion of unregistered MSMEs, disproportionate RP and compliance costs, and insufficient Swiss challenge participation means that many filings cannot overcome these structural barriers. During economic downturns, MSMEs often prefer informal workouts or direct liquidation rather than face these obstacles.
7. What are the key reforms needed to improve PPIRP? The most important reforms are: raising the default threshold from Rs 1 crore to Rs 10 crore; reducing the unrelated FC consent requirement from 100% to 66%; streamlining the registration requirement through self-certification; making Swiss challenge auctions mandatory with a 30-day minimum; and implementing expedited NCLAT appeals and annual outcome audits.
8. How does PPIRP protect operational creditors such as suppliers and vendors? Under PPIRP, operational creditors must receive at least their liquidation value under the Section 53 waterfall priority in the base resolution plan. While this protects them from receiving less than they would in liquidation, it also artificially inflates base plans because the promoter must guarantee this floor regardless of the overall recovery available.
Key Takeaways
PPIRP was introduced through the IBC (Second Amendment) Act, 2021 under Sections 54A to 54P as a debtor-in-possession, fast-track insolvency mechanism specifically designed for MSMEs, operational from September 2021.
The maximum duration of PPIRP is 120 days compared to CIRP's 330-day average, and CoC approval requires 66% voting share by value compared to the 75% threshold in CIRP.
Eligibility is restricted to MSMEs registered under the MSMED Act, 2006 with defaults not exceeding Rs 1 crore, excluding approximately 90% of informal and unregistered MSMEs and limiting access to early-stage distress rather than deeper financial crises.
The 100% unrelated financial creditor consent requirement for the base plan is the single most significant structural barrier to PPIRP adoption, creating holdout risks that freeze negotiations.
As of early 2026, IBBI data shows only approximately 20 admissions, 5 to 6 successful plan approvals, average recoveries of 15-20%, and 80% of filings pending or withdrawn — a stark gap between PPIRP's potential and its performance.
GCCL Infrastructure & Projects Ltd., the first PPIRP admission in India (NCLT Ahmedabad, September 2021), demonstrated that the framework can deliver seamless, rapid, promoter-controlled resolution when creditor alignment is achieved pre-filing.
NCLAT in Krishh Realtech (2022) confirmed that pre-admission hearings under PPIRP do not violate natural justice, striking a balance between speed and anti-collusion safeguards.
The key reforms needed are: raising the default threshold to Rs 10 crore, reducing the unrelated FC consent requirement to 66%, streamlining MSMED registration, mandating 30-day Swiss challenge auctions, and implementing expedited NCLAT appeals.
MSMEs contribute 30% of India's GDP and support 45 million jobs; a functional PPIRP is not merely an insolvency law improvement but a macroeconomic necessity.
PPIRP remains a framework worth saving — but only if structural reforms address the eligibility gaps, creditor consent barriers, and cost disproportionality that are preventing it from functioning as the transformative rescue mechanism it was designed to be.
References
Insolvency and Bankruptcy Code, 2016: The primary legislation governing corporate insolvency in India, under which PPIRP operates through Sections 54A to 54P as inserted by the IBC (Second Amendment) Act, 2021.
IBC (Second Amendment) Act, 2021: Operationalised PPIRP from September 2021; requires MSMED registration; prescribes 100% unrelated FC consent; mandates NCLT admission within 7 days.
IBBI (Pre-Packaged Insolvency Resolution Process) Regulations, 2021: Govern base plan disclosures, RP supervision, creditor votes (66% CoC threshold), optional Swiss challenge auctions, and the Section 54B moratorium.
MSMED Act, 2006: Defines the eligible MSME categories for PPIRP access under Section 54A(2) of the IBC; the registration requirement is a gateway and a structural barrier.
GCCL Infrastructure & Projects Ltd. v. Guardian Finance, NCLT Ahmedabad, CP(IBPP) No. 01/AHM/2021, September 14, 2021: First PPIRP admission in India; confirmed rapid 7-day entry, debtor-in-possession control, and operational continuity.
Krishh Realtech Pvt. Ltd., NCLT Delhi CP(IBPP) No. 152/ND/2022 and NCLAT CA(AT)(Ins) Nos. 1008-1009/2022, December 2022: Confirmed that pre-admission hearings do not violate natural justice under Section 424 of the Companies Act; clarified the balance between speed and collusion safeguards.
Kratos Energy and Infrastructure Ltd., NCLT Mumbai, IA No. 2207/2024 in CP(IBPP) No. 03/MB/2023, July 28, 2025: Demonstrated successful Swiss challenge execution and value maximisation within the 120-day PPIRP framework.
IBBI Newsletters and Annual Reports, 2023-2026: Source data on PPIRP admissions (13-20), plan approvals (5-6), recovery percentages (10-20%), average durations (100+ days), and 80% pendency rate.
Vidhi Centre for Legal Policy Report, 2020: Advocates increasing the default eligibility threshold to Rs 10 crore, mandatory auctions, and promoter equity limits as key structural reforms to improve PPIRP uptake.
IIPI-CAI Report, 2025: Proposes 66% FC approval threshold, blind valuations, RP training programmes, tax exemptions on resolved plans, and Gujarat pilot programmes as mechanisms to increase resolution numbers.
Disclaimer
This article is published by CLEAR LAW (clearlaw.online) strictly for educational and informational purposes only. It does not constitute legal advice, legal opinion, or any form of professional counsel, and must not be relied upon as a substitute for consultation with a qualified legal practitioner. Nothing contained herein shall be construed as creating a lawyer-client relationship between the reader and the author, publisher, or CLEAR LAW (clearlaw.online).
All views, interpretations, and conclusions expressed in this article are solely those of the author and represent independent academic analysis. CLEAR LAW (clearlaw.online) does not endorse, verify, or guarantee the accuracy, completeness, or reliability of the content, and expressly disclaims any responsibility for the same.
While reasonable efforts are made to ensure that the information presented is accurate and up to date, no warranties or representations, express or implied, are made regarding its correctness, adequacy, or applicability to any specific factual or legal situation. Laws, regulations, and judicial interpretations are subject to change, and the content may not reflect the most current legal developments.
To the fullest extent permitted by applicable law, CLEAR LAW (clearlaw.online), the author, editors, and publisher disclaim all liability for any direct, indirect, incidental, consequential, or special damages arising out of or in connection with the use of, or reliance upon, this article.
Readers are strongly advised to seek independent legal advice from a qualified professional before making any decisions or taking any action based on the contents of this article. Reliance on any information provided in this article is strictly at the reader's own risk.
By accessing and using this article, the reader expressly agrees to the terms of this disclaimer.