Comparative Analysis of Key Provisions of Corporate Insolvency Resolution Process and Pre-Packaged Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016

COVID-19 pandemic has impacted businesses, financial markets, and economies all over the world, including India, and has affected the business operations of micro, small and medium enterprises and exposed them to financial distress. The Government has taken several measures to mitigate the distress used by the pandemic including increasing the minimum amount of default for initiating insolvency resolution process to Rupees One Crore, and suspending filing of applications for initiation of corporate insolvency resolution process in respect of the defaults arising during the period of one year, beginning from March 25, 2020 which has ended on March 24, 2021. The Government of India has recently amended the IBC (through ordinance dated April 4, 20213) and has introduced a new mechanism for insolvency resolution specially for entities classified as MSMEs by insertion of new Chapter IA in the IBC which deals with Pre-Packaged Insolvency Process'. Corporate insolvency resolution process (“CIRP”) for insolvency resolution of corporate persons being companies and limited liability partnerships are governed under Chapter II of Part I of the Insolvency and Bankruptcy Code, 2016 (“IBC”) and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”). Pre-packaged insolvency resolution process (“PPIRP”) for micro, small and medium enterprises (“MSMEs”) regulated under the Micro, Small and Medium Enterprises Development Act, 2006, are governed under Chapter IIIA of Part I of the IBC and the Insolvency and Bankruptcy Board of India (Pre – Packaged Insolvency Resolution Process) Regulations, 2021 (“Pre – Pack Regulations”). A brief comparative analysis of key provisions of CIRP and PPIRP as envisaged under the IBC and the relevant regulations introduced by the Insolvency and Bankruptcy Board of India (“IBBI”).