Abstract

The introduction of the Pre-Packaged Insolvency Resolution Process (PIRP) under the Insolvency and Bankruptcy Code (IBC) 2016 marked a pivotal development in addressing the delays and challenges faced by distressed companies, particularly Micro, Small, and Medium Enterprises (MSMEs), during the COVID-19 pandemic. Enacted through the 2021 amendment, PIRP was designed as an expedited and streamlined alternative to the Corporate Insolvency Resolution Process (CIRP). It involves pre-negotiation of a resolution plan between creditors and debtors, which is subsequently submitted for formal approval. This mechanism aims to balance creditor interests while mitigating adverse economic impacts on MSMEs. The PIRP offers several advantages, including a shorter resolution timeline (120 days), reduced litigation, and enhanced debtor-creditor collaboration. However, its adoption has been limited, largely due to hesitancy among financial creditors and lack of awareness about its potential benefits. Structural challenges such as the absence of a framework for group insolvency and a secondary market for stressed assets further impede its success. Despite these challenges, PIRP aligns India’s insolvency framework with global practices in jurisdictions like the UK and USA, promoting confidence among international creditors. To ensure its effectiveness post-COVID, the government must introduce complementary measures, such as legal reforms to empower adjudicating authorities and enhance procedural efficiency. While PIRP remains underutilized, its potential to transform insolvency resolution for MSMEs is significant. Its continued necessity hinges on addressing current impediments, fostering creditor confidence, and integrating a robust framework for group insolvency and secondary asset markets. By overcoming these challenges, PIRP could evolve into a cornerstone of India’s insolvency landscape, fostering quicker resolutions and minimizing economic disruptions.

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