PPIRP (Syllabus: GS Paper 3 – Economy)

Context: The Pre-packaged Insolvency Resolution Process (PPIRP) has resulted in the full settlement of operational creditors' claims in five cases.

Pre-packaged Insolvency Resolution Process (PPIRP)

• About: PPIRP involves the negotiation of a pre-packaged plan between the debtor and its creditors before the commencement of the insolvency process.
• Introduced in: April 2021 to address the impact of the Covid pandemic on small and mid-sized companies.
• Aimed at providing tailored solutions for distressed MSMEs due to their unique business nature.
• Purpose: Provides an expedited resolution mechanism for micro, medium, and small enterprises facing financial distress.
• Process: Involves negotiation and agreement between debtor and creditors on a resolution plan before formal insolvency proceedings.

oUpon creditor approval, the pre-packaged plan is submitted to the National Company Law Tribunal (NCLT), resembling an out-of-court settlement.

oDrafting and finalization of the resolution plan precede formal initiation of the insolvency process.

oThe finalized plan, upon creditor majority approval, is presented to NCLT.

• Implementation: It is initiated voluntarily by the debtor.
• Legal Provision: It is a recent addition to the Insolvency and Bankruptcy Code, 2016 (IBC) and provides for a faster and more efficient mechanism for the resolution of corporate insolvency.
• Significance: Reduces resolution time compared to the traditional corporate insolvency resolution process, with minimal disruptions.