When the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 introduced the Pre-Packaged Insolvency Resolution Process (PPIRP), it represented the most significant structural innovation to the IBC framework since the Code’s original enactment. Designed exclusively for micro, small, and medium enterprises (MSMEs), PPIRP promised a faster, cheaper, and less disruptive insolvency process — one that preserved management continuity while offering creditors a structured resolution pathway.

Four years since its introduction, what does the evidence tell us? And where does the framework still fall short?

The PPIRP Framework: What It Was Designed to Do

PPIRP is a debtor-in-possession mechanism — the promoters and management of the MSME remain in control of the entity during the resolution process, unlike CIRP where the RP displaces management on the commencement date. The process begins before the NCLT is even approached: creditors must approve the base resolution plan submitted by the debtor before the PPIRP application is filed.

The timeline is aggressive: PPIRP must be completed within 120 days from commencement, compared to 330 days under CIRP. The cost architecture is correspondingly leaner — the debtor’s management continues operations, reducing the overhead of an appointed RP running the entity.

Eligibility: The MSME Constraint

PPIRP is available only to corporate debtors classified as MSMEs under the MSMED Act. This means:

  • Manufacturing enterprises with investment up to ₹50 crore and turnover up to ₹250 crore
  • Service enterprises with investment up to ₹50 crore and turnover up to ₹250 crore

Eligibility must be established at the time of filing. A corporate debtor that has outgrown MSME classification — or that has uncertain registration status — cannot access PPIRP. The MSME registration requirement is a hard condition, not a procedural formality.

What Works

The debtor-in-possession architecture is PPIRP’s most significant practical advantage. In a CIRP, the replacement of management creates disruption to operations, client relationships, and institutional knowledge that often destroys enterprise value before any resolution plan can be approved. Under PPIRP, continuity of management mitigates this risk substantially.

The pre-negotiation requirement — that a base plan be agreed with creditors holding 66% of total financial debt before PPIRP commences — means that the NCLT process can be swift. If the pre-pack plan has already been negotiated, the 120-day window is often more than sufficient.

The pre-packaged process works when the parties arrive at the NCLT having already done the hard work of negotiation. It struggles when that negotiation has not happened in good faith.

Where the Framework Falls Short

Despite its structural logic, PPIRP has seen limited uptake in practice. Several factors explain this:

  • Creditor coordination: Obtaining 66% creditor consent for the base plan before commencement requires a level of coordination among lenders — often including multiple banks — that is difficult in practice, particularly where creditors have divergent interests
  • Debtor reluctance: MSMEs are often promoter-driven businesses where the personal reputation and assets of the promoter are intertwined with the company. Promoters are reluctant to initiate insolvency proceedings even in a debtor-in-possession format, fearing reputational damage and lender scrutiny
  • Operational creditor exclusion: Operational creditors have no role in PPIRP — they are not included in the pre-pack plan negotiation and have limited recourse to challenge an approved plan. This creates fairness concerns that have not been fully resolved
  • Regulatory uncertainty: Several provisions — including the scope of the moratorium and the treatment of personal guarantees during PPIRP — remain areas of interpretive uncertainty pending further judicial clarification

The Path Forward

PPIRP has the right structural instincts — debtor control, pre-negotiation, speed, cost efficiency — but requires refinement to achieve the uptake its designers intended. Recommendations from the Insolvency Law Committee (ILC) and the IBBI have pointed to enhanced creditor coordination mechanisms, broader awareness among MSMEs and their lenders, and greater judicial familiarity with the process as the key to unlocking PPIRP’s potential.

For MSMEs facing genuine financial stress, PPIRP remains a genuinely superior option to CIRP in cases where early engagement with creditors is possible. The window for that engagement — before a creditor files a CIRP application — is the critical one. Waiting for a creditor to act removes the debtor-in-possession advantage entirely.

Our insolvency team regularly advises MSME promoters and lenders on PPIRP eligibility, base plan structuring, and the coordination mechanics required to make the process work. Early legal advice — before the first creditor default notice — is almost always more effective than crisis counsel.