Insolvency and Bankruptcy

• The primary attribute of this revamped system, renowned as PPIRP, is that once an MSME unit fails to repay debts amounting to INR 10.00 Lakhs or even further, then the present management of said MSME facility is authorized to suggest a Base Resolution Plan to the lenders and the NCLT to alleviate their fiscal stress.
• The incumbent board is often permitted to persist in operating the facility throughout the IRP. This is in contradiction to the current CIRP procedure, in which Control is passed to IRP promptly after the procedure is commenced. For insolvency resolution, the revised PPIRP shifts from the “Lender approach” to a “borrower approach”.

• PPIRP is designed to be concluded in a time span of 120 days, inclusive of 30 days period provided for the A.A. to approve the resolution plan.
• This Amendment integrates “the finest of all systems” such that bankruptcy procedures hinder borrowers’ commercial operations as little as possible through balancing the effectiveness, timeliness, affordability, and adaptability of exercises with the enforceable nature and framework of official insolvency procedures.
• This Amendment has numerous upsides over the traditional settlement approach. The majority of these are due to 2 factors:
  1. The unofficial approach and
  2. A smaller timeframe for settlement. Because the approach preceding the initiation of the official action is casual, which enables stakeholders to figure out a consensus, yet practical, plan for successful settlement and asset utilization, which may be challenging underneath the official insolvency proceedings.
• Neither any court cases are also anticipated from the side of a CD because he controls the organization and the procedure is carried out with his and FC’s explicit approval alone. A CD should establish a Base Resolution Plan (BRP) based on the enterprise sustainability and inherent assurance and stability to FC, and its application shall be carried out with the explicit approval of FC. The Resolution Professional is not obliged to manage the entity and must instead focus on the Settlement Strategy, which is the foundation of IBC procedures.
• Because a tentative agreement has apparently been achieved among the FCs and CDs, clearance will be swift considering there might barely be any disagreement on the settlement strategy. A thorough evaluation of concerns will not be necessary during the admissions phase. As an outcome, the pressure on NCLT is lessened.
• The sustainability and accomplishment of the PPIRP are dependent on the CD, its executives, and directors’ assertive involvement in the procedure.
• As previously stated, PPIRP offers several intrinsic benefits over traditional CIRP. There is no need, in our opinion, to limit the plan to the MSME exclusively. It should be expanded to other institutions as well, possibly with stronger regulations.

“One who wears the shoes knows where shoe pinches”

The CD has a deeper understanding of the firm, its financial distress, and the potential of its settlement. In certain circumstances, the CD may be the only individual concerned and capable of resolving the enterprise’s financial distress. In acknowledgment of the fact, that in each state’s legal framework pre-pack system permits just the CD to commence the procedure independently, and proactively and acquire the assent of important parties prior to petitioning the Tribunal. When CD does so freely and with the approval of key players, the prospect of surrendering the firm or the potential of liquidation is significantly reduced. As expressly stated that the CDs may propose the BRP (Base Resolution Plan) either alone or in collaboration with another individual or entity.