Published On: 7th October 2026
Authored By: Pranav Raj
Gitarattan International Business School, GGSIPU
Introduction[1]
India established its pre-packaged insolvency resolution process (PPIRP) through the 2016 Insolvency and Bankruptcy Code (IBC) to provide businesses with a faster and less disruptive method of resolving corporate insolvency compared to traditional corporate insolvency resolution process (CIRP) methods. The PPIRP program which started to operate for micro small and medium enterprises (MSMEs) wanted to give debtors management rights while creditors could monitor their activities until they reached a prearranged solution that would safeguard their business assets.[2] The framework was created to decrease operational expenses and reduce business interruptions and enable faster problem solving. Yet its practical adoption has remained strikingly limited. As of 31 March 2026, only 18 PPIRP applications had been admitted, with ten resolution plans approved.[3]
The restricted adoption of this solution creates a major problem for private equity (PE) and distressed-mergers-and-acquisitions (M&A) markets because it shows that businesses need to develop their operational capacity through established processes for urgent asset sales and distressed financial situations. The answer is particularly important because PE investors frequently require predictable transaction timelines control over execution risk and mechanisms capable of preserving enterprise value during financial distress.
PPIRP contains multiple features which might appeal to those particular investors. The 120-day statutory outer limit of the system operates under a much shorter time frame than the typical extended duration which CIRP cases usually require. The base-resolution-plan mechanism allows existing promoters and other eligible stakeholders to negotiate a restructuring proposal before the formal process begins.[4] The framework allows multiple resolution plans to operate under certain conditions which enable market evaluation and asset value enhancement. The PPIRP system remains restricted because it only allows MSME businesses to participate and requires promoters to maintain control while needing consent from creditors and facing possible lawsuits that can occur throughout the process.
The existing restrictions make standard CIRP more appealing when a distressed asset needs to undergo an open sale procedure or when outside investors want to gain instant ownership rights. This research investigates PPIRP as a possible private equity exit strategy and distressed merger-and-acquisition method, but it shows that the system’s practical benefits face limitations due to its restricted legal framework.
The study recommends a controlled process which allows MSME businesses to expand and establishes stronger investor protection through essential process modifications which will transform PPIRP into a valid method for distressed businesses to attract investment.
Statutory Framework
The PPIRP process operates under Chapter III-A of Part II of the Insolvency and Bankruptcy Code 2016 which includes sections 54A through 54P. The Insolvency and Bankruptcy Code (Amendment) Act 2021 established the framework which enables creditors to approve financial distress resolution processes that maintain operational control for corporate debtors.[5]
The section 54A of the law establishes criteria which determine who can participate in the Public Private Infrastructure Recreation Program. The PPIRP program exists for corporate debtors who meet the definition of micro small and medium enterprises according to the Micro Small and Medium Enterprises Development Act 2006.[6] The debtor must fulfill extra requirements which include two conditions because the debtor must show that they have not entered CIRP or PPIRP during the past three years and that they currently do not operate under CIRP and that they have not received a liquidation order and they meet the requirements to file a resolution plan according to section 29A.[7] Moreover, 66% of financial debt holders must agree to a PPIRP to authorize the process.[8] The corporate debtor needs to obtain member approval while making the required statutory declarations about their planned procedure. The base resolution plan serves as a unique element of the system.
The corporate debtor needs to present a base resolution plan according to section 54K before obtaining approval from creditors.[9] After the start of proceedings the Committee of Creditors (CoC) will examine the proposed plan. The CoC may approve the base plan when it does not impair operational creditors’ claims according to their required method of protection. The plan needs approval but it cannot proceed because it creates a burden on particular claims which exist.[10] This mechanism strives to harmonize the process of restructuring by negotiation with the competitive process of value discovery.
The process follows a timetable which has been established by law and cannot be altered. The PPIRP process needs to be finished within 120 days after its start according to section 54D because the resolution professional must present the confirmed plan to the Adjudicating Authority within 90 days.[11] Management initially remains with the corporate debtor under section 54H, distinguishing PPIRP from the management displacement ordinarily associated with CIRP. The resolution professional supervises all operations while handling management control issues that emerge from legal requirements.[12]
Approval, appeal, termination, and how to apply IBC Rules and Regulations are also regulated by Sections 54L–54p.[13] The hybrid system results from these elements which enable negotiation throughout both pretrial and trial periods while insolvency regulations require creditor supervision and court permission for implementation.
PE Exit Lens
The distressing situation of investments demands private equity (PE) investors to develop an investment strategy which needs fast execution together with maintaining asset worth and ensuring deal completion. Traditional CIRP can provide an open competitive process for acquiring distressed assets, but its practical duration, litigation exposure and uncertainty over value erosion can complicate investment planning. PPIRP presents a potentially attractive alternative because it permits financial distress to be addressed through a negotiated resolution plan while preserving operational continuity.
The 120-day statutory timeline stands as the most important benefit. The resolution professional must present the CoC-approved resolution plan to the Adjudicating Authority within 90 days according to Section 54D, which requires the entire process to finish within 120 days.[14] The CIRP process establishes a 180-day period as its initial timeframe because the law allows for one extension that lasts up to 90 days. The Code establishes 330 days as the maximum duration which includes both litigation times and other associated time periods.[15] The statutory timelines do not match actual completion times, but PPIRP provides investors with a more accurate execution schedule than existing statutory timelines.
The base resolution plan establishes a crucial advantage for transaction planning. A distressed promoter can negotiate a restructuring proposal with creditors before formal commencement, allowing the commercial contours of a transaction to be developed in advance.[16] The process enables PE investors to conduct preliminary due diligence while negotiating valuation and establishing financing terms. An investor may potentially participate through a competing plan where the statutory conditions require the CoC to invite alternative proposals.[17] The system enables parties to negotiate changes while maintaining some level of market competition.
The existing financial backers of the company can use PPIRP as a method to exit their investments. The agreed resolution plan allows a distressed portfolio company to proceed with debt restructuring and new capital acquisition and ownership transfer without experiencing the typical delays that come with standard insolvency procedures. A private equity sponsor can choose to exit their investment through three methods which include ownership dilution and debt-equity restructuring and the replacement of current shareholders, but they must obtain section 29A eligibility and creditor consent before proceeding.[18] The current situation requires evaluation of business operations because the company continues to function yet its financial resources have become unmanageable.
The promoter-in-possession framework which incoming investors will encounter creates major conflicts between their interests and the existing business model. Corporate debtors maintain operational control through Section 54H which grants management power but requires completion of their responsibilities under the resolution professional’s oversight.[19] The PE buyer who wants to buy a distressed company will experience restricted operational authority throughout the essential time period which includes both negotiation and takeover execution of the deal. The automatic management transfer system in Section 54J allows management to change only in specific situations which investors must prove to obtain control.[20]
The comparison with CIRP consequently involves more than speed. CIRP displaces existing management and puts control of the situation into the hands of the resolution professional who creates a distinct boundary between the distressed promoter and the potential acquirer. PPIRP maintains two organizational boundaries but reduces them to achieve operational stability and minimal interruption. The process may maintain going-concern value but it decreases investor trust when creditors raise concerns about promoter actions or governance problems.
PPIRP therefore has genuine PE potential especially for viable distressed MSMEs that need quick restructuring instead of going through value-based liquidation processes. The distressed-MA acquisition process needs better knowledge of competing proposals and who has control and how creditors will negotiate and how judges will handle their cases. Private equity investors will still choose CIRP because it takes longer to complete since they find the traditional process more understandable in terms of market competition.
Comparative Angle
The UK pre-pack administration model provides a useful comparator for evaluating India’s PPIRP because both mechanisms seek to preserve distressed businesses through accelerated restructuring while reducing the value destruction associated with prolonged insolvency proceedings. The two systems operate through different fundamental structural elements. A UK pre-pack sale requires administrators to negotiate a business sale before or at the moment when they assume their official duties which allows them to sell the business or its assets without needing to conduct a lengthy marketing period.[21] The model therefore prioritises speed and going-concern preservation, particularly at points where delays lead to customer loss and employee departure and asset value decline.
India’s PPIRP system operates with fundamental structural differences because its statutory resolution process requires business control to remain with the corporate debtor instead of using its primary function as an expedited sale method.[22] It is only after approval from the specified creditors that the voting rights begin, after which the resolution applicant presents a basic resolution plan to the Committee of Voting Members.[23] Where the original plan is rejected or falls outside the scope for direct negotiation after market testing has been advised.[24] The Indian model therefore embeds creditor participation and potential competitive bidding into the statutory process because it requires their direct involvement.
The UK experience demonstrates the importance of speed and value preservation. Pre-pack transactions can prevent the immediate destruction of goodwill and operational value that follows a standard administration sale. However, transparency issues and creditor participation problems and perceived management conflicts which exist when existing management acquires the business have created concerns throughout history. The Administration (Restrictions on Disposal etc to Connected Persons) Regulations 2021 established an independent assessment process which requires evaluators to prepare reports about specific connected-party transactions.[25]
India’s Permanent Pollution Import Restriction Program uses a different system for protecting its resources. The CoC holds primary control over decision-making powers which the resolution professional oversees, and the Adjudicating Authority will make the final judgment about the resolution plan.[26] The structure which focuses on creditors protects financial creditors. However, this protection reduces the ability private equity investors to complete transactions because they need quick acquisition certainty.
The UK model teaches Indian authorities to develop their own speed solutions which need trustworthy systems that prevent insider trading not to copy pre-pack administrative methods. The Indian system which allows promoters to control their companies requires independent valuation processes because they need to disclose their business operations and test the market. The pre-packaging process will lose its main benefits when organizations create excessive procedural rules which transform it into a standard CIRP process.
The best Indian model for distressed-M&A and PE needs to combine the PPIRP negotiated resolution system with market-testing methods which will examine the proposed transaction when it involves connected parties and major ownership shifts and critical creditor losses. The 120-day period can be maintained through a controlled method which provides necessary business details to creditors and new investors for value evaluation.
The comparison assessment shows that both stakeholder trust and operational efficiency work together to determine their results. The UK reforms require companies to disclose their related party transactions because the CoC-based system in India shows how valuable creditor approval becomes. The framework for PPIRP can become a reliable method for distressed company investment through the integration of these principles which will still protect its main function of value maintenance.
Critical Gaps
The primary limitation of PPIRP stems from its legal framework which defines its operational scope as narrower than the distressed-M&A market that it attempts to address. First, eligibility is confined to corporate debtors falling within the statutory definition of micro, small and medium enterprises.[27] The restriction exists to protect smaller businesses from conventional insolvency which was the original policy objective of the regulation. The legal requirement for PPIRP to use existing regulations limits its application to private equity situations. The majority of PE-backed enterprises exceed the statutory MSME category because institutional capital has enabled their major growth. The mechanism for rapid restructuring needs to exclude certain businesses which require transaction certainty and preservation of their operational value to maintain their business value.
The promoter-in-possession model establishes a fundamental conflict between continuous operations and trust from investors. Section 54H permits the existing management to remain in control while the resolution professional supervises the process.[28] The solution maintains operational knowledge, which prevents interruptions to business activities, but it creates a risk of financial problems because of poor management, weak governance systems, and disputes between current shareholders and creditors. The management transfer under section 54J allows for specified situations, yet the system requires special permission to proceed with this transfer.[29] The upcoming PE investor needs to handle acquisition negotiations with the distressed business while its owner continues to operate the company which creates greater risks for both deal execution and information exchange.
The main benefit of fast proceedings loses its value because litigation risk exists. The PPIRP process requires a 120-day waiting period according to legal requirements yet actual implementation faces delays because of applications and creditor disputes and challenges that reach the National Company Law Tribunal and appellate courts.[30] The judicial examination has high importance because insolvency transactions create conflicts between creditors and raise questions about asset valuation and eligibility and avoidance transactions and how to handle dissenting stakeholders. The formal timeline therefore cannot secure business reliability.
The base resolution plan process will limit companies from discovering their optimal market prices. The CoC can approve the base plan when it meets all statutory requirements without needing to consider other competing plans.[31] The process needs to maintain its efficiency while safeguarding its settled agreements which creates problems about determining optimal value for creditors. The issue becomes more serious when promoters or their associates maintain control over their business operations. The adoption of the system exists at a low level which results in less demand for its use.
The current situation shows that only a few PPIRP cases have been accepted which shows that the process needs more development before it can operate as an alternative to CIRP. By March 2026 only a small number of PPIRP applications had been accepted and even fewer had resulted in successful plan approvals.[32] The low utilization of the program exists because it requires MSME eligibility while investors show limited understanding and creditors choose to use CIRP as their preferred method and the program faces implementation uncertainty. The combination of these restrictions creates a situation that produces contradictory outcomes. PPIRP is designed to be faster than CIRP while creating less operational disruption and achieving better results through negotiated agreements, but the system excludes enterprises that would attract private equity interest, while the regulated entities still present governance and litigation dangers. The implementation of reform should focus on two goals, which include expanding the PPIRP program and establishing its operational reliability for advanced distressed asset investors.
Reform Proposals
PPIRP requires regulation changes which must maintain its current processing speed and ability to reach agreements with parties while enabling complex distressed-investment deals. The first and most consequential reform should be phased expansion beyond MSMEs. Section 54A currently limits PPIRP operations to corporate debtors who meet MSME standards because original policy discussions considered extending the framework to non-MSME debtors after its initial implementation.[33] The subsequent regulatory experience now provides a stronger basis for reassessment. A phased pilot for mid-sized companies, subject to enhanced eligibility requirements and creditor safeguards, could test whether PPIRP can operate effectively beyond its original constituency.
The framework needs to align its design with the operational schedules used in private equity transactions. Investors need to know their funding commitments will be secure before they will invest in the attractive 120-day statutory period. The regulations should therefore establish expedited procedures for due diligence, valuation and approval of resolution plans, while limiting adjournments and interlocutory challenges that can erode the process’s principal advantage.[34] The dedicated procedural track for third-party investor transactions enables better execution outcomes.
The PPIRP needs to establish stronger market-testing protection mechanisms when a promoter-sponsored base plan undergoes ownership changes or major creditor claim reductions. The existing framework permits the CoC to approve a compliant base plan without inviting competing plans in specified circumstances.[35] The process of material ownership transfers requires an abbreviated competitive process which improves price discovery without extending the duration of CIRP. Greater investor participation requires organizations to provide clearer information about who can participate and how control and management will change.
The PE investors require dependable regulations which specify the timing when incoming resolution applicants will gain operational control and the functioning of transitional management procedures. Clear regulatory guidance will decrease uncertainty about specific transactions while maintaining the CoC’s authority to supervise. The IBBI should regularly publish PPIRP performance statistics which show admission numbers and resolution duration and recovery rates and withdrawal rates and litigation results and outcomes.
The framework has remained relatively lightly used, with 14 applications admitted by 31 March 2025 and eight resolution plans approved at that stage.[36] Recent IBBI materials verify that the PPIRP continues to get regulatory attention, with the revision of PPIRP Regulations in May 2026.[37] The future reforms need transparent empirical assessment which will provide evidence instead of speculative evaluation.
The objective should be a PPIRP capable of serving both distressed MSMEs and carefully selected larger enterprises which will provide PE investors a reliable path to fast value-preserving acquisitions while maintaining essential creditor protection.
Conclusion
PPIRP provides India with a useful mechanism that connects two different processes which start with negotiated restructuring and end with official insolvency. The 120-day statutory timeline together with the debtor-in-possession system and base resolution plan will maintain enterprise value while decreasing operational disturbances that typically occur during standard CIRP procedures.[38] The private equity investors will achieve faster distressed acquisitions and recapitalization and exits through these characteristics. The current design of the system creates barriers that prevent users from reaching their full potential. The MSME-only eligibility requirement excludes multiple PE-backed businesses from access, while promoter control and restricted competitive bidding and litigation processes lead to decreased transaction certainty.[39] PPIRP has not yet become a standardized method for handling distressed mergers and acquisitions.
The reform process needs to concentrate on controlled growth because it requires more effective methods than complete system transformation. The extended eligibility system for larger businesses which introduces enhanced market-testing standards for promoter-linked plans and establishes clear investor-management rights and better procedural certainty will increase institutional capital attraction to PPIRP.[40]
PPIRP needs to develop into an effective distressed-investment platform which operates under specific time limits and functions as a trustworthy mechanism for MSME business restoration. The program needs to demonstrate its effectiveness through two specific outcomes: better operational use and improved ability to resolve issues and protect value and build trust with both creditors and investors.
References
[1] 5th Year Law Student, B.A.LL.B. Student, Gitarattan International Business School (GGSIPU).
[2] Insolvency and Bankruptcy Code 2016, ss 54A–54P, inserted by the Insolvency and Bankruptcy Code (Amendment) Act 2021.
[3] Insolvency and Bankruptcy Board of India, Quarterly Newsletter: January–March 2026 (2026).
[4] Insolvency and Bankruptcy Code 2016, ss 54D and 54K.
[5] Insolvency and Bankruptcy Code 2016, ch III-A; Insolvency and Bankruptcy Code (Amendment) Act 2021.
[6] Insolvency and Bankruptcy Code 2016, s 54A (1).
[7] ibid s 54A(2)(a)–(d).
[8] ibid s 54A (3).
[9] ibid s 54A(4)(c).
[10] ibid s 54K.
[11] ibid s 54D (1)– (2).
[12] ibid ss 54H and 54J.
[13] ibid ss 54L–54P.
[14] Insolvency and Bankruptcy Code 2016, s 54D.
[15] ibid ss 12(1), 12(3) and 12(3)(b).
[16] ibid s 54K.
[17] ibid s 54K (4) – (5).
[18] ibid ss 29A and 54K.
[19] ibid s 54H.
[20] ibid s 54J.
[21] Graham Review into Pre-Pack Administration (2014); Insolvency Act 1986, sch B1.
[22] Insolvency and Bankruptcy Code 2016, s 54H.
[23] ibid ss 54A and 54K.
[24] ibid s 54K (4) – (5).
[25] Administration (Restrictions on Disposal etc to Connected Persons) Regulations 2021, SI 2021/427.
[26] Insolvency and Bankruptcy Code 2016, ss 54H, 54J and 54K.
[27] Insolvency and Bankruptcy Code 2016, s 54A (1).
[28] ibid s 54H.
[29] ibid s 54J.
[30] ibid ss 54D and 61.
[31] ibid s 54K (4)– (5).
[32] Insolvency and Bankruptcy Board of India, Quarterly Newsletter: January–March 2026 (2026).
[33] Insolvency and Bankruptcy Code 2016, s 54A; Standing Committee on Finance, Report on the Insolvency and Bankruptcy Code (Amendment) Bill (2021).
[34] Insolvency and Bankruptcy Code 2016, ss 54D and 54K.
[35] ibid s 54K (4)– (5).
[36] Standing Committee on Finance, Report on the Insolvency and Bankruptcy Code (Amendment) Bill (2025).
[37] Insolvency and Bankruptcy Board of India, ‘IBBI (Pre-Packaged Insolvency Resolution Process) (Second Amendment) Regulations, 2026’ (20 May 2026).
[38] Insolvency and Bankruptcy Code 2016, ss 54D, 54H and 54K.
[39] ibid ss 54A, 54H and 54K.
[40] ibid ss 54A–54P.
