Pre-Packaged Insolvency Resolution Process (PPIRP) Under The Insolvency & Bankruptcy Code (IBC), 2016: Why a Non-Starter?

Abstract

The micro, small and medium enterprises (MSMEs) significantly contribute to the Indian economy, country’s exports and employment generation. With low-capital base and heavier dependence on both formal source of credit from the banks and informal sources, they are prone to sickness at the time of economic downturn. They were worst hit during the Covid-19 pandemic. The pre-packaged insolvency resolution process (PPIRP) was uniquely designed on April 4, 2021 to give relief to the stressed MSMEs, by amending the Insolvency & Bankruptcy Code (IBC), 2016. But even after 18 months’ of the legislation, the progress of PPIRP is far from satisfactory. The objective of this article is to analyse the causative factors for the tardy progress in resolution of distressed MSMEs under the new pre-pack regime. The methodology adopted was through literature survey, and a structured questionnaire to the senior bankers, practising insolvency professionals, and MSME entrepreneurs. The article attempts to suggest remedial measures for smoother implementation of the pre-pack process, tailormade for the stressed MSMEs.