Page 28 - Banking Finance February 2023

ARTICLE

in asset classification banking norms, flexibility in director's
obligations to initiate insolvency proceeding, relief from
compliance with specific legal obligations, etc.

Considering the current COVID 19 Pandemic certain
measures were taken in the same line like , more
experiments were done especially after the period of
forbearance MSME expired on March 24, 2021 and to save
viable units during Pandemic, Government considered to
implement settlement framework under IBC-2016 in the
form of PPIRP.

How this PPIRP works:
The entire mechanism under PPIRP framework is designed
on Pre-packaged Insolvency Resolution Process (PPIRP) on under 6 major parameters namely:
31st October 2020 along with a pre-pack framework within Step 1. Eligibility Criterion
the basic structure of the Code for the Indian market. After
Step 2. Pre-Commencement Phase
that the MCA, vide notification dated 8th January-2021,
Step 3. Application Phase
invited comments/suggestions from public on this PPIRP
framework. Step 4. Post-Commencement Phase

Step 5. Approval of Resolution Plan
It was proposed to implement the said PPIRP from
immediate effect, to reform the MSME Sector. This was Step 6. Closure Proceedings
expected to be the biggest reform to restructure the MSME.
Let's see Stepwise mechanism.
It is applicable to all the corporate persons (Companies
registered under the Companies Act, LLPs and other
corporate entities) which are covered under the definition Eligibility Criterion: (Step-1)
of "MSME" as defined in section 7 of the MSMED-Act, 2006. A CD, which is an MSME as per the definition given under
Minimum default is Rs. 10 Lacs to opt for this IPPIRP the MSMED Act- 2006, is eligible to apply for initiation of
PPIRP, if it-
Now moving forward in context of India this very date of has committed a default of minimum of Rs. 10 lakh;
4th April 2021 is quite critical. Why it is critical is backed by
is eligible to submit a resolution plan under section 29A
a fact that in India, the 1st of its kind "Pre-packaged
of the IBC-2016;
Insolvency Resolution Process (referred as PPIRP) for MSME
has not undergone a PPIRP/CIRP during the 3 yrs.
sector, was introduced with The Insolvency and Bankruptcy
preceding the initiation date;
Code (Amendment) Ordinance, 2021 (referred as PPRIP
Ordinance 2021) promulgated by an extra-ordinary is not undergoing a CIRP; &
ordinance dated 04/04/2021 by Government of India.
is not required to be liquidated by an order under section
33 of the Code.
Now let us again address that question
is having updated Udyam Registration Certificate or
of why this framework is needed ? proof of investment in plant and machinery or
equipment and turnover as per extant guidelines
Recent Happenings in IBC-2016:
We all are aware with the fact that from time to time the
Pre-Commencement Phase: (Step-2)
Governments have responded to save MSME with various
measures such as moratorium on loan repayments, sector PPIRP intended to be a blended process, where pre-
specific forbearance, infusion of liquidity into the banking commencement phase is largely informal (offers
system to provide credit to financially distressed firms, relief flexibility for the CD and its creditors to swiftly explore

24 | 2023 | FEBRUARY | BANKING FINANCE