Page 43 - Banking Finance October 2022

ARTICLE

PRE-PACKAGED

INSOLVENCY

RESOLUTION

PROCESS FOR

THE MSMES

he Insolvency and Bankruptcy Code 2016 ("IBC") Development Act, 2006 and as per Notification no. 2119(e)
T provides a framework for insolvency resolution Enterprises.
dated 26.06.2020 of Ministry of Micro, Small and Medium
of corporate debtors in a time bound manner
and the provision relating to corporate
The Government has also introduced the Insolvency and
insolvency resolution process came into force on 01.12.2016
Bankruptcy (Pre-packaged Insolvency Resolution Process)
and for guarantors to Corporate Debtor came into force
Rules, 2021, with effect from April 9, 2021.
from 01.12.2019.
Background:
The Government on April 4, 2021 notified the Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2021 ("IBC IBC has been criticized for failing to bring successful
Ordinance, 2021") amending the IBC, 2016 (by introducing resolution in a majority of cases. One of the main reasons
new chapter IIIA) to introduce Pre-packaged insolvency for this is neither the committee of creditors nor the
resolution process (PPIRP) for Micro, Small and Medium resolution professionals are in many cases equipped to take
Enterprises, classified as MSME under Sub-Section (1) of timely and fruitful business decisions, and it is the promoters
Section 7 of the Micro, Small and Medium Enterprises who have their fingers on the pulse of their businesses. This
in turn leads to the businesses eventually succumbing to
liquidation, which was the residuary but not the primary
About the author
expected outcome of the IBC.
Upender Uppalanchi
Chief Manager and Faculty Pre-Packaged Insolvency therefore works on the formula of
Union Bank of India, debtor-in-control approach (in contrast with the creditor-
Staff Training Centre, Hyderabad
in-control IBC regime prevailing till now), since a conscious

BANKING FINANCE | OCTOBER | 2022 | 43