Page 44 - Banking Finance October 2022

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and willing promoter of the corporate debtor has the best various conditions as enumerated in Section 54A an
shot of reviving his own business with the support of law, application for initiating pre-packed insolvency resolution can
the creditors and of course, the NCLT. be made by a Corporate Applicant with the Adjudicating
Authority in respect of Corporate Debtor classified as
The intent of the Ordinance is to address the specific MSME.
requirements of MSME enterprises relating to the resolution
of their insolvency during the Covid 19 pandemic, due to the The provisions of Pre-pack Insolvency for MSME shall not be
unique nature of their businesses and simpler corporate applicable where an application under Section 7, 9 or 10 of
structures and to provide an efficient alternative insolvency IBC has been filed and pending as on date of above
resolution, ensuring quicker, cost-effective and value mentioned Ordinance, 2021. In case where an Application
maximizing outcomes for all the stakeholders, in a manner to initiate pre-pack insolvency resolution process is pending
which is least disruptive to the continuity of their businesses in terms of Section 54C, the Adjudicating Authority before
and which preserves jobs. considering any application filed under Section 7, 9, or 10
of IBC shall admit or reject Section 54C on priority. In case,
Pre-Packaged Resolution: an Application under Section 54C is filed within 14 days of
any application filed under Section 7, 9 or 10, which is
A pre-pack is an agreement for the resolution of the debt
pending then the Adjudicating Authority must dispose of the
of a distressed company through an agreement between
Application under Section 54C. Where an Application under
secured creditors by following informal (Out of Court) and
Section 54C is filed beyond 14 days from filing of any
formal (judicial) process through the Insolvency and
application under Section 7, 9 or 10, then the Adjudicating
Bankruptcy Code 2016 under the NCLT supervision with an
Authority shall dispose of the application under Section 7, 9
aim to facilitate early resolution through a fast, cost efficient
or 10 of the IBC.
and effective manner in resolution of stressed asset, much
before value deteriorates, with the least business disruptions
An Approval of 66% has to be obtained by the Corporate
and without attracting the stigma attached with the formal
Debtor from its Financial Creditors, not being its related
insolvency process.
parties for filing an application for initiation of pre-pack
insolvency process in such a form as may be specified. The
Highlights of PPIRP:
timeline for competition of Pre-Pack insolvency process for
Vide the Ordinance dated 04.04.2021 a separate chapter, MSME is 120 days from the pre-pack insolvency
Chapter IIIA has been inserted in the IBC to deal with the commencement date.
pre-packaged insolvency resolution process. Subjected to
The Adjudicating Authority within 14 days from the receipt
of Application by an order may admit or reject the
Application. However, before rejecting an application, the
Adjudicating Authority must give notice to the applicant to
rectify the defect in the Application within 7 days.

Moratorium as prescribed under the Section 14 of IBC shall
be mutatis mutandis apply to the Pre-Pack insolvency Process
for MSME. The Moratorium shall be available from the pre-
pack commencement date till the process is closed. Unlike
the usual Corporate Insolvency Resolution Process the
control and possession during the Pre-Pack process lies with
the current promoters and management of the Corporate
Debtor. The Base Resolution Plan as submitted by the
existing management in case not approved or in case where

44 | 2022 | OCTOBER | BANKING FINANCE