Introduction
Pre-Packaged Insolvency Resolution Process (PPIRP) was introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2021 (effective 4 April 2021) via Sections 54A–54P (Chapter III-A) specifically for corporate MSMEs. The legislature intended PPIRP as a swift, creditor-backed rescue mechanism: it “prioritise[s] speed, flexibility, and minimal court intervention” and provides a “speedy and cost-effective mechanism” to revive stressed MSMEs. In contrast to the lengthier CIRP, PPIRP was designed to be completed within 120 days (with a limited 90-day window to submit a plan) and to minimize business disruption through advance negotiation of a base resolution plan. The Insolvency Law Committee envisioned PPIRP as a hybrid regime (combining debtor-in-possession with creditor-in-control) that preserves going-concern value before deterioration.
The low uptake of PPIRP in India is primarily attributable to procedural complexity and lack of creditor incentives rather than to defects in legislative intent or market immaturity. In other words, even though the law’s intent is sound, cumbersome procedures and stakeholder disincentives have stifled adoption. Therefore, this blog examines the explanations behind the low adoption rate of PPIRP despite its objectives; Procedural & regulatory hurdles impede MSMEs from choosing PPIRP; Creditor incentives and attitudes affecting PPIRP’s viability; Institutional constraints influencing its implementation; and lessons India can draw by comparing PPIRP to UK pre-pack administrations and US pre-pack Chapter 11 restructurings.
Legislative Architecture of PPIRP
PPIRP is governed by Chapter III-A of IBC, 2016 and the Insolvency and Bankruptcy (Pre-packaged Insolvency Resolution Process) Rules, 2021. The process begins when an eligible MSME (registered under the MSME Act) that has committed a default of at least ₹10 lakh seeks approval from its financial creditors to initiate PPIRP. After the NCLT admits the application, a Resolution Professional (RP) is appointed, who must constitute the Committee of Creditors (CoC) of unrelated financial creditors within 7 days. The CoC must approve the initiation of PPIRP with at least 66% voting share. The debtor then submits a Base Resolution Plan (BRP); if it is unsatisfactory, the RP invites competing plans through a Swiss challenge process. The CoC evaluates the plans and approves one with a 66% vote, after which the NCLT sanctions the plan or, if none is viable, orders termination or conversion into CIRP.
The process must be completed within 120 days, with the RP required to submit the approved plan within 90 days. Unlike CIRP, no extensions are allowed, reflecting the goal of faster resolution with limited court involvement. Promoters are allowed to submit the BRP (subject to eligibility under the IBC), and related-party resolutions are not barred if approved by the CoC. However, procedural safeguards remain: creditors’ claims must be verified, valuations obtained, and competing plans invited if necessary. As a result, despite its streamlined intent, PPIRP still involves multiple procedural steps, combining the speed of pre-negotiated restructuring with core IBC protections such as creditor consent, moratorium, and binding resolution plans.
Uptake Trends and Empirical Analysis
In practice, PPIRP uptake has remained extremely limited, even when assessed against the most recent data. Official figures and policy reports indicate that only a small number of PPIRP cases have been admitted since its introduction in April 2021. While early data suggested only six admissions by May 2023, more recent estimates indicate that the total number of admitted cases has risen only marginally to approximately 14–15 cases over nearly five years. This remains negligible when compared to the scale of insolvency proceedings under the IBC more broadly – for instance, several hundred CIRPs continue to be initiated annually.
The Economic Survey 2025-26sssss reiterates this concern, noting that PPIRP “has failed to take off” despite its targeted design for MSMEs. The Survey also highlights persistent structural issues within the insolvency ecosystem, including delays and institutional capacity constraints, which indirectly affect PPIRP’s viability. Recent data further suggests that although the few admitted PPIRP cases have generally been resolved within the prescribed timelines, their overall economic significance remains limited due to the small number of filings and modest asset sizes involved.
This updated empirical position reinforces the core concern: despite incremental increases in case numbers, PPIRP continues to account for a negligible fraction of insolvency resolutions in India. The problem, therefore, is not merely one of early-stage adoption, but of sustained underutilization even after several years of legislative and institutional familiarity.
However, multiple sources emphasize the gross underutilization of the tool. The Economic Survey (2025–26) noted that “PPIRP for MSMEs has failed to take off, with only 14 cases admitted in the past four years”. Indeed, despite strong policy emphasis, PPIRP accounts for a negligible fraction of overall insolvency resolutions. Even industry practitioners are unsure why adoption lags, noting in surveys that awareness of PPIRP remains very low. In a recent industry survey, many respondents perceived the legislative framework as inadequate or unproven, ranking “legislative infrastructure” and “newness” as major concerns. Some analyses infer that PPIRP is growing slowly; for example, a professional body’s report observed a “healthy, upward trend” in case resolutions and industries involved, suggesting adoption may be picking up from near-zero baseline. Overall, the empirical evidence highlights a stark gap between PPIRP’s promise and its use. We find that neither legislative intent nor MSME market conditions alone explains the low uptake. Rather, as we discuss below, procedural and incentive problems appear to be central obstacles.
Procedural and Institutional Bottlenecks
Despite its promise as a faster and more flexible restructuring mechanism, PPIRP has struggled to gain traction due to several procedural and institutional hurdles. A major barrier is its narrow eligibility criteria: only MSMEs registered under the MSME Act can initiate PPIRP. In reality, barely 4% of India’s 6.3 crore MSMEs are formally registered, leaving the vast majority of small businesses outside the framework and undermining the objective of addressing MSME distress. Even for eligible firms, NCLT capacity constraints create delays and uncertainty. PPIRP applications go before the same tribunals handling CIRP cases, which are already overloaded. The Economic Survey 2026 reported over 30,600 pending IBC cases, suggesting that at current disposal rates it could take nearly a decade to clear the backlog. As a result, PPIRP filings often face the same procedural bottlenecks – registry scrutiny, scheduling delays, and repeated hearings – despite being designed to minimize judicial involvement.
The framework is further complicated by strict statutory timelines. PPIRP must be completed within 120 days with no extensions, unlike CIRP which may run up to 330 days. While intended to ensure speed, stakeholders fear such rigid deadlines may prove unrealistic when tribunal delays occur. Another challenge is the high creditor approval threshold: both initiating the process and approving the resolution plan require 66% consent of unrelated financial creditors, which can be difficult for smaller firms with fragmented lenders. Acknowledging this issue, the Parliamentary Select Committee (2025) has suggested reducing the threshold to 51%. Finally, despite the “pre-pack” label, the process remains procedurally heavy. Promoters must prepare a base resolution plan, claims documentation, information memoranda, valuation reports, and conduct a Swiss challenge process. For many MSME promoters with limited resources or expertise, navigating these requirements can be daunting. Collectively, these eligibility limits, institutional delays, rigid timelines, high voting thresholds, and complex procedures have created significant friction in the PPIRP framework, raising doubts about whether it can truly deliver the quick and accessible insolvency resolution it was intended to provide.
These challenges become more pronounced when situated within recent policy developments in the insolvency framework. Notably, the government and IBBI have proposed the introduction of a Creditor-Initiated Insolvency Resolution Process (CIIRP), which would allow financial creditors – particularly banks and NBFCs – to trigger insolvency proceedings without relying on debtor consent. This proposal reflects a broader policy shift toward strengthening creditor control in resolution processes. In contrast, PPIRP remains fundamentally debtor-initiated and dependent on prior creditor approval (66%), creating a structural misalignment: creditors may prefer to wait for a more direct enforcement mechanism rather than negotiate within a debtor-led framework. Consequently, the anticipated move toward CIIRP may be inadvertently dampening incentives to utilise PPIRP, reinforcing its underutilization despite its procedural advantages.
Comparative Frameworks: UK Pre-Pack Administration and US Chapter 11 Pre-Pack
Looking at other jurisdictions offers useful lessons for improving PPIRP. In the United Kingdom, pre-pack administration allows an administrator to quickly sell the debtor’s business – often immediately upon appointment and sometimes even to related parties – without prior creditor approval. This model prioritizes speed and confidentiality, but it has faced criticism for lack of transparency, as limited marketing may allow insiders to capture value at the expense of unsecured creditors. Concerns over such practices have led to reforms, including advisory oversight mechanisms like the “pre-pack pool.”
The United States follows a different approach through pre-packaged Chapter 11 reorganizations. Here, the debtor negotiates a restructuring plan with creditors before filing for bankruptcy. The plan must secure the required creditor approvals in advance, after which the bankruptcy court formally confirms it. This system ensures strong creditor participation and judicial oversight, but it involves formal court proceedings and offers less confidentiality than the UK model.
India’s PPIRP combines elements of both systems. Like the U.S. model, it requires prior creditor approval and tribunal sanction, while also aiming for the speed and business-continuity focus seen in UK pre-packs. However, transfers still require approval by the NCLT, and promoters generally remain in control unless removed. International experience suggests that structured creditor voting and independent oversight can strengthen the framework – for instance, adopting class-based voting (as in the U.S.) or advisory review mechanisms similar to the UK’s pre-pack pool. In essence, India can borrow the speed of the UK model and the structured creditor safeguards of the U.S. system, while adapting them to its tribunal-based insolvency regime.
Reform Proposals and Policy Options
To realize PPIRP’s potential, several targeted reforms are necessary. First, the creditor approval threshold for initiating and approving a resolution plan should be reconsidered. The 2025 Parliamentary Select Committee has recommended reducing the requirement from 66% to 51%, which would significantly ease coordination problems among fragmented lenders and align PPIRP more closely with general corporate decision-making thresholds. This proposal also assumes greater importance when viewed alongside ongoing discussions on introducing a CIIRP, which would allow financial creditors to trigger insolvency proceedings directly. A lower threshold within PPIRP could function as a bridge between debtor-led and creditor-led models, ensuring that the framework remains viable even as the insolvency regime gradually shifts toward greater creditor control. Second, eligibility should be expanded beyond strictly registered MSMEs. Including unregistered MSMEs or allowing firms facing pre-default stress to access PPIRP would significantly widen its reach, especially since the vast majority of MSMEs remain outside formal registration systems.
Another priority is strengthening institutional capacity. The backlog at NCLT benches continues to slow down both CIRP and PPIRP proceedings, so increasing tribunal benches and registry staff is essential. At the same time, regulators such as the IBBI and MCA could issue clearer procedural guidance to reduce uncertainty. Procedural requirements could also be simplified. Slightly extending tight deadlines, allowing creditors’ committees to waive certain formalities by consensus, and adopting concepts like “unimpaired creditor classes” (as used in the U.S.) would reduce the burden on smaller firms.
Further, creditor incentives could improve adoption. Measures such as partial credit guarantees, tax incentives for lenders choosing PPIRP over liquidation, or broader awareness campaigns could reduce hesitation among banks and MSMEs. Finally, India could borrow best practices from other jurisdictions, such as safeguards used in UK pre-packs or structured voting frameworks from the U.S., along with model documentation to lower compliance costs. Overall, experts and policy bodies increasingly agree that stronger stakeholder engagement, improved institutional support, and active promotion of PPIRP are key to making the framework work in practice. Rather than abandoning the model, the path forward lies in aligning the legal framework with on-ground realities.
Conclusion
The PPIRP framework for MSMEs was introduced to provide a faster, cost-efficient insolvency process, but its adoption has remained extremely low. The evidence suggests that the problem lies less in policy intent and more in procedural complexity and weak stakeholder incentives. Strict timelines, complex filings, narrow eligibility, and creditor hesitation have collectively limited its practical use. To address this, policymakers should refine rather than abandon PPIRP. Reforms such as lowering creditor thresholds, expanding eligibility, and strengthening NCLT capacity could improve accessibility. At the same time, clearer guidelines, awareness efforts, and creditor incentives would help align stakeholder interests. By simplifying procedures and incorporating effective global practices, In particular, aligning PPIRP with emerging creditor-driven reforms and recalibrating its initiation thresholds will be crucial to ensuring that it remains relevant within India’s evolving insolvency architecture. PPIRP can evolve into a practical restructuring tool for MSMEs instead of remaining underutilized.
(This post has been authored by Ms. Samragyee Roy & Mr. Animesh Chaturvedi, fourth-year law students at National Law Institute University, Bhopal.)
CITE AS: Ms. Samragyee Roy & Mr. Animesh Chaturvedi, ‘Pre-Packaged Insolvency for MSMEs under the IBC: Challenges, Underutilization, and the Way Forward’ (The Contemporary Law Forum, 27 April 2026) <https://tclf.in/2026/04/27/pre-packaged-insolvency-for-msmes-under-the-ibc-challenges-underutilization-and-the-way-forward/↗> date of access.