Pre-Packaged Insolvency Resolution for MSMEs (2026)
How the pre-packaged insolvency resolution process (PPIRP) works for MSMEs under the Insolvency and Bankruptcy Code, 2016: who can use it, the base resolution plan, the creditor approval needed, and the 120-day timeline. Last verified October 2026.
Explainer · Insolvency · IBC
The pre-packaged insolvency resolution process (PPIRP) is a faster insolvency route built for micro, small and medium enterprises (MSMEs). It was added to the Insolvency and Bankruptcy Code, 2016 (IBC) by a 2021 amendment, as Chapter III-A. Its big idea is to let a small business resolve its debt quickly while the existing management stays in charge, instead of being pushed into the long, control-shifting corporate insolvency process. This guide explains who can use the PPIRP, the base resolution plan, the creditor approval needed before filing, and the 120-day timeline. Last verified October 2026.
- What it is: a faster, debtor-driven insolvency route for MSMEs under Chapter III-A of the IBC, added in 2021.
- Who can use it: MSME corporate debtors only; the debtor files, not a creditor; minimum default Rs 10 lakh.
- Debtor in possession: the existing management stays in control, with a resolution professional overseeing the process.
- Timeline: the plan goes to the NCLT within 90 days and the whole process is capped at 120 days.
01Why MSMEs needed a faster route
The regular corporate insolvency process is long, public, and it takes control away from the promoter. For a large company that may be acceptable. For a small business, the same process can destroy the very goodwill and relationships that give it value.
MSMEs are also often run by owner-managers whose personal effort is the business. Removing them can mean the business simply stops. The PPIRP was designed to fix this: a quicker, less disruptive route where the owner stays in charge and much of the deal is agreed before the case even reaches the Tribunal.
02What the PPIRP is
The PPIRP is a hybrid process. It blends an informal, out-of-court negotiation with a formal, court-approved outcome. The corporate debtor and its financial creditors work out a plan first, and then take it to the NCLT for approval.
Two features set it apart from the regular process:
- Debtor in possession: the existing management stays in control of the company during the process, rather than handing over to a resolution professional.
- Pre-agreed plan: the debtor brings a base resolution plan that has already been discussed with the creditors, which is why it is called pre-packaged.
Debtor in possession, with checks
Unlike the regular CIRP, the promoter does not lose control in a PPIRP. A resolution professional still oversees the process and reports to the creditors, but the day-to-day management stays with the existing team. This is the main reason MSMEs prefer it.
03Who can use it
The PPIRP is not open to every company. It is limited to corporate debtors that are classified as MSMEs under the MSME law, and that meet the eligibility conditions in the Code.
- MSME only: the corporate debtor must be a micro, small or medium enterprise.
- Filed by the debtor: only the corporate debtor can apply for a PPIRP, not a financial or operational creditor.
- Minimum default: the notified minimum default to start a PPIRP is Rs 10 lakh, much lower than the Rs 1 crore for the regular process.
The company must also not be ineligible on grounds such as a recent PPIRP or a pending liquidation order.
04The base resolution plan and approval
The base resolution plan is the heart of the PPIRP. Before filing, the corporate debtor prepares this plan and shares it with its financial creditors.
Two approvals are needed up front:
- the financial creditors who are not related parties must approve the initiation of the PPIRP, and the proposed resolution professional, by at least 66% of the value of their debt; and
- the base resolution plan must not impair the claims of operational creditors.
If the committee of creditors does not approve the base plan, or the plan impairs operational creditor claims, the resolution professional invites other plans in a competition (the Swiss challenge), so a better plan can displace the base plan.
05The steps and the timeline
The PPIRP runs on a tight clock, much shorter than the regular process.
| Step | Time |
|---|---|
| NCLT admits or rejects the application | within 14 days |
| Resolution plan submitted to the NCLT | within 90 days of the commencement date |
| NCLT approves or rejects the plan | within 30 days of receiving it |
| Total process | capped at 120 days |
If the resolution plan is not submitted within 90 days, the PPIRP is terminated. The whole process is designed to be completed within 120 days, far faster than the resolution plan route in a regular insolvency.
Two safeguards keep the debtor-in-possession model honest. First, the management is a custodian during the process, so the promoter cannot strip or misuse assets, and the resolution professional can ask the Tribunal to hand management to the professional if there is fraud or mismanagement. Second, the committee of creditors can, by the required vote, decide to end the PPIRP or move the company into the regular process. So the PPIRP gives the MSME owner control, but control that is watched and can be taken away. In practice, take-up has been modest since 2021, and the speed of admission has not always matched the design, so the real timeline can be longer than the statute suggests.
06Where Claw fits
Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.
A PPIRP moves quickly, but it still runs at the NCLT, with appeals possible at the NCLAT. Claw follows cases, orders and hearings across 9,102 courts, benches and forums and searches 30 crore+ judgments, returning results in under 5 seconds, so you can trace a pre-pack by the MSME name or the advocate name and study how benches have applied Chapter III-A of the Code. Coverage spans Supreme Court judgments since 1950 and High Court judgments since 1990. Claw does not use your case documents to train any AI model.
Start a free Claw account to keep a PPIRP matter tracked by party or advocate name. To search the wider body of law, see case search across Indian courts.
07Sources and further reading
- Insolvency and Bankruptcy Board of India (PPIRP regulations): ibbi.gov.in
- India Code (official text of the IBC, 2016): indiacode.nic.in
- Ministry of MSME (MSME classification): msme.gov.in
- Claw: clawlaw.in
This explainer is general information, not legal advice. The Code and its regulations change often, so check the current text and take advice from counsel before you act.
08Frequently asked questions
What is the pre-packaged insolvency process (PPIRP)?
It is a faster insolvency route under Chapter III-A of the IBC, added in 2021, for MSME corporate debtors. The debtor stays in control of the company and brings a pre-agreed base resolution plan to the NCLT, so the process is quicker and less disruptive than the regular corporate insolvency.
Who can use the PPIRP?
Only a corporate debtor that is classified as a micro, small or medium enterprise (MSME) can apply, not a creditor. The notified minimum default to start a PPIRP is Rs 10 lakh, much lower than the Rs 1 crore for the regular process.
What is a base resolution plan?
It is the plan the corporate debtor prepares and shares with its financial creditors before filing. The unrelated financial creditors must approve the initiation and the resolution professional by at least 66% of the debt value, and the base plan must not impair operational creditor claims.
Does the promoter lose control in a PPIRP?
No. The PPIRP is a debtor-in-possession process, so the existing management stays in control of the company during the process. A resolution professional oversees the process and reports to the creditors, but does not take over day-to-day management.
How long does the PPIRP take?
The resolution plan must be submitted to the NCLT within 90 days of the commencement date, and the whole process is capped at 120 days. If no plan is submitted within 90 days, the PPIRP is terminated.
Can I track a PPIRP matter in Claw?
Yes. Claw follows cases, orders and hearings for a PPIRP at the NCLT and the higher courts by party or advocate name across 9,102 courts, benches and forums, with results in under 5 seconds. It tracks and researches the matter but does not give legal advice.