From CIRP to PPIRP: has India's insolvency law shifted from creditor-in-control to debtor-in-possession, and what does theory say about it?

Sarbani Mohapatra; Asima Dandapat; Suchipriya Bahidar

From CIRP to PPIRP: has India's insolvency law shifted from creditor-in-control to debtor-in-possession, and what does theory say about it?

Author(s)	Ms. Sarbani Mohapatra, Ms. Asima Dandapat, Ms. Suchipriya Bahidar
Country	India
Abstract	control remained with the company’s management even after they had pushed the company into financial difficulties. As a consequence, financial creditors had to wait for years to get a part of their dues. To solve this problem, a new code called Insolvency and Bankruptcy Code, 2016, was introduced. The code initially offered much-needed improvements through the Corporate Insolvency Resolution Process (CIRP). Through this new system, after a company defaults and becomes insolvent, the management is changed, and the Board of Directors is suspended under Section 17. The control is then given to the Committee of Creditors, comprising financial creditors, to take decisions regarding the company’s resolution. The Committee of Creditors decided what was going to happen next. The Insolvency and Bankruptcy Code, 2016 and the Corporate Insolvency Resolution Process were put into place for lenders. The Supreme Court, in the Swiss Ribbons vs Union of India, in a 2019 ruling, said, "The old system was a paradise for those who defaulted on payments." It was not good policy, but it was required by the constitution. Section 29A has taken it a step further by saying that promoters who caused the default are not permitted to buy back the companies through a resolution plan. The message was clear: "If you caused the problem, you don't get to solve it on your own terms." Something new happened in the year 2021. The Parliament introduced the Pre-Packaged Insolvency Resolution Process in Chapter III-A of the IBC. This was supposed to be a friendly way for small businesses, such as MSMEs, to deal with debts up to ₹1 crore. The problem with this is that the people in charge of the company, the Board of Directors, are still in charge. The company that owes money gets to make a plan on how they are going to fix things before the people they owe money to get together and discuss it. The people who never paid their debts are in charge of the situation. This is not a small change to the CIRP. It goes against it. This paper is asking a question. Can these two very different methods of doing things, one in which the people in charge are taken out of the situation and one in which they are still in charge, work together in the same law without causing problems? Through an examination of the ideas about insolvency, the argument between allowing managers to stay in charge and not allowing them to stay in charge, this paper argues that the Pre-Packaged Insolvency Resolution Process is causing a problem that the courts, in India, will have to deal with at some point in the future. The fact that some companies have been able to utilize the Pre-Packaged Insolvency Resolution Process since 2021 says a lot about the situation that the Pre-Packaged Insolvency Resolution Process does not align well with either of the two ways of thinking about insolvency, the Pre-Packaged Insolvency Resolution Process.
Keywords	Insolvency and Bankruptcy Code, CIRP, PPIRP, Creditor-in-Control, Manager-Driven Model, Section 29A, Legal Contradictions, Swiss Ribbons Case.
Field	Sociology > Administration / Law / Management
Published In	Volume 8, Issue 5, September-October 2026
Published On	2026-09-04

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From CIRP to PPIRP: has India's insolvency law shifted from creditor-in-control to debtor-in-possession, and what does theory say about it?

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