CIRP provides a time-bound framework for resolving financial distress while attempting to preserve the value of the corporate debtor.
What Is CIRP Under the IBC?
CIRP stands for Corporate Insolvency Resolution Process and is primarily governed by Part II of the Insolvency and Bankruptcy Code, 2016 and regulations made under the Code.
- NCLT is the adjudicating authority
- The process seeks to balance creditor and stakeholder interests
- Preservation of corporate debtor value is an important objective
Who Can Initiate CIRP?
CIRP may generally be initiated by three categories of applicants.
- Financial Creditor under Section 7
- Operational Creditor under Section 9
- Corporate Applicant under Section 10
What Is the Minimum Default Requirement?
The source states that the current minimum default threshold for proceedings under Part II of the IBC is ₹1 crore, subject to applicable notifications and the statutory framework in force at the relevant time.
Step-by-Step CIRP Process
- Default occurs
- Application is filed before the NCLT
- NCLT examines the application
- Moratorium begins
- Interim Resolution Professional is appointed
- Claims are invited from creditors
- Committee of Creditors is formed
- Resolution Professional takes over
- Resolution plans are invited
- Committee of Creditors approves a resolution plan
- NCLT approves the resolution plan
- Resolution or liquidation
How Long Does CIRP Take?
The IBC establishes a 180-day period for completing CIRP from the insolvency commencement date, with extensions possible under the Code where statutory requirements are satisfied.
What Happens to the Existing Management?
Once CIRP begins, the powers of the board of directors are suspended and management of the corporate debtor is placed under the control of the IRP or RP as provided under the IBC.
What Happens If No Resolution Plan Is Approved?
If the CIRP does not result in an approved resolution plan within the applicable framework, the corporate debtor may be ordered into liquidation.
Conclusion
CIRP provides a structured mechanism for addressing corporate financial distress through the NCLT, IRP/RP, Committee of Creditors and resolution-plan process.
