Insolvency and Bankruptcy Code: CIRP, Liquidation and Pre-Packaged Resolution — Practice

Question 1

Under which section can the corporate debtor itself apply to trigger CIRP?

Accepted Answer

Section 10.

Question 2

What is the standard CIRP timeline (before any extension) in days?

Accepted Answer

180 days from admission.

Question 3

What CoC voting threshold applies to approval of a resolution plan under Section 30(4)?

Accepted Answer

66%.

Question 4

List three actions Section 14's moratorium bars against the corporate debtor, and state one action it does NOT bar.

Accepted Answer

Barred: institution/continuation of suits, execution of decrees, and enforcement of security interests (any three of these, or asset transfer/encumbrance/alienation/disposal). Not barred: action against a personal guarantor of the corporate debtor.

Question 5

State the first three priority categories in the Section 53 liquidation waterfall.

Accepted Answer

(a) Insolvency resolution process costs and liquidation costs; (b) workmen's dues for the 24 months preceding liquidation, pari passu with secured creditors who have relinquished security; (c) wages/dues of other employees for the 12 months preceding liquidation.

Question 6

State PPIRP's minimum default threshold and the specific provision that exempts MSME promoters from the general Section 29A ineligibility bar.

Accepted Answer

Rs. 10 lakh minimum default; Section 240A exempts MSME promoters from Section 29A's ineligibility bar.

Question 7

Explain the choice a secured creditor faces under the Section 53 waterfall between relinquishing and retaining its security, and the priority consequence of each choice.

Accepted Answer

A secured creditor can choose to relinquish its security interest, in which case its claim ranks in category (b), pari passu with workmen's dues for the 24 months preceding liquidation. Alternatively, it can retain its security, in which case any unrealised shortfall on its secured claim ranks instead in category (e), pari passu with government dues and other unsecured creditor claims for the 2 years preceding liquidation — a lower, later-paid priority than category (b). This means relinquishing security can, depending on the specific numbers involved, actually improve a secured creditor's effective priority position relative to retaining it, which is why the choice is a genuine strategic decision rather than a formality.

Question 8

Explain how the 2026 IBC Amendment Act's CIIRP track differs from classical CIRP in three specific ways, including the moratorium gap.

Accepted Answer

First, CIIRP is creditor-initiated out of court by financial creditors holding 51% or more of financial debt after 30 days' notice, rather than requiring an NCLT application to trigger admission. Second, CIIRP is debtor-in-possession — the corporate debtor's existing management stays in control of day-to-day operations, subject to a resolution professional's oversight and veto power over board resolutions, unlike classical CIRP where the resolution professional takes over management. Third, and most structurally significant, CIIRP does NOT carry an automatic Section 14 moratorium on initiation — the resolution professional must separately apply to the NCLT for one, unlike classical CIRP's automatic moratorium from the date of admission, which is being discussed as a live structural gap in the new track.

Practice — Insolvency and Bankruptcy Code: CIRP, Liquidation and Pre-Packaged Resolution

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