Corporate Insolvency Resolution Process (CIRP) – Step by Step.

1. Who Can File: initiation of CIRP

• • Financial creditor: files under Section 7 of the IBC with evidence of default. India Code

• • Operational creditor: serves a statutory demand (Section 8) and then files under Section 9 if unpaid.

• • Corporate applicant (the company itself): can file under Section 10 for voluntary CIRP.

The applicant needs to be able to show a provable default and within limitation.

2. Admission and Moratorium

• • The AA, namely, the NCLT may admit the CIRP upon a proper application.

• • Once admitted, a moratorium automatically comes into effect: legal actions, recovery suits, and enforcement of security are suspended to protect the company’s assets.

This pause allows an orderly resolution process without creditors racing to seize assets.

3. Appoint Interim Resolution Professional (IRP)

• • The NCLT appoints an Interim Resolution Professional (IRP) forthwith on admission.

• • The IRP takes control of the company’s management, collects books and records, and protects assets.

The IRP is the single point of contact and writes a report of preliminary status in nature.

4. Public Notice and Claims

• • The IRP publishes a public announcement inviting claims from all creditors and stakeholders.

• • Creditors file proof of their claims within the time limit set by the IRP.

• • Claims are verified and compiled for the formation of the Committee of Creditors (CoC).

Public notice ensures transparency and allows unknown creditors to come forward.

5. Composition of Committee of Creditors (CoC)

• • The CoC comprises financial creditors and is the key decision-making body during CIRP.

• • The CoC evaluates the company’s financial position, approves the Resolution Professional (RP) if IRP is replaced, and decides on resolution strategy.

• • Major decisions require a prescribed voting threshold, usually 66% by value.

The CoC steers the recovery process and has the commercial authority to accept or reject plans.

6. Invitation for Resolution Plans

• • The RP invites Prospective Resolution Applicants (PRAs) to submit Expression of Interest (EOI).

• • Eligible applicants receive Request for Resolution Plan (RFRP) and submit resolution proposals by the deadline.

• • The RP evaluates plans for feasibility, viability, and value to creditors. The CoC then votes to approve a plan.

This competitive process aims to find the best offer to revive the company or maximize creditor recovery.

7. Timeline: Completion and Extensions

The statutory objective: complete CIRP within a time-bound period to avoid value loss. Current regulatory and judicial guidance emphasizes strict adherence to timelines, with the overall frame for resolution standing at the legislated period subject to permitted extensions. Recent jurisprudence and regulatory updates stress completion within the prescribed limit unless exceptional circumstances apply.

Courts have become stricter about undue delay and may order liquidation if timelines are missed without valid reasons.

8. NCLT Approval and Implementation

• • Once CoC approves a resolution plan by the required majority, the RP files the plan with NCLT for approval

• • NCLT checks compliance with IBC provisions and public interest before sanctioning the plan.

• • If approved, the plan is implemented, and the company is revived under new terms.

NCLT’s sanction gives the resolution plan binding effect on all stakeholders.

9. Liquidation, If No Viable Plan Emerges

• • If CoC rejects all plans or the NCLT finds no feasible plan, the tribunal may order liquidation.

• • Liquidator sells assets and distributes proceeds according to statutory priority in Section 53 of IBC.

Liquidation is the last resort when revival is infeasible.