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Corporate Restructuring, Valuation and Insolvency · Pre-Packaged Insolvency Resolution Process

Conduct of Pre-Pack Process and Moratorium under IBC

Updated 11 October 2026 · Fact-checked

In a pre-packaged insolvency resolution process, the Adjudicating Authority admits the application, declares a moratorium, appoints a resolution professional and orders a public announcement. The resolution professional monitors the existing management and forms the committee of creditors. Management leaves the board only if the CoC votes by 66% and the Tribunal finds fraud or gross mismanagement.

Understand Conduct of the Process and Moratorium

A pre-pack is a quicker, debtor-friendly route than the regular CIRP. The company and its financial creditors agree a base resolution plan before the case reaches the Adjudicating Authority. Once the case is admitted, the task is to conduct the process in an orderly way and protect the business while creditors decide.

On the pre-packaged insolvency commencement date, along with the order of admission under section 54C, the Adjudicating Authority does three things under section 54E. It declares a moratorium. It appoints a resolution professional (RP). It causes the RP to make a public announcement immediately after appointment.

The moratorium works for the purposes in section 14(1) read with section 14(3), applied mutatis mutandis. Broadly, it stops suits, execution of orders, transfer of assets and enforcement of security against the debtor. It runs from the date of the order until the pre-pack process period ends.

The RP is chosen differently from the regular CIRP. The Tribunal appoints the person named in the application if no disciplinary proceeding is pending against them. If one is pending, it appoints on the recommendation of the Board (IBBI). The RP does not take over the company. The RP monitors management, which stays with the existing board. This debtor-in-possession feature is the main contrast with CIRP, where the IRP takes over.

The RP also confirms claims, forms the committee of creditors (CoC), prepares the information memorandum and files avoidance and wrongful-trading applications. Takeover of management happens only as an exception under section 54J.

Key rules to remember

Orders on commencement (section 54E(1))
Admission order under 54C + moratorium + RP appointed + public announcement by RP immediately after appointment
The moratorium and RP appointment are made on the commencement date, along with the admission order.
Duration of moratorium (section 54E(2))
From the date of the order till the pre-pack process period ends
Moratorium is under section 14(1) read with 14(3), mutatis mutandis.
Choice of RP (section 54E(1)(b))
Named in application if no disciplinary proceeding pending; else on Board's recommendation
The Tribunal does not freely choose the RP.
RP's duties (section 54F(2))
Confirm and update claims, inform creditors, monitor management, inform CoC of board breaches, constitute CoC and attend meetings, prepare information memorandum, file avoidance or wrongful-trading applications
Learn them as a list; each is a likely sub-point.
RP's information window (section 54F(3)(f))
Business operations and financial and operational payments for previous two years from commencement date; assets and liabilities as on initiation date
Used to spot avoidable or wrongful transactions.
Vesting management in RP (section 54J)
CoC vote ≥ 66% of voting shares + Tribunal opinion of fraudulent conduct or gross mismanagement
Both conditions are needed. The RP applies to the Tribunal.
Penalty for fraudulent management (section 67A)
Not less than ₹1,00,000 and up to ₹1,00,00,000 on the officer
Imposed by the Adjudicating Authority on the RP's application, on and after the commencement date.

How to solve Conduct of the Process and Moratorium questions

Pre-pack questions are case-based. Work from the date of admission and ask who holds control at each stage.

  1. 1Fix the stage: before filing, on commencement date, during the process, or after a CoC vote to vest management.
  2. 2State the orders under section 54E: moratorium, RP appointment and public announcement.
  3. 3Apply the rule on RP selection: person named, or Board's recommendation if disciplinary proceedings are pending.
  4. 4Say who manages the company. By default, the existing board continues under the RP's monitoring.
  5. 5List the RP's relevant duties and powers from section 54F, and tie them to the facts.
  6. 6Check the exception: if fraud or gross mismanagement is alleged, apply the section 54J test of a 66% CoC vote and the Tribunal's opinion.
  7. 7Mention consequences for wrongdoing, such as the section 67A penalty.
  8. 8Conclude in one line that answers the exact question asked.

Quickest way: Four-line pre-pack control check

When to use it: Use for short-answer questions on who controls the company, or what happens on admission.

  1. Admission day: moratorium, RP, public announcement.
  2. Control: board stays, RP monitors.
  3. Exit of board: 66% CoC vote plus Tribunal finding under section 54J.
  4. Misconduct: avoidance applications and a section 67A penalty.

Common mistakes in Conduct of the Process and Moratorium

  • Saying the RP takes over management on admission, as in CIRP.

    Students merge pre-pack with regular CIRP.

    Fix: Write that management stays with the board and the RP monitors it. Takeover happens only under section 54J.

  • Saying the Tribunal vests management on the CoC's vote alone.

    Students remember the 66% figure and forget the second condition.

    Fix: State both: a CoC vote of not less than 66% of voting shares and the Tribunal's opinion of fraud or gross mismanagement.

  • Treating the moratorium as starting from filing or ending with plan approval.

    Confusion over dates.

    Fix: It starts with the admission order on the commencement date and runs till the pre-pack process period ends.

  • Saying the Tribunal always appoints any RP of its choice.

    Students carry over the CIRP idea of IRP appointment.

    Fix: Name the two routes: the RP named in the application, or the Board's recommendation if a disciplinary proceeding is pending.

  • Writing that the 66% approval of financial creditors at filing is the same as the vesting vote.

    The figure 66% appears in several places.

    Fix: Separate them. Section 54A needs 66% in value of unrelated financial creditors for initiation; section 54J needs 66% of voting shares in the CoC for vesting.

  • Quoting the penalty range wrongly under section 67A.

    Mixing it with other penalty sections.

    Fix: Write: not less than ₹1,00,000, up to ₹1,00,00,000, imposed on an officer who manages with intent to defraud.

Worked examples

Example 1

Aarav Textiles Ltd, an MSME, has been admitted into a pre-pack process. Its promoters ask whether they must hand over management to the resolution professional, and whether creditors can sue to recover dues. Advise.

Show the solution
  1. Aarav is an MSME, so it is eligible under section 54A(1). The Tribunal has admitted the application.
  2. On the commencement date the Tribunal declares a moratorium under section 54E(1)(a). It runs till the pre-pack process period ends.
  3. The moratorium applies as under section 14(1) read with 14(3). So suits and recovery proceedings against the company are barred during it.
  4. Management stays with the board. The RP's duty under section 54F(2)(d) is to monitor management.
  5. The promoters must cooperate with the RP under section 54F(5).
  6. Management shifts only if the CoC resolves by not less than 66% of voting shares and the Tribunal finds fraud or gross mismanagement under section 54J.

Answer: The promoters need not hand over management now; the board continues under the RP's monitoring. Creditors cannot sue or enforce during the moratorium. Management passes to the RP only through section 54J.

Example 2

During a pre-pack process of Kaveri Components Pvt Ltd, the RP finds that a director sold machinery below value to a relative and is diverting receipts. The CoC wants the board removed. Explain the steps and consequences.

Show the solution
  1. Under section 54F(2)(e) the RP informs the CoC of breaches by the board.
  2. The RP can look back two years at operations and payments under section 54F(3)(f), and files avoidance or wrongful-trading applications under section 54F(2)(h).
  3. To remove the board, the CoC must resolve by not less than 66% of voting shares to vest management in the RP.
  4. The RP then applies to the Tribunal. If the Tribunal is of the opinion that affairs were conducted fraudulently or there was gross mismanagement, it must pass an order vesting management in the RP.
  5. From that order, the listed provisions, including sections 17, 19 and 20, apply mutatis mutandis until the pre-pack period ends.
  6. The director may face a penalty under section 67A on the RP's application: at least ₹1,00,000 and up to ₹1,00,00,000, if managing with intent to defraud creditors.

Answer: The RP reports to the CoC and files avoidance applications. A 66% CoC vote and the Tribunal's finding of fraud or gross mismanagement vests management in the RP. The director risks a section 67A penalty of ₹1,00,000 to ₹1,00,00,000.

Exam tips

  • Draw the contrast with CIRP: board in control under monitoring, not an IRP takeover. Examiners like this comparison.
  • Quote section numbers you are sure of: 54E, 54F, 54J and 67A, with the exact thresholds.
  • In case questions, follow provision, application to facts, conclusion. Name the party who acts: Tribunal, RP or CoC.
  • Keep a one-line list of the RP's duties ready and pick the ones that fit the facts.
  • Do not confuse the 66% needed at filing with the 66% needed for vesting.

Practice questions from Pre-Packaged Insolvency Resolution Process

Conduct of the Process and Moratorium: frequently asked questions

What does the moratorium in a pre-pack process do?

It applies section 14(1) read with 14(3), mutatis mutandis, to the pre-pack proceedings. It bars actions against the corporate debtor as under section 14. It starts with the order and lasts till the pre-pack process period ends.

Does the resolution professional run the company in a pre-pack?

No. The RP conducts the process and monitors how the board manages the company. The RP gets management only if the Tribunal orders vesting under section 54J.

Who forms the committee of creditors in a pre-pack process?

The resolution professional constitutes the CoC and convenes and attends its meetings under section 54F(2)(f). The CoC can resolve to vest management in the RP by a vote of not less than 66% of voting shares.

When is the public announcement made?

The Tribunal causes it to be made by the RP, in the specified form and manner, immediately after the RP's appointment. This happens along with the admission order on the commencement date.