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CS Professional · Insolvency and Bankruptcy - Law and Practice · Pre-Packaged Insolvency Resolution Process (Elective 7.5)

Sunrise Packaging Pvt Ltd, an MSME, has defaulted on its debts. It has never been through a PIRP or CIRP, is not under CIRP and is not in liquidation. The directors want to start a pre-packaged insolvency resolution process (PIRP). Under the Code, which statement about eligibility is correct?

A corporate debtor classified as a micro, small or medium enterprise can apply for PIRP. A debtor already undergoing CIRP or subject to a liquidation order cannot, because section 54A excludes those cases, and a debtor with no financial creditors is not the only eligible class.

  1. AOnly a corporate debtor with no financial creditors can apply
  2. BAn application may be made for a corporate debtor classified as a micro, small or medium enterpriseCorrect
  3. COnly a corporate debtor already in CIRP can convert to a PIRP
  4. DA corporate debtor under a liquidation order can apply if its members pass a special resolution

Explanation

Section 54A(1) allows an application for PIRP in respect of a corporate debtor classified as a micro, small or medium enterprise. A debtor already in CIRP or ordered into liquidation is excluded by section 54A(2)(b) and (c), so the other options are wrong.

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