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CS Professional · Insolvency and Bankruptcy - Law and Practice · Corporate Insolvency Resolution Process

Sunrise Textiles Pvt Ltd, which is not an MSME, defaults on a financial debt. Its CIRP was completed 2 years ago. Its directors want to file for a pre-packaged insolvency resolution process (PPIRP) under the conditions in section 54A(2). Which statement is correct?

Sunrise Textiles is not eligible. Section 54A(2)(a) bars a corporate debtor that has undergone a PPIRP or completed a CIRP in the three years before the initiation date, and Sunrise completed its CIRP two years ago.

  1. AIt is eligible, because only a CIRP in progress bars a PPIRP
  2. BIt is not eligible, because it completed a CIRP within the three years preceding the initiation dateCorrect
  3. CIt is eligible, because a debtor that is not an MSME is exempt from the three-year condition
  4. DIt is not eligible, because a PPIRP can be used only once in the life of a company

Explanation

Under section 54A(2)(a), a corporate debtor that has undergone a PPIRP or completed a CIRP during the three years preceding the initiation date cannot apply. Sunrise completed its CIRP only 2 years ago, so the condition fails. The option saying only an ongoing CIRP bars it ignores clause (a).

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