Debtor-In-Possession In India’s PPIRP: The Treatment Of Operational Creditors And Creditor Haircuts
- IJLLR Journal
- Mar 7
- 1 min read
Aman Kapoor, Christ University, Bangalore
ABSTRACT
The introduction of the Pre-Packaged Insolvency Resolution Process (PPIRP) under the Insolvency and Bankruptcy Code, 2016 marks India’s first structured attempt to incorporate a debtor-in-possession (DIP) model within its otherwise creditor-centric insolvency regime. Designed primarily for Micro, Small and Medium Enterprises (MSMEs), the PPIRP seeks to combine the speed and flexibility of informal workouts with the binding force of a statutory process. This paper critically examines whether the Indian PPIRP framework meaningfully departs from creditor control, or whether it merely repackages the existing power asymmetry in compressed form. Focusing on two interlinked concerns, the paper analyses the treatment of operational creditors and the governance of creditor haircuts under the PPIRP. It argues that while the statutory scheme ostensibly protects operational creditors through non-impairment thresholds and liquidation value floors, these safeguards are largely illusory in practice due to their exclusion from decision-making and the structure of the Swiss challenge process. Through a comparative analysis of pre-pack regimes in the United States, the United Kingdom, and Singapore, the paper demonstrates that India’s model neither fully embraces efficiency-driven exclusion nor adequately compensates for it through procedural or judicial safeguards. The paper concludes that the PPIRP reflects an unresolved tension between debtor control and creditor dominance, resulting in disproportionate distributive burdens on operational creditors. It proposes targeted reforms aimed at recalibrating participation, valuation transparency, and judicial review to restore legitimacy to India’s pre-pack framework.
Keywords: Pre-Packaged Insolvency, Debtor-in-Possession, Operational Creditors, Haircuts, IBC, MSMEs, Comparative Insolvency.
