The Pre-packaged Insolvency Resolution Process (PPIRP) introduced in April 2021 for MSMEs has admitted only 13 applications as of September 30, 2024, said insolvency regulator Insolvency and Bankruptcy Board of India (IBBI) in its latest quarterly newsletter for July-September 2024. Out of the admitted cases, one has been withdrawn, resolution plans for five others have been approved and seven cases are ongoing.
The five approved cases are of Amrit India Limited, Sudal Industries Limited, Shree Rajasthan Syntex Limited, Enn Tee International Limited and GCCL Infrastructure and Projects Limited. The ongoing cases include Mudraa Lifespaces, Kethos Tiles, Shreemati Fashions, Kratos Energy & Infrastructure, Garodia Chemicals, Kvir Towers, and Rg Residency.
The process, which aimed at providing a quicker and cost-effective alternative insolvency resolution framework for the revival of MSMEs, has seen limited effectiveness due to various factors which could be bifurcated as debtor-related, creditor-related or institutional infrastructure-related, IBBI had said in its annual report published in October 2024.
Another reason could be the reluctance of lower-level bankers to make decisions regarding the approval of PPIRPs and instead delegate this responsibility. Moreover, the absence of a robust adjudicating infrastructure has contributed to delays in resolving cases, the IBBI report had said while delays in PPIRPs could result in reduced prospects for approval of the initial base resolution plan submitted during the PPIRP application.
In August this year, IBBI had proposed that MSMEs undergoing insolvency resolution should disclose whether they are formally registered with the government through the Udyam registration in order to reduce information asymmetry in the resolution process and encourage greater participation from MSMEs who may have otherwise been uncertain about their eligibility.
Currently, since the status of the MSME is not explicitly required to be disclosed, IBBI said there have been instances where the classification of a corporate debtor as an MSME has been contested during the insolvency resolution process. “This uncertainty can lead to complications and potential delays in the resolution process,” the regulator said.