The above news is from Indian Express. Let me explain it....pl | ECONOMY by VIVEK SINGH

The above news is from Indian Express. Let me explain it....please read it carefully:

1) Last year the IBC 2016 was amended wherein the default limit was increased to Rs. 1 crore (from Rs. 1 lakh earlier) for IBC 2016 to be applicable.

2) For normal defaults above Rs. 1 crore, the IBC process is initiated and "Resolution Applicants" submit the BID to purchase a bankrupt company (Debtor). These Resolution Applicants are basically other companies operating in the business in that sector in which Debtor was functioning. If the owners of Debtor company are not "wilful defaulter" and meet certain conditions then the owners of the Debtor company are also allowed to participate in the bid process with the Resolution Applicants to purchase their own company again (may be at throw away prices). But during this "Corporate Insolvency Resolution Process (CIRP)" the management of the the Debtor company is passed on to "Resolution Professionals" so that the owners of the Debtor company cannot manipulate its finances and siphon of funds from the books of Debtor (company).

But in case of "Pre-Packaged Insolvency Resolution Process (PIRP), during the PIRP, the management of the company will remain with the owners of the Debtor (MSME company). AND no other "Resolution Applicant" will be allowed to submit the Bid/plan for resolution of the defaulted MSME company (advantage for MSME owners) OTHER than the owners of the MSME company (debtor) but it should be approved by 2/3 of the creditors by value.

But in case the "Operational Creditors" have not been paid their total dues (which means the PIRP is basically about resolution of the debt of financial creditors) then OTHER "Resolution Applicants" will also be allowed to participate in the Bid to takeover the MSME company (debtor). But the owners of the MSME company will still be asked to match the BID of the other applicants (Swiss Challenge) and if they match then the MSME company (debtor) will remain with its (present) owners. And if the MSME owners are not able to match the BID of other applicants then the MSME company (debtor) will go in the hands of the new owners and the previous owners will loose their MSME company/Investments done in the MSME.

3) In normal IBC, the Debtor/Creditor approach the NCLT and then NCLT appoints resolution professionals and then the resolution process starts and advertisement is made for who is interested in the defaulted company etc... which takes time and effort of NCLT. But in PIRP... the owners of the defaulted company (MSME) will prepare a resolution plan on their own and initiate the PIRP. So it will relieve the burden on NCLT.

4) PIRP is applicable if an MSME has taken loan and the default is of less than Rs. 1 crore.