IBBI’s CIIRP Framework: An Out-of-Court Insolvency Track for India

On 15 April 2026, the Insolvency and Bankruptcy Board of India released a discussion paper setting out proposed amendments to the CIRP Regulations, 2016, to operationalise the Insolvency and Bankruptcy Code (Amendment) Act, 2026. At the centre of this exercise is Chapter IV-A of the Code — newly inserted Sections 58A to 58K — which introduces the Creditor-Initiated Insolvency Resolution Process (CIIRP). The mechanism allows a notified class of financial creditors holding at least 51% of the debt to trigger resolution without first seeking NCLT admission, compressing the statutory clock to 150 days. Stakeholder comments on the draft are due by 28 April 2026.

Key Takeaways

• The IBC Amendment Act, 2026 received Presidential assent on 6 April 2026 and introduces CIIRP through a new Chapter IV-A (Sections 58A to 58K).
• CIIRP may be initiated only by notified financial creditors holding at least 51% in value of debt, after a 30-day notice to the corporate debtor.
• The process must conclude within 150 days, extendable once by 45 days with CoC approval of 66%.
• Unlike CIRP, the corporate debtor’s board remains in management under RP oversight, and the Section 14 moratorium is not automatic.
• The NCLT may convert CIIRP to CIRP where procedural defects are found, cooperation fails, or no plan is approved within time.
• As of September 2025, the conventional CIRP averaged 688 days to conclude — more than double the statutory 330-day limit — driving the policy push toward out-of-court alternatives.
• IBBI’s comment window for the draft regulations closes on 28 April 2026.

From Tribunal-Led to Creditor-Led: What Has Changed

Since its enactment in 2016, the Insolvency and Bankruptcy Code, 2016 (IBC) has relied on a single adjudication-driven path: a financial or operational creditor files an application under Sections 7 or 9, the National Company Law Tribunal (NCLT) admits or rejects it, and a moratorium kicks in on admission. That architecture has faced sustained criticism on speed. IBBI data indicates that admitted CIRP cases took 688 days on average by September 2025, against a statutory limit of 330 days, with close to three-fourths of ongoing matters exceeding 270 days post-admission.

A Select Committee of Parliament, whose recommendations informed the 2026 amendments, concluded that legacy backlog, contested defaults, and admission-stage adjournments were the principal causes of value erosion. The CIIRP is designed to bypass the admission bottleneck for a specified class of smaller corporate debtors by allowing creditors to commence the process through a resolution professional’s public announcement, while preserving the NCLT’s supervisory role for disputes, moratorium grants, and plan approval.

The 51% Threshold and Notified Class of Financial Creditors

Under proposed Section 58A, CIIRP applies only to corporate debtors the Central Government notifies on the basis of asset size, income, class of creditors, or quantum of debt. The process cannot be initiated where the corporate debtor is already in CIRP, pre-packaged insolvency, or liquidation, or has undergone any of those within the preceding three years. Section 58B requires the initiating financial creditor — drawn from a notified class of institutions — to secure approval from financial creditors holding at least 51% of the debt by value. The debtor must then be given 30 days to respond. If objections are received, the creditors must reconfirm their 51% approval within a further 30 days before appointing the resolution professional.

The 51% threshold departs from the 66% CoC voting share required at several key junctures of a conventional CIRP, including for extensions and certain transactional approvals. The Select Committee’s rationale is that an out-of-court process involving a narrower pool of notified institutional creditors warrants a lower trigger, since downstream safeguards — debtor objections before the NCLT, mandatory conversion on default — remain available.

Debtor-in-Possession: A Hybrid Control Model

The sharpest structural departure from the CIRP is that CIIRP leaves the corporate debtor’s board of directors, or its partners, in control of operations during the process. Under proposed Section 58E, the resolution professional’s duties track those under Sections 18 and 25 of the IBC — claim collation, information memorandum, verification against Sections 29A and 30, and compliance reporting to the IBBI — but daily management continues with existing personnel. Transactions above a specified threshold require prior approval of the Committee of Creditors. Section 14’s moratorium is not automatic: the RP may apply to the NCLT for protection, with the consent of creditors holding 51% of the debt.

This is a meaningful policy choice. In a conventional CIRP, control passes to the interim resolution professional on admission, the existing board stands suspended, and the moratorium extinguishes coercive action. CIIRP instead places a supervisory layer over continuing management, with the RP empowered to police above-threshold transactions and escalate non-cooperation to the NCLT. The Select Committee described this as a middle path between a full CIRP and an informal workout — structured oversight without operational rupture.

The 150-Day Clock and Conversion to CIRP

Section 58D fixes a 150-day completion timeline from the commencement date, extendable once by 45 days with 66% CoC approval. If no resolution plan is approved within that window, if the debtor’s personnel fail to cooperate, if the NCLT rejects a submitted plan, or if the CoC itself resolves by 66% vote to convert the proceeding, the NCLT is required to direct conversion into a conventional CIRP. Proposed Section 58C allows the corporate debtor to object to commencement before the NCLT within 30 days; the tribunal may declare the CIIRP void ab initio if no default has occurred, or convert it to CIRP if procedural requirements were not met. On conversion, the RP from the CIIRP is appointed as the interim resolution professional, a Section 14 moratorium is declared, and costs already incurred in CIIRP are absorbed as CIRP costs.

The design aims to ensure that the compressed timeline does not become a shelter. If the debtor frustrates the process or creditors lose confidence, the case migrates to the established CIRP framework without starting afresh — a continuity that should limit tactical delays.

Cross-Practice Impact

For banking and finance practices, CIIRP will reshape the early-distress playbook. Banks and financial institutions covered by the notified class can press defaulting borrowers through a mechanism with a credible 150-day exit, rather than relying on Section 7 applications that may take months merely to be admitted. Intercreditor coordination will move earlier in the timeline, since the 51% approval must be assembled before the RP is appointed and the public announcement made.

For M&A and restructuring advisors, the debtor-in-possession model creates a distinct transaction window. A resolution plan under CIIRP binds the corporate debtor and its creditors much as a CIRP plan does under Section 31, yet the target’s operations continue uninterrupted. Bidders who prefer going-concern purchases to liquidation-proximate acquisitions may find CIIRP outcomes commercially cleaner than the late-stage CIRP distress sales that typify Indian bankruptcy practice. Diligence, however, will need to test whether Section 14 protections were sought and secured, and whether transactions during the CIIRP period had the required CoC approvals — flaws here may unravel post-closing.

Litigation and disputes practices will see a new line of applications cluster around Section 58C objections, moratorium refusals, and conversion orders. Because CIIRP does not supply the automatic stay of a CIRP, guarantors and security-holders will test the boundaries of parallel enforcement during the resolution window. NCLAT appeals from CIIRP orders feed into the newly inserted sub-section (6) of Section 61, which requires disposal within three months of receipt — an ambitious timeline given current appellate load.

Corporate governance advisors will need to revisit board-level protocols for companies that fall within the notified CIIRP class. The board continues to function but under a supervisory RP, with CoC sign-off required for above-threshold transactions. Board minutes, delegation matrices, and internal financial controls will require recalibration to avoid inadvertent breaches during a CIIRP window.

Comparative Lens: Echoes of Chapter 11 and the UK Restructuring Plan

The CIIRP’s debtor-in-possession design draws on well-established comparative models. US Chapter 11 preserves incumbent management subject to court supervision and permits debtor-in-possession financing with super-priority status — a feature CIIRP does not replicate. The UK restructuring plan under Part 26A of the Companies Act 2006, introduced by the Corporate Insolvency and Governance Act 2020, similarly leaves management in possession and turns on court-sanctioned class voting, though without an automatic statutory stay. India’s CIIRP sits closer to the UK model in its restrained use of moratorium and its reliance on creditor-driven initiation, while retaining the NCLT’s supervisory role that characterises the IBC as a whole.

The divergence matters for cross-border restructurings. Foreign lenders and sponsors accustomed to Chapter 11’s automatic stay and DIP financing framework will find CIIRP’s design less protective of going-concern continuity during the process. Cross-border insolvency practitioners, already tracking the separate group and cross-border provisions introduced by the 2026 Amendment, will need to map CIIRP outcomes onto recognition regimes before India’s Model Law adoption is finalised.

Risks, Open Questions, and Implementation Gaps

The reforms are not without concern. The absence of an automatic moratorium creates a window in which secured creditors outside the initiating class may move to enforce against collateral, potentially undercutting the resolution effort before the RP can apply for NCLT protection. Academic commentary has also flagged the debtor-in-possession model as a source of governance risk where incumbent management has been the cause of the distress — the very concern that underpinned the original IBC’s decision to displace suspect management during CIRP.

Three further questions will determine CIIRP’s effectiveness in practice. First, the Central Government’s notification identifying the eligible class of corporate debtors and the class of financial creditors authorised to initiate — without that notification, the framework cannot be operationalised. Second, the IBBI’s final form of the CIRP and PPIRP regulations following the 28 April stakeholder window, particularly on claim verification, withdrawal, and documentation requirements. Third, the interplay between CIIRP and proceedings under the Prevention of Money Laundering Act, 2002, where parallel Enforcement Directorate attachment has repeatedly complicated conventional CIRPs — an issue the 2026 amendments do not expressly resolve.

Looking Ahead

Stakeholder submissions to the IBBI close on 28 April 2026, after which the final regulations are expected to be notified. The Central Government is separately expected to notify the eligible classes of corporate debtors and financial creditors before CIIRP becomes operational in fact. Financial creditors, corporate boards, and advisors operating in the distressed-credit space should track both notifications closely, since the trigger mechanics, notice protocols, and documentation standards will determine how quickly the new track can be deployed. The coming quarters will test whether CIIRP lives up to its stated aim of faster, less disruptive resolution — or whether, absent careful implementation, it reproduces the admission-stage delays it was meant to cure.

Frequently Asked Questions

What is the Creditor-Initiated Insolvency Resolution Process (CIIRP) under the IBC?

CIIRP is a new out-of-court insolvency mechanism introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, through Chapter IV-A (Sections 58A to 58K). It allows a notified class of financial creditors holding at least 51% of the debt to initiate a time-bound resolution process against certain corporate debtors, without first obtaining NCLT admission. The corporate debtor’s management remains in possession during the process under the oversight of a resolution professional.

When will the CIIRP framework come into force?

The IBC Amendment Act, 2026 received Presidential assent on 6 April 2026. For CIIRP to become operational, the Central Government must notify the eligible classes of corporate debtors and financial creditors, and the IBBI must finalise the associated regulations. The discussion paper released on 15 April 2026 invites stakeholder comments until 28 April 2026, after which final regulations are expected.

How does CIIRP differ from the conventional CIRP under the IBC?

CIRP is initiated by an application to the NCLT under Sections 7 or 9 and triggers an automatic moratorium under Section 14 on admission, with management passing to the interim resolution professional. CIIRP, by contrast, commences through a public announcement after creditor approval, without requiring prior NCLT admission. The corporate debtor’s board retains operational control subject to RP oversight, and a moratorium must be separately applied for. CIIRP must conclude within 150 days against the 330-day CIRP timeline.

What is the 51% threshold for initiating CIIRP?

To initiate CIIRP, a financial creditor from a notified class must secure approval from financial creditors of the corporate debtor holding at least 51% in value of the debt. If the corporate debtor objects within the 30-day notice period, the initiating creditors must reconfirm this 51% approval within another 30 days before the RP is appointed and the public announcement is made.

What happens if the CIIRP fails or the corporate debtor obstructs the process?

Under the 2026 amendments, the NCLT must convert the CIIRP into a conventional CIRP if no resolution plan is approved within 150 days (extendable by 45 days), if the debtor’s personnel fail to cooperate, if the plan is rejected by the NCLT, or if the CoC resolves by 66% vote to convert. On conversion, the RP from the CIIRP is appointed as the interim resolution professional, a Section 14 moratorium is declared, and CIIRP costs form part of CIRP costs.