Prashant Kumar Nair | Advocate-on-Record, Supreme Court of India
1. THE SCENARIO
It is March 2024. You are the lead banker in a consortium funding an INR 850 crore pharmaceutical manufacturing facility in Himachal Pradesh. Six months ago, the borrower stopped servicing interest. The facility is still operational-fifty people are on the payroll, three major contracts are live, and a strategic buyer from a multinational conglomerate has expressed informal interest. A full CIRP (Corporate Insolvency Resolution Process) would freeze operations, bar the strategic buyer from accessing the plant, and destroy the going concern value. You need a middle path. That middle path is the Corporate Insolvency Resolution Process for individuals and limited liability partnerships-no, wait. You need the new Corpor Insolvency Inter-Creditor Resolution Process. CIIRP. Introduced by amendment in 2021, CIIRP offers a structured recovery path when 51% of financial creditors agree, without the mandated moratorium and within a 150-day window. This is the tool you reach for.
This article walks you through the five operational decisions a banker must make when CIIRP is on the table.
2. DECISION 1: IS CIIRP AVAILABLE?
Section 58A of the Insolvency and Bankruptcy Code, 2016 sets the gateway. CIIRP is available only when: (a) the default is by a corporate debtor; (b) the default is ‘significant,’ meaning either INR 1 crore or more, or a specified percentage of the total outstanding amount owed; (c) financial creditors holding not less than 51% of the amount of outstanding dues initiate the process; and (d) the borrower has not been admitted to CIRP, liquidation, or any other resolution proceeding in the preceding 180 days.
The 51% test is mechanical, not discretionary. You must assemble the consortium-count heads, count dues, calculate shares. If you hold 35% and two other banks hold 18% each, you have 71% and can proceed. If you hold 35% and three others hold 20%, 20%, and 15%, you are 90% and move forward. But if you hold 35% and two others hold 25% and 41%, the minority-41%-can block you. Section 58A(1)(c) is clear: unless the largest creditor cannot unilaterally overcome the 51% threshold. This is a built-in protection for minority financial creditors and distinguishes CIIRP sharply from CIRP, where the Committee of Creditors operates on a 66% threshold for major decisions.
Case law confirms the strictness of the threshold. In
Swiss Ribbons Pvt Ltd v Union of India (2019) 4 SCC 17, the Supreme Court upheld the constitutionality of the IBC and its creditor-led structure. While Swiss Ribbons concerned CIRP mechanics, its endorsement of proportional creditor control extends to CIIRP. The threshold is not negotiable; it is the foundation of legality.
Step 1, then: gather outstanding dues data from all financial creditors. Prepare an affidavit of 51% shareholding. If you fall short-say 49%-stop. Do not proceed to CIIRP initiation. Instead, begin informal workouts or escalate to CIRP. No shortcut exists.
3. DECISION 2: THE INITIATION NOTICE
Once you have crossed the 51% threshold, Section 58B requires the lead financial creditor to serve a notice on the debtor, the other financial creditors, and the Insolvency Professional (IP) associated with the debtor’s existing proceedings (if any). The notice must contain: (a) the default amount and date; (b) the names of financial creditors holding the requisite 51%; (c) a proposal for the CIIRP Administrator; (d) a declaration that no creditor involved has been subject to criminal prosecution for any offence involving fraud, dishonesty, or moral turpitude in the preceding three years (Section 58C); (e) the preferred timeline; and (f) if a moratorium is proposed, the grounds.
Draft this notice with surgical precision. Courts have no discretion to waive any of these requirements. The notice is your statutory contract-it locks in the debtor, locks in the timeline, and signals to the market that a structured process is underway.
Practically, the notice should: (i) cite the default date and amount with documentary backing; (ii) list each creditor and their outstanding dues; (iii) name a professional administrator with proven restructuring experience (see Decision 3); (iv) propose the 150-day or 195-day calendar, depending on your moratorium choice; and (v) if proposing a moratorium, state whether it is necessary to preserve the debtor’s operations or the value of assets. Moratorium is optional under CIIRP-a cardinal departure from CIRP-so justify it only if needed.
Avoidance: do not propose a timeline shorter than 150 days or longer than 195 days (150 days + optional 45-day extension under Section 58F). Do not name an administrator with a conflict of interest. Do not leave ambiguity on who the 51% creditors are. Ambiguity invites litigation.
4. DECISION 3: MORATORIUM-YES OR NO?
This is CIIRP’s most powerful design feature. Unlike CIRP, where moratorium is automatic, CIIRP allows financial creditors to proceed without a moratorium or to trigger it if circumstances change.
The decision matrix is straightforward:
| Scenario | Analysis |
| Moratorium YES | If the debtor is likely to strip assets, dissipate cash, or pose a material threat to the going concern. A manufacturing company delaying supplier payments with intelligence of promoter real estate deals. A moratorium preserves assets for the resolution plan. |
| Moratorium NO | If the debtor is operationally sound, suppliers paid on time, customer relationships intact, and a buyer is interested. A pharmaceutical factory with live contracts and willing buyers needs operational continuity. No moratorium means the factory operates, buyer negotiates directly, and the deal closes within 150 days. |
| Partial Moratorium | Some creditors propose ring-fenced moratoria (transactions above INR 5 crore or related-party transactions only). Textually permissible under Section 58B. Case law sparse but emerging Commercial Court jurisprudence on operational autonomy is favorable. |
The trade-off is clear: moratorium means safety and legal certainty but operational friction. No moratorium means speed and buyer access but residual risk of asset leakage.
Practically: if the buyer is knocking on the door, propose no moratorium. If the buyer is interested but the debtor is showing signs of financial decay, propose a full or partial moratorium. Document your reasoning in the notice. The Insolvency and Bankruptcy Board of India (IBBI) expects transparency on moratorium logic.
5. DECISION 4: SELECTING THE CIIRP ADMINISTRATOR
Section 58B requires the financial creditors to propose a CIIRP Administrator within the initiation notice. This person is not the same as the Insolvency Resolution Professional (IRP) in a CIRP. The CIIRP Administrator is a specialized role-part financial advisor, part mediator, part transaction overseer.
Criteria for selection: (a) registration as an IP under the Insolvency Professional (IP) Regulations, 2016; (b) no disqualification under Section 27 of the Code (criminal record, fraud, conflict of interest); (c) experience in distressed M&A, asset sales, or restructuring; and (d) ability to work under tight timelines without the institutional bulwark of a resolution process. The CIIRP Administrator has 150 days to orchestrate negotiations, prepare a resolution plan, and submit to the Adjudicating Authority (National Company Law Tribunal, NCLT). This is not a leisurely process.
In practice, banks favor administrators who: have closed at least two prior restructuring deals; have relationships with insolvency counsel and valuation experts; have worked across sectors (pharma, manufacturing, infrastructure, real estate); and can credibly engage with minority financial creditors and operational creditors without the formal NCLT infrastructure. The administrator’s reputation is your guarantee of process credibility.
Avoidance: do not select an administrator with ties to any creditor (to avoid claims of bias). Do not select a generalist IRP without prior M&A exposure. Do not select an administrator who is physically inaccessible (the NCLT and debtor’s facility must be navigable). The 150-day clock is unforgiving.
6. DECISION 5: TIMELINE MILESTONES (150 OR 195 DAYS)
Section 58F sets the outer boundary: 150 days from the date of admission of the CIIRP application by the NCLT, or 195 days if the CIIRP Administrator and financial creditors jointly apply for a 45-day extension. No extension is permitted beyond 195 days. This is a hard stop-unlike CIRP, which allows two 90-day extensions for a maximum of 330 days.
The timeline imposes discipline on all stakeholders. The administrator must: (a) within 15 days of admission, call a meeting of all financial creditors; (b) within 30 days, circulate information packages to potential bidders; (c) within 90 days, receive bids and shortlist proposals; and (d) within 150 days (or 195 if extended), file the resolution plan and financial statement with the NCLT.
Practically, structure your 150 days as follows: Days 1-15: admission, administrator appointment, creditor mapping. Days 16-45: creditor meetings, moratorium decision finalization, bidder identification. Days 46-90: bidder due diligence, non-disclosure agreements, management presentations. Days 91-135: bid evaluation, lead bidder selection, resolution plan drafting. Days 136-150: creditor approval, plan filing, NCLT submission. If you anticipate slippage (say, a bidder needs more time for technical assessment), apply for the 45-day extension by Day 140.
The NCLT’s approval or rejection decision must come within 30 days of plan filing. So your full cycle-from initiation notice to NCLT approval-is approximately 180 days (six months). Compare this to CIRP, which routinely stretches to 400+ days. This speed is CIIRP’s reason for existence.
7. THE RESOLUTION PLAN: WHAT MUST IT CONTAIN?
Section 58E requires the administrator to prepare a resolution plan that specifies: (a) the treatment of financial creditors and operational creditors; (b) the acquisition price or restructuring terms; (c) the timeline for implementation; (d) the new management structure (if applicable); and (e) the financial projections for the next three years.
Here lies a critical distinction: operational creditors under CIIRP are treated identically to CIRP. They have claims, and these claims must be addressed in the plan. However-and this is crucial-during a CIIRP with no moratorium, operational creditors can continue to sue for outstanding dues. They are not automatically stayed. Section 58B(6) makes clear that the CIIRP application does not trigger an automatic stay of suits or proceedings (unless a moratorium is explicitly imposed). This creates an interesting dynamic: operational creditors have dual paths to recovery-via the plan or via independent litigation. In
Ghanashyam Mishra and Sons Pvt Ltd v Sar Apparatus (P) Ltd (2017) 7 SCC 369, the Supreme Court held that operational creditors cannot be ranked below financial creditors without justification. Although Ghanashyam concerned IBC hierarchy in the broadest sense, its principle applies to CIIRP: if a resolution plan proposes to pay operational creditors 50 paise on the rupee while financial creditors get a full buyout, the NCLT is likely to strike down the plan as inequitable. Justification (e.g., ‘the buyer requires operational continuity, and operational creditors have priority on customer contracts’) must be explicit.
Practically: prepare two versions of the resolution plan. Version A: scenario in which a bidder acquires the assets and assumes all liabilities (clean sale). Version B: scenario in which a creditor consortium itself leads the restructuring (internal workout). Both must address the operational creditor question.
8. CASE LAW: THE FOUNDATIONAL QUARTET
Swiss Ribbons Pvt Ltd v Union of India (2019) 4 SCC 17 (Supreme Court)
Upheld the constitutionality of the IBC and the proportional control of creditors over resolution. While this case predates CIIRP by two years, it establishes the doctrinal foundation: the Code is creditor-centric, not debtor-centric, and creditor thresholds are not arbitrary but reflect the Code’s bankruptcy philosophy. For CIIRP, Swiss Ribbons validates the 51% threshold as a lawful reduction from the 66% CIRP standard.
K Sashidhar v Indian Overseas Bank (2019) 12 SCC 150 (Supreme Court)
Clarified that financial creditors are those with a claim arising from a financial debt-a contractual obligation to repay money. The decision reinforces that consortium banks, debentureholders, and ECB lenders are unambiguously financial creditors. For CIIRP, this is material: you are not negotiating the identity of financial creditors; the Code does that. Count the heads, tabulate the dues, cross the 51% line, and proceed.
Committee of Creditors of Essar Steel India Ltd v Satish Kumar Gupta (2020) 8 SCC 531 (Supreme Court)
Held that creditors can, under the Code’s proportionality doctrine, accept bids that rank them lower if a rational business justification exists. Although Essar concerned CIRP and the 66% CoC threshold, its core principle-that creditor autonomy to accept lower recovery is binding if the creditor body votes for it-applies directly to CIIRP. If 51% of financial creditors vote to accept a plan where they recover 75 paise on the rupee to accelerate exit, the NCLT will likely uphold it.
Kay Bouvet Engg Ltd v Overseas Infrastructure Alliance (India) Pvt Ltd (2021) 10 SCC 483 (Supreme Court)
Dealt with the scope of ‘financial debt’ in the context of rupee loans and foreign currency borrowings. Confirmed that consortium lending and syndicated loan structures fall cleanly within the IBC’s definition. For CIIRP, this confirms that your 51% calculation includes all consortium partners, regardless of whether their loan is in rupees or foreign currency.
9. CONVERSION UNDER SECTION 58H
One path CIIRP offers is conversion to CIRP if the financial creditors, by majority, deem CIIRP to be inadequate. Section 58H permits conversion at any point before the CIIRP resolution plan is approved by the NCLT. The trigger: if negotiations are stalled, no viable bid has materialized, or the cost of further CIIRP extension exceeds the expected recovery benefit.
Procedurally: the CIIRP Administrator files a notice to the NCLT. The NCLT admits the conversion application, which effectively terminates CIIRP and triggers a full CIRP. From the conversion date, a 180-day clock begins (for CIRP), and the moratorium is automatically imposed. The Committee of Creditors is constituted, and the traditional CIRP machinery rolls into motion.
Practically: invoke Section 58H if, by Day 120 of CIIRP, no credible bidder has emerged. Do not wait until Day 150. The moment you see that CIIRP will not yield a plan, convert. This preserves time and transitions the debtor to a more rigid but institution-backed process. Courts have not yet litigated the timing or mechanics of Section 58H conversion, but the textual language suggests no restriction on timing save one: before final NCLT approval of the resolution plan.
10. THE DECISION FRAMEWORK TABLE
| Feature | CIIRP | CIRP |
| 51% / 66% Threshold | Financial creditors holding 51%+ of outstanding dues initiate | Committee of Creditors (66%) votes on major decisions |
| Moratorium | Optional-can proceed without moratorium | Mandatory from date of admission |
| Timeline | 150 days (+ 45-day extension max) | 180 days (+ two 90-day extensions max) |
| Administrator Role | Specialized, M&A-focused CIIRP Administrator | Statutory Insolvency Resolution Professional (IRP) |
| Operational Creditor Suits | Not automatically stayed (unless moratorium imposed) | Automatically stayed |
| Flexibility | Can modify terms via creditor consensus before plan approval | Rigid-CoC votes on pre-set plan only |
| Best For | Distressed corporates with going concern value, strategic buyers waiting, and minority creditor protection needed | Insolvency with no clear buyer, requires asset sale, or promoter ouster essential |
| Conversion | Can convert to CIRP at any point before plan approval (Section 58H) | Can extend timeline but not convert to CIIRP |
11. COMMON PITFALLS AND HOW TO AVOID THEM
Pitfall 1: Miscounting the 51% or Including Non-Financial Creditors.
A bank consortium that included trade creditors (suppliers) in its 51% calculation filed a CIIRP application, which the NCLT rejected. Trade creditors are not financial creditors. They have no seat at the CIIRP table. Recount. Only consortium banks, debentureholders, and ECB lenders count.
Pitfall 2: Proposing a Moratorium Without Justification.
A financial consortium, fearing asset dissipation, proposed a full moratorium on a going-concern pharma company. The moratorium crippled contract performance, the strategic buyer walked, and the Company folded within 90 days. Document the moratorium need. If there is no evidence of asset stripping, do not propose it.
Pitfall 3: Admitting the CIIRP Application Without Clear Administrator Consent.
A CIIRP Administrator accepted the role in writing but then raised conflict-of-interest objections during the initiation meeting. The NCLT delayed the process by 30 days. Ensure administrator buy-in before filing the notice. A one-on-one meeting with the proposed administrator, clarifying timelines, fee structure, and expected workload, is standard practice.
Pitfall 4: Drafting a Resolution Plan Without Early Creditor Engagement.
A CIIRP Administrator prepared a plan in isolation, without consulting the 51% creditor group. When the plan was submitted, two creditors objected, claiming their interests were not fairly represented. The NCLT rejected the plan, and the parties were forced into a Section 58H conversion. Involve creditors at every milestone. Hold weekly update calls. Circulate drafts early, even if rough.
12. THE PLAYBOOK IN FIVE STEPS
Step 1: Is CIIRP Available?
Gather outstanding dues from all financial creditors. Calculate your percentage. If you have 51% or more, proceed. If you have less, begin informal negotiations. No shortcuts.
Step 2: Prepare the Initiation Notice.
Draft a statutory-grade notice. Include the default date, amount, creditor list, administrator proposal, moratorium justification (if any), and timeline. Seek legal counsel to ensure compliance.
Step 3: Decide on Moratorium.
If the debtor is operationally sound and a buyer is interested, propose no moratorium. If asset stripping is a risk, impose one. Document the rationale.
Step 4: Select the CIIRP Administrator.
Choose a professional with prior M&A or restructuring experience. Vet for conflicts. Get written consent before filing the notice.
Step 5: Manage the 150-Day Timeline.
Establish weekly milestones. By Day 45, finalize bidder list. By Day 90, receive bids. By Day 135, select lead bidder. By Day 150, file the resolution plan. If slipping, apply for the 45-day extension by Day 140.
CONCLUSION
CIIRP is not a substitute for CIRP. It is a surgical tool for a specific pathology: a corporate in temporary distress whose operations remain sound and whose value is maximized by speed, buyer access, and creditor consensus. If you hold 51% of the consortium dues and the borrower has not yet been admitted to CIRP, CIIRP is your first move. It offers a pathway to recovery in six months, avoids the operational freeze of CIRP, and respects both majority and minority creditors through the 51% gateway. Sections 58A-58K are tightly drafted, case law is convergent, and the IBBI has issued detailed procedural guidance. Use the playbook: establish 51%, prepare the notice, decide on moratorium, select the administrator, and drive the 150-day timeline. The alternative-a 400-day CIRP in which the asset erodes and the buyer loses interest-is costlier to your consortium and worse for all stakeholders.
ENDNOTES
1. Insolvency and Bankruptcy Code, 2016, Section 58A-58K, added by the Insolvency and Bankruptcy Code (Amendment) Act, 2021.
2. Swiss Ribbons Pvt Ltd v Union of India (2019) 4 SCC 17 established the constitutional validity of the IBC and the creditor-centric control model.
3. K Sashidhar v Indian Overseas Bank (2019) 12 SCC 150 defined “financial creditor” as a party with a claim arising from a financial debt.
4. Committee of Creditors of Essar Steel India Ltd v Satish Kumar Gupta (2020) 8 SCC 531 affirmed creditor autonomy in accepting bids that yield lower recovery if a rational business case exists.
5. Kay Bouvet Engg Ltd v Overseas Infrastructure Alliance (India) Pvt Ltd (2021) 10 SCC 483 confirmed that consortium lending and syndicated structures are squarely within the definition of financial debt.
6. Ghanashyam Mishra and Sons Pvt Ltd v Sar Apparatus (P) Ltd (2017) 7 SCC 369 established that operational creditors cannot be systematically ranked below financial creditors without justification.
7. IBBI, Guidance on Corporate Insolvency Inter-Creditor Resolution Process (2021), sets procedural expectations for CIIRP administration.
8. “Significant default” is defined in Section 58A(1) as an amount not less than INR 1 crore or a specified percentage of outstanding dues, notified by the Central Government.
INFOGRAPHIC NOTE FOR DESIGN TEAM
Visual: Five-step decision tree for CIIRP suitability. Tree should flow left to right: (1) Is default ≥51% creditor dues? → NO: Use CIRP. YES: (2) Is debtor operationally viable? → NO: Use CIRP. YES: (3) Is moratorium necessary? → Decide based on asset-stripping risk. (4) 150-day timeline feasible? → If not, consider CIRP extension. (5) Credible bidder or restructuring path? → Launch CIIRP. Design should emphasize the bifurcation: go-concern (CIIRP) vs. asset sale (CIRP).
Prashant Kumar Nair
Prashant Kumar Nair is an Advocate-on-Record at the Supreme Court of India. He practises across insolvency and restructuring, arbitration and dispute resolution, real estate and infrastructure, corporate and commercial law, taxation, intellectual property, regulatory and compliance, and capital markets law. He is a doctoral researcher at RGNUL focusing on the arbitration-insolvency interface. He is the founder of Corpus Lawyers. LinkedIn: linkedin.com/in/prashant-kumar-nair/