The Creditor-Initiated Insolvency Resolution Process (CIIRP): A Faster Route for Stressed Assets

The Creditor-Initiated Insolvency Resolution Process (CIIRP): A Faster Route for Stressed Assets#

The CIIRP, introduced under Chapter III-A of the IBC (Amendment) Act, 2026, creates an alternative resolution pathway that addresses the most significant criticism of the original CIRP: the immediate displacement of management. By allowing the debtor's board to remain in control under professional oversight, CIIRP encourages earlier intervention and preserves institutional knowledge during the resolution period.

Why a New Process Was Needed#

The original CIRP's creditor-in-possession model created a paradox:

• Promoters avoided voluntary resolution because initiating CIRP meant losing control of their own company
• Value erosion during CIRP was significant — the management vacuum, combined with employee uncertainty and customer/vendor anxiety, often destroyed more value than the resolution process saved
• Operational continuity suffered because the IRP/RP, while professionally qualified, lacked domain knowledge of the specific business

CIIRP resolves this by keeping the existing management in place while introducing professional oversight to protect creditor interests.

Initiation: Out-of-Court, Creditor-Driven#

Unlike CIRP (which requires an NCLT application under Section 7, 9, or 10), CIIRP is initiated out-of-court:

Prerequisites#

1. Financial creditors holding 51% or more in value of the total notified financial debt must consent to initiation
2. A Resolution Professional must be identified and appointed by the consenting creditors
3. The RP must provide written consent and a declaration of independence
4. The corporate debtor must have committed a default as defined under the Code

Process#

1. Consenting financial creditors issue a notice of initiation to the corporate debtor
2. The RP takes up the oversight role within 7 days of appointment
3. A moratorium (equivalent to Section 14 under CIRP) comes into effect, protecting the debtor from enforcement actions
4. The RP files a confirmation of CIIRP initiation with the NCLT within 14 days — this is a filing for record, not an application for admission

The out-of-court initiation eliminates the single largest bottleneck in Indian insolvency: the NCLT admission delay. Under CIRP, applications routinely take 6–18 months to be admitted due to judicial backlogs. CIIRP bypasses this entirely.

Debtor-in-Possession: How It Actually Works#

"Debtor-in-possession" does not mean the board operates without constraints. The IBC 2.0 framework imposes a structured oversight mechanism:

Board Powers (Retained)#

• Day-to-day operational management
• Customer and vendor relationship management
• Employment decisions (within normal course)
• Compliance with regulatory obligations
• Execution of existing contracts

Board Restrictions#

• No new borrowings without RP and CoC approval
• No asset disposals outside the ordinary course of business
• No related-party transactions without RP consent
• No change in capital structure without CoC approval
• No creation of new security interests over corporate debtor assets

RP Powers (Oversight)#

The Resolution Professional under CIIRP has a distinctly different role from CIRP:

The veto power is the critical safeguard: if the board passes a resolution that could prejudice creditor interests (e.g., approving a related-party transaction, diverting cash flows, or accelerating payments to specific creditors), the RP can block it. The board can appeal to the CoC, but the RP's veto stands until the CoC decides otherwise.

The 150-Day Timeline#

CIIRP operates on an aggressively compressed timeline compared to CIRP:

Why the Shorter Timeline Works#

The compressed timeline is feasible because:

1. No management transition — no learning curve for the RP to understand the business
2. Out-of-court initiation — no NCLT admission delay
3. Existing information systems — the board already has access to all financial data
4. Pre-existing creditor relationships — the 51% consent threshold means key creditors are already aligned

Failure Protocol: Conversion to CIRP#

If CIIRP does not produce an approved resolution plan within 150 days (plus 45-day extension):

1. The CIIRP automatically converts to standard CIRP under Chapter II
2. The board is displaced — standard creditor-in-possession rules apply
3. The IRP/RP appointed for CIRP is a new professional (the CIIRP RP may be reappointed if the CoC agrees)
4. The timeline for CIRP runs fresh from the date of conversion — the 150 days already spent under CIIRP do not count against the 330-day CIRP limit
5. All claims verified during CIIRP are carried forward — no re-verification required

This design ensures that CIIRP failure does not result in liquidation by default. The business gets a second opportunity at resolution through the more intensive CIRP model.

Eligibility and Exclusions#

Who Can Use CIIRP#

• Any corporate debtor that meets the default threshold under the Code
• Initiated by financial creditors (not operational creditors or the debtor itself)
• Requires 51% consent in value of notified financial creditors

Who Cannot Use CIIRP#

• Corporate debtors already undergoing CIRP or liquidation
• Entities covered by Section 29A disqualifications (the same bar that applies to CIRP resolution applicants)
• MSMEs — separate provisions apply under Section 240A

Key Takeaways#

• CIIRP is initiated out-of-court with 51% creditor consent — no NCLT admission delay
• The board retains control under RP oversight with mandatory veto power
• The 150-day timeline (195 days maximum) is significantly shorter than CIRP's 330 days
• Failure converts to standard CIRP — not liquidation — with a fresh timeline
• Claims verified during CIIRP carry forward to CIRP, avoiding duplication