Definition
Time-bound IBC process to revive an insolvent company.
The structured 180-day process under the IBC, 2016 to resolve corporate insolvency through a resolution plan.
Statutory Definition
Insolvency and Bankruptcy Code, 2016, Sections 7-33.
Etymology & Origin
Acronym expanded: 'Corporate' (body corporate — company or LLP) + 'Insolvency' (unable to pay debts) + 'Resolution' (from Latin 'resolutio', a loosening, dissolving — finding a solution) + 'Process' (from Latin 'processus', a going forward — a structured procedure). CIRP is the structured procedure for 'going forward' toward a 'solution' to the 'insolvency' of a 'corporate' debtor.
Full Legal Analysis
The Corporate Insolvency Resolution Process (CIRP) is the structured time-bound procedure under the Insolvency and Bankruptcy Code, 2016 for resolving the insolvency of a corporate debtor (company or LLP). The CIRP is initiated by an application to the NCLT by a financial creditor (Section 7), operational creditor (Section 9), or the corporate debtor itself (Section 10). On admission of the application, the NCLT appoints an Interim Resolution Professional (IRP) and declares a moratorium — a protective shield around the corporate debtor's assets preventing all legal proceedings and asset transfers.
The key stages and timelines of the CIRP: (1) Day 0 — NCLT admits application and appoints IRP; moratorium commences; (2) Days 1-30 — IRP takes control of management; collects claims from all creditors; constitutes the Committee of Creditors (CoC) comprising all financial creditors; (3) First CoC meeting — CoC may replace the IRP with a Resolution Professional (RP) of their choice; (4) Days 1-180 — RP manages the corporate debtor; invites Resolution Applicants to submit resolution plans; (5) Extension — NCLT may extend CIRP by 90 days (maximum 330 days including litigation, per Supreme Court in Essar Steel); and (6) Outcome — either a Resolution Plan is approved by the CoC (66% vote by value) and NCLT, or the NCLT passes a liquidation order.
The Supreme Court upheld the resolution plan for Essar Steel (approved by the CoC and NCLT) and laid down crucial principles: (1) the CoC has paramount commercial wisdom in approving or rejecting resolution plans — the NCLT/NCLAT's role is limited to checking that the plan complies with the IBC requirements, not to substitute their commercial judgment; (2) the 330-day outer timeline for CIRP (including litigation) is mandatory; (3) all creditors — including operational and financial creditors — must receive at least the liquidation value; and (4) the Resolution Applicant takes the corporate debtor free from all past liabilities not addressed in the resolution plan — a clean-slate principle.
The Resolution Plan must comply with Section 30(2) IBC requirements: (a) provide for payment of insolvency resolution process costs (priority); (b) provide for repayment of debts to operational creditors at least equal to the liquidation value; (c) provide for the management of the company after approval; (d) be feasible and viable; and (e) not violate any applicable law. Once approved by the NCLT, the plan is binding on the corporate debtor, all creditors, shareholders, and guarantors — including those who did not participate in the CIRP.
For advocates, CIRP work is highly specialised and fast-paced: (1) filing creditor applications — Section 7 with financial debt documentation or Section 9 after demand notice; (2) representation before NCLT and NCLAT; (3) advising CoC members on voting on resolution plans; (4) advising Resolution Applicants on structuring compliant plans; (5) personal guarantor insolvency — the Supreme Court in Lalit Kumar Jain v. Union of India (2021) held that CIRP against the corporate debtor does not automatically extinguish the personal guarantor's liability — separate personal insolvency proceedings may be initiated against guarantors.
This Term in Indian Statutes
Insolvency and Bankruptcy Code, 2016, 2016
"Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting— (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor; (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor."
Essar Steel: 330-day outer limit, CoC commercial wisdom, clean-slate principle; Section 30 resolution plan 66% CoC vote; all creditors bound by approved plan; personal guarantor liability survives CIRP
