What Triggers Conversion From CIIRP to a Full CIRP?
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 creates five routes by which a creditor-initiated insolvency resolution process under the newly inserted Chapter IV-A converts into a full corporate insolvency resolution process, ending the board's control of the company. Three of the five, set out in Section 58H(1), are mandatory once established: no resolution plan approved in time, failure of the corporate debtor to cooperate with the resolution professional, or rejection of a plan as non-compliant. The remaining two arise from a Committee of Creditors vote under Section 58H(2) or an unsuccessful objection under Section 58C. This article maps each trigger, who controls it, and what a board should track.
Five Routes Out of Debtor Control, and Where Each One Lives in the Statute
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (the 2026 Amendment) inserts Chapter IV-A into the Insolvency and Bankruptcy Code, 2016 (the Code), creating a creditor-initiated insolvency resolution process (CIIRP) in which management is not displaced. Section 58F(1) leaves the affairs of the corporate debtor with the board or the partners; section 58F(2) gives the resolution professional (the RP) the right to attend meetings of members, of the board and of committees of directors, and to reject any resolution passed there. That is the bargain, and conversion is what ends it.
The provisions are not usable yet. Notification S.O. 2625(E) dated 22 May 2026 brought a large part of the 2026 Amendment into force from 26 May 2026, but no CIIRP can begin until the Central Government notifies the categories of corporate debtors under section 58A and the class of financial institutions entitled to initiate under section 58B, and the regulations of the Insolvency and Bankruptcy Board of India remain in draft. Mapping the triggers now is worth the time, because a board cannot build a monitoring routine after the clock has started.
The Three Mandatory Triggers in Section 58H(1)
Section 58H(1) is cast in mandatory terms. Where the Adjudicating Authority does not receive a resolution plan for approval within the period stipulated by section 58D, or is satisfied that the corporate debtor or its personnel have failed to assist or cooperate with the RP, or rejects the plan under section 58J(2) read with section 31(2), it shall by order convert the process. Once one of the three is established there is no discretion to give the company another chance.
The Two That Sit Outside Section 58H
Two further routes sit outside the conversion provision. Section 58H(2) lets the committee of creditors (the CoC) resolve to convert at any time by a vote of not less than sixty-six per cent of voting share, on which the RP must apply and the tribunal must pass the same order. Section 58C, the corporate debtor's own objection provision, can also produce a conversion, and it is the trigger a company is most likely to pull on itself.
Conversion trigger | Provision and threshold | Who controls it |
No resolution plan approved within the section 58D period | Section 58H(1)(a); 150 days, extendable once by 45 on a 66 per cent CoC vote | The resolution professional and the CoC |
Failure of the corporate debtor or its personnel to assist or cooperate | Section 58H(1)(b); satisfaction of the NCLT | The resolution professional, through the record he builds |
Rejection of the resolution plan as non-compliant | Section 58H(1)(c) with sections 58J(2) and 31(2) | The resolution applicant and the NCLT |
Resolution of the committee of creditors to convert | Section 58H(2); 66 per cent of voting share | The committee of creditors |
Initiation not in accordance with sections 58A and 58B, default established | Section 58C, on the corporate debtor's own objection | The corporate debtor |
The Timeline Trigger: One Hundred and Fifty Days, Forty-Five More, and Whether the Tribunal Can Give Any
The company does not control the clock. The RP calls for claims, prepares the information memorandum and issues the invitation for resolution plans; the CoC votes on any extension; the tribunal converts if nothing arrives in time. What the company controls is the input, and the input is what causes slippage. An information memorandum reissued because the underlying data was incomplete costs three weeks, and three weeks out of one hundred and fifty decides whether a plan reaches a vote.
Whether the outer limit can be stretched is untested. In Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [(2020) 8 SCC 531] the Supreme Court struck down the word "mandatorily" in the proviso to section 12(3), so that a CIRP may in an exceptional case run beyond three hundred and thirty days where the delay is not attributable to the parties. Chapter IV-A is drafted differently: section 58H(1)(a) makes conversion the consequence of the period expiring rather than leaving the tribunal to police a deadline. The argument that Essar Steel transplants is available, but no board should plan on it.
The Week by Week Monitoring List
Five items deserve a standing weekly entry. First, the claims position, because a late or revised admission changes CoC arithmetic. Second, the state of the information memorandum and every outstanding data request. Third, the invitation timetable and the dates by which expressions of interest and plans fall due. Fourth, the extension vote, which must be taken and recorded before the initial period expires. Fifth, the compliance of any plan in circulation with sections 29A and 30, since section 58E(1)(c) requires the RP to certify exactly that.
Why Does the Cooperation Trigger Deserve the Most Attention?
This is the only trigger that turns on a finding about the company's own conduct. It is the cheapest for a creditor to run, and the one where a contemporaneous record decides the outcome.
What Do Sections 58E(2) and 58F(3) Actually Require?
Section 58E(2) casts the duty widely. Any person who is or has been personnel of the corporate debtor, or its promoter, or associated with its management, or engaged in a contract for service with it, must extend all assistance and cooperation to the RP, and sub-sections (2) and (3) of section 19 apply mutatis mutandis. Section 58F(3) adds a specific obligation on the promoter and personnel to supply the information needed for the information memorandum, with liability where material information is omitted or false or misleading information is given. The duty therefore reaches former officers and outside contractors, and the information memorandum limb is the one most often breached inadvertently, because it is discharged by finance and operations rather than by legal.
What Failure to Cooperate Has Meant Under Sections 19 and 70
Section 19 jurisprudence will be borrowed, and it is more favourable to companies than the phrase suggests. The appellate tribunal has read the category of persons subject to the duty narrowly, holding that a statutory auditor is not a person associated with the management within section 19(1). Directions under section 19(3) are also just that, directions; they follow an application under section 19(2) and identify what is to be produced, so a company facing one has a documented opportunity to comply.
On sanction the position is clearer. In Rakesh Gupta v. Mahesh Bansal [2023 SCC OnLine NCLAT 2198] the appellate tribunal set aside a fine of five lakh rupees imposed on suspended directors for non-cooperation, holding that a fine is a penalty falling under sections 70 and 236 and can be imposed only by a Special Court, the Adjudicating Authority being confined to costs. The effective sanction for non-cooperation was therefore never the fine. Under Chapter IV-A it is conversion, which arrives on the tribunal's satisfaction and without a criminal standard of proof.
The traffic runs both ways. In Vijay Kumar Jain v. Standard Chartered Bank [(2019) 20 SCC 455] the Supreme Court held that members of the erstwhile board, being vitally interested in resolution plans discussed at meetings of the CoC, must be given copies of those plans with the notice of the meeting. In a CIIRP the board is not suspended at all, so its entitlement to see what the CoC sees is stronger.
A Document and Access Protocol That Prevents an Adverse Finding
The protocol is unglamorous and it works. Name one custodian of the RP relationship and route every request through that person. Keep a register recording the date of each request, its subject, the owner inside the business, the due date, and the date and format of the response. Insist in writing that oral requests be confirmed by email, because a request that exists only in someone's memory becomes a failure to cooperate in someone else's affidavit.
Answer everything, including requests the company considers excessive, by supplying what is available and stating in writing why the balance is not. Log physical access to premises and records and system access to accounting software, since access refused is the allegation easiest to make and hardest to disprove. Minute the RP's attendance at every board meeting, and put a litigation hold on relevant records at the outset. Keep promoter disputes separate: a promoter who will not answer is a problem for that individual under section 58E(2), but if the company's own response is silence the finding is made against the company.
The CoC Vote, and the Objection That Can Backfire
Section 58H(2) has no merits filter. If the CoC resolves to convert by sixty-six per cent of voting share the RP must apply and the tribunal must pass the order, and the company has no answer on the law. The only defence is commercial, which makes the composition of the CoC worth watching as closely as the plan. Voting share moves when claims are admitted or revised, and when debt is assigned, so a single assignment can turn a comfortable margin into a hostile one.
Why a Section 58C Objection Can Hand the Company a Full CIRP
Section 58C lets the corporate debtor object to the initiation within thirty days of the commencement date, and the outcome depends entirely on the ground taken. If the tribunal finds that no default occurred it may declare the initiation void from the outset. If default did occur, and the objection succeeds only in showing that the initiation failed to meet the criteria in sections 58A and 58B, the tribunal converts the process into a CIRP. A procedural objection run by a company that cannot deny default is, in substance, an application to lose the board's seat.
What Does a Conversion Order Carry With It?
A conversion order is not a fresh start. Section 58H(1) requires the tribunal, in the same order, to convert the process, to decide the stage from which the CIRP will commence after considering any recommendation of the CoC, to appoint the CIIRP resolution professional as interim resolution professional or resolution professional, to declare a moratorium for the purposes of section 14, and to treat costs incurred during the CIIRP as insolvency resolution process costs. The professional who formed the view that the company failed to cooperate is therefore likely to be the one who then runs it.
Section 58H(3) settles the rest. Proceedings for an avoidance transaction, for fraudulent or wrongful trading, or under section 47 continue into the CIRP rather than lapsing. The conversion order is deemed to be an order of admission under section 7, with the financial creditor who initiated the CIIRP treated as the applicant.
The Lookback That Reaches Back to the Commencement Date
Section 58H(3)(c) is the provision to put in front of the board. For sections 43, 46 and 50 the words "initiation date and ending on the insolvency commencement date" are to be read as "creditor-initiated insolvency commencement date and ending on the insolvency commencement date". Every payment, security and transfer effected while the board was still in control therefore sits inside the window for a preference or undervalue challenge. Decisions taken during a CIIRP should be minuted with the commercial rationale on the record.
Frequently Asked Questions
How many ways are there for a CIIRP to become a full CIRP?
Five. Three are mandatory under section 58H(1): no plan approved in time, a finding that the corporate debtor or its personnel failed to assist or cooperate, and rejection of the plan as non-compliant. A fourth is a CoC resolution under section 58H(2) carried by sixty-six per cent of voting share. The fifth arises under section 58C, where the company objects, default is established, and the initiation is found not to meet sections 58A and 58B.
Can the one hundred and fifty day period be extended more than once?
The statute provides a single extension of up to forty-five days on a sixty-six per cent CoC vote. Whether a tribunal can go further is untested. Essar Steel relaxed the corresponding CIRP limit in exceptional cases, but section 58H(1)(a) makes conversion follow the expiry of the period, so the safer assumption is that one hundred and ninety-five days is the outer limit.
What evidences a failure to cooperate?
Usually a paper trail rather than an event: unanswered written requests, refused or delayed access to premises, books or systems, incomplete responses on the information memorandum, and unexplained gaps in records. Because the tribunal acts on satisfaction rather than proof to a criminal standard, the register of requests and responses you maintain is more useful than any explanation offered later.
Can the NCLT fine directors who do not cooperate?
No. In Rakesh Gupta v. Mahesh Bansal the appellate tribunal held that a fine is a penalty under sections 70 and 236 and can be imposed only by a Special Court. The Adjudicating Authority can issue directions and deal with costs. Under Chapter IV-A the real exposure is not a fine but conversion and the loss of board control.
Is it safe to object to the initiation under section 58C?
Only if you can put default in issue. If default is established and the objection rests on the initiating creditor's failure to meet sections 58A and 58B, the tribunal converts the process into a full CIRP. Objecting on procedure alone can cost the company the control it is trying to keep.
Is the creditor-initiated process in force?
Not yet in practical terms. Much of the 2026 Amendment commenced on 26 May 2026, but a CIIRP cannot be started until the Central Government notifies the categories of corporate debtors and the class of financial institutions, and the Board's regulations are still in draft.
Who appoints the resolution professional in a CIIRP, and does that change on conversion?
In a CIIRP the resolution professional is appointed at the outset of the creditor-initiated process. Under Section 58H(1), the tribunal ordinarily appoints the same person as interim resolution professional or resolution professional for the converted CIRP, so the professional who found the company failed to cooperate is typically the one who then administers the full process.
What happens to the promoter's board seat if the CoC votes to convert under Section 58H(2)?
Once the National Company Law Tribunal passes a conversion order under Section 58H(2), the process becomes a full corporate insolvency resolution process, and the resolution professional, not the board, manages the company's affairs from that point, ending the promoter's control regardless of whether any wrongdoing has been alleged. The vote itself carries no merits requirement once the sixty-six percent threshold is met.
Can avoidance transaction applications from before the conversion be pursued after the CIIRP becomes a CIRP?
Yes. Section 58H(3) provides that proceedings for avoidance transactions, fraudulent or wrongful trading, or under Section 47 continue into the converted CIRP rather than lapsing, and the lookback period under Sections 43, 46 and 50 is extended back to the creditor-initiated insolvency commencement date, not merely the later CIRP commencement date.
Is a corporate debtor's objection under Section 58C the same as challenging the underlying default?
Not necessarily. A Section 58C objection can dispute either that a default occurred at all, in which case a successful objection voids the initiation entirely, or only that the initiating creditor failed to meet the eligibility criteria in Sections 58A and 58B, in which case a successful objection on that narrower ground converts the process into a full CIRP rather than ending it.
What happens to the corporate debtor's management once conversion takes effect?
Conversion moves the process out of debtor control. The management that continued to run the company during the creditor-initiated process gives way to the resolution professional exercising the powers of the board, as in an ordinary corporate insolvency resolution process. Directors and officers remain under a duty to cooperate and to hand over books, records and assets, and that duty does not end merely because control has changed hands.
Should a counterparty treat a converted process differently from an ordinary CIRP?
Once conversion has occurred the process is a corporate insolvency resolution process, and the familiar consequences follow: the resolution professional binds the company, claims are filed with him, and the moratorium and priority rules operate in the usual way. A counterparty that had been dealing with the company's own management during the debtor-controlled phase should confirm the change in authority and re-verify who may give instructions before continuing to perform.
What records should a creditor preserve in anticipation of a conversion application?
Correspondence showing requests for information and the response or silence that followed, minutes recording non-attendance or refusal of access, and any record of the debtor's dealings with assets during the debtor-controlled phase. Where conversion is sought on the cooperation ground, the application succeeds or fails on this contemporaneous material rather than on assertion, and it is considerably harder to assemble after the fact than to keep as matters unfold.
Vikrant D. Shetty | Vikrant D. Shetty leads the Insolvency and Arbitration Practice at the law firm Vikrant D. Shetty & Associates, Advocates & Solicitors which advises financial creditors, operational creditors, and corporate debtors in proceedings before the National Company Law Tribunal (NCLT), Mumbai Bench, including applications concerning cooperation with resolution professionals and the conduct of resolution processes, and represents parties in domestic and international commercial arbitrations seated in India and abroad, including enforcement and challenge proceedings before the Bombay High Court.
This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please seek direct consultation with an advocate.
Comments