What Is CIIRP, India's New Creditor-Initiated Insolvency Process

The Creditor-Initiated Insolvency Resolution Process, or CIIRP, is a new route under Chapter IV-A of the Insolvency and Bankruptcy Code, 2016, in which a notified financial creditor commences insolvency proceedings, a resolution professional supervises them, and the corporate debtor's own board continues running the company. Chapter IV-A, inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, reverses the Code's usual position, under which an admitted application suspends the board and hands management to the resolution professional, but Central Government notification of Chapter IV-A is awaited, so no creditor can use CIIRP yet. This article explains how CIIRP works, what remains pending notification, and how to respond to a notice.

Chapter IV-A Is on the Statute Book and Still Not in Force

The Amendment Act received Presidential assent on 6 April 2026, and most of it is already operating: notification S.O. 2625(E) dated 22 May 2026 brought the bulk of its provisions into force on 26 May 2026. Chapter IV-A was deliberately left out of that tranche and has not been notified since. Until it is, no financial creditor can commence a CIIRP against any company, however eligible that company might look on paper.

Why the Commencement Position Belongs in the Next Board Note

The 2026 Amendment has to be briefed in two halves, and the halves point in opposite directions. Everything in the 26 May 2026 tranche, from the substituted section 7 admission test to the codified clean slate in section 31, governs a petition filed this week and should be reported to a board as live law. Chapter IV-A does not, so a board told that a creditor-initiated process is already available to its lenders takes provisioning and disclosure decisions on a false premise. The Insolvency and Bankruptcy Board of India has circulated a discussion paper on draft CIIRP regulations, which suggests the subordinate framework is being assembled ahead of commencement rather than scrambled together afterwards.

Two Notifications Sit Between Section 58A and a Live CIIRP

Section 58A does not itself identify the companies that can be put through a CIIRP. It empowers the Central Government to notify the categories, framed by reference to asset or income thresholds, to class or amount of debt, or to any other criterion the notification adopts. Section 58B restricts the other side in the same way: only a financial creditor belonging to a class of financial institutions notified by the Central Government may initiate. Both halves of eligibility are delegated and neither has been filled in, so exposure cannot be assessed from the Act alone. Track the notifications, not the statute.

The Fifty-One Per Cent the Initiating Creditor Has to Assemble

A single notified financial creditor cannot act alone. Before it moves, it must obtain the approval of financial creditors holding at least 51 per cent in value of the debt owed to notified financial creditors of the corporate debtor. That approval is perishable. After the corporate debtor's representations have been considered, the initiating creditor must obtain the 51 per cent approval again within 30 days, failing which it must begin the approval exercise afresh.

That is a structural difference from section 7, which one financial creditor may invoke by itself. A single aggrieved lender in a consortium cannot reach for Chapter IV-A; it has to carry its peers. Borrowings spread thinly across many notified institutions are, on the face of it, harder to convert into a CIIRP than debt sitting with two or three lenders, and the arithmetic is worth mapping before a notice arrives.

The Three-Year Bar and the Bar Where a Process Is Already Running

CIIRP is unavailable where insolvency resolution or liquidation proceedings under Part II of the Code are already pending against the corporate debtor, and equally unavailable where the company has been through a CIIRP, a pre-packaged insolvency resolution process or a CIRP in the preceding three years. Traffic runs the other way as well: while a CIIRP is on foot, no CIRP or pre-packaged application may be filed or admitted against the same corporate debtor. The first process in time forecloses the others, which gives a distressed company and its lenders an incentive to move first for opposite reasons.

The Thirty-Day Notice Is the Only Pre-Commencement Window

Before initiating, the creditor must inform the corporate debtor of its intention, allow not less than 30 days for representations, and consider what the company says before returning to its fellow creditors for the second approval. That is the whole of the pre-commencement window and the only stage at which the company can influence events before a process exists.

What the Representation Should Actually Be Aimed At

The representation is addressed to creditors, not to a tribunal, which changes what belongs in it. Whether a cure period has run, whether an account has been correctly classified, whether the default is technical rather than real: each point is aimed at persuading enough of the notified creditor group to withhold approval. Because the 51 per cent must be reassembled afterwards, converting even a modest slice of that group defeats the arithmetic without any adjudication. A credible restructuring proposal does more work here than a legal argument, and so does documentary evidence of payment history and forbearance.

Objections After Commencement Under Section 58C

Once the process has commenced, section 58C gives the corporate debtor 30 days from the creditor-initiated insolvency commencement date to object before the Adjudicating Authority, which must dispose of the objection within 30 days. Where the tribunal finds that no default occurred, or that initiation contravened section 58A or section 58B, it may declare the commencement void ab initio.

The trap lies in the alternative outcome. Where a default did occur but the process was initiated in contravention of the prescribed requirements, the tribunal does not restore the status quo; it converts the CIIRP into a CIRP. A successful objection on the wrong ground therefore replaces a process in which the board stays in office with one in which its powers are suspended. Model that before drafting an objection.

Debtor in Possession Acquires Statutory Content

Section 58F leaves management of the corporate debtor vested in its board of directors or partners. The resolution professional exercises oversight: a right to attend meetings of the members, directors or partners, and a power to reject resolutions passed at those meetings in the manner to be prescribed. Promoters and personnel must furnish complete and accurate information for the information memorandum, and carry liability for loss caused by an omission or a misrepresentation.

The label debtor in possession comes from Chapter 11 of the United States Bankruptcy Code, and the idea is not wholly new here: the pre-packaged insolvency resolution process for micro, small and medium enterprises already leaves the board in place. What Chapter IV-A does for the first time is combine creditor initiation with debtor possession. Until now a company kept its board only in a process it started itself.

Is There an Automatic Moratorium on Day One?

Section 58G makes the moratorium optional. The resolution professional may apply for it with the approval of the committee of creditors or, before that committee is constituted, of financial creditors holding at least 51 per cent in value. It takes effect from the date of the application and runs for the CIIRP period, subject to confirmation by the Adjudicating Authority. Recovery suits, enforcement action and contractual termination rights are therefore not frozen by commencement itself, so a legal team should know which contracts carry insolvency-linked termination triggers, because those may bite in the interval.

CIIRP, CIRP and the Pre-Packaged Process Side by Side

The three corporate routes differ on nearly every axis that matters to a legal team.

Feature	CIIRP (Chapter IV-A)	CIRP (Chapter II)	Pre-packaged process (Chapter III-A)
Who initiates	A notified class of financial creditors, with 51 per cent approval by value	A financial creditor, an operational creditor or the corporate debtor	The corporate debtor, an MSME, with financial creditor approval
Management during the process	Board continues; the resolution professional has oversight and may reject board resolutions	Board powers suspended under section 17; the resolution professional manages	Board continues, under resolution professional oversight
Moratorium	Not automatic; the resolution professional applies to the NCLT	Automatic on admission under section 14	Applies from commencement
How it commences	Public announcement by the resolution professional, with no prior admission order	Admission order of the NCLT	Admission order of the NCLT
Outer timeline	150 days, extendable once by up to 45 days	180 days plus 90 days, with an outer limit of 330 days	120 days
Committee of creditors approval for a plan	66 per cent	66 per cent	66 per cent

When Does the One Hundred and Fifty Day Clock Start?

The CIIRP period runs from the creditor-initiated insolvency commencement date, which is the date of the resolution professional's public announcement under section 58B and not the date of any tribunal order. Completion is required within 150 days, extendable once by up to 45 days on the resolution professional's application backed by a 66 per cent vote of the committee of creditors. If no plan is approved, conversion into a CIRP follows. The outer boundary is 195 days, none of it consumed by an admission hearing, so counsel accustomed to contested section 7 proceedings in which admission alone absorbs months should recalibrate.

Why Defending a CIIRP Is Not Defending a Section 7 Petition

Under section 7 the contest happens before anything happens. In Innoventive Industries Ltd. v. ICICI Bank [(2018) 1 SCC 407] the Supreme Court held that on a financial creditor's application the Adjudicating Authority need only satisfy itself that a financial debt exists and that a default has occurred, and that the default need not be of a debt owed to the applicant creditor. The 2026 Amendment narrows the ground further, adding an explanation that once debt and default are established no other intervening or attendant circumstance may be considered, which removes the discretionary space recognised in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [(2022) 8 SCC 352]. That explanation is part of the 26 May 2026 tranche and applies to petitions filed now.

A CIIRP offers no admission hearing to lose. The process commences on a public announcement. Everything the company wants to say about the debt is said either in the 30-day representation to creditors or in a section 58C objection filed after commencement. The centre of gravity shifts from advocacy before a tribunal to persuasion of a creditor group.

What Changes in a Company's Standing Insolvency Response Plan?

Start with a lender map: which financial creditors are likely to fall within a notified class, and what proportion of the debt owed to that group each holds. Without it, nobody can say on the day a notice arrives whether the initiating creditor can reach 51 per cent.

Add an escalation rule. Any communication describing an intention to initiate insolvency proceedings must reach the general counsel on the day it arrives, because the 30-day period is the whole of the defence, and a notice that sits in a treasury inbox for a fortnight has halved the response time. Then attend to document readiness: section 58F puts promoters and personnel on the hook for omissions in the information memorandum, so the material a resolution professional will ask for should be capable of quick and accurate production rather than reconstruction under pressure.

Two Models of Control: Section 17 Displacement Against Section 58F Oversight

Under a conventional corporate insolvency resolution process, control changes hands on day one. Section 17 of the Code provides that from the appointment of the interim resolution professional the management of the affairs of the corporate debtor vests in that professional, the powers of the board or partners stand suspended and are exercised by the professional, and the officers and managers report to the professional. Section 23 carries this forward, requiring the resolution professional to conduct the process and manage the operations of the corporate debtor as a going concern.

Section 58F reverses the default. Management continues to vest in the board of directors or partners, and the resolution professional receives oversight rights instead: a right to attend meetings of the members, directors or partners, and a power to reject resolutions passed at those meetings in the manner to be prescribed. That relocates the seat of corporate decision-making without amending a line of the Companies Act, 2013.

Suspension Was Never Removal, and the Distinction Now Carries Weight

Even in a conventional process the directors are not removed. Their powers are suspended; they remain directors, remain officers for much of the Companies Act, 2013, and retain rights in the process itself. In Vijay Kumar Jain v. Standard Chartered Bank [2019 SCC OnLine SC 103] the Supreme Court held that members of the suspended board have a right to participate in every meeting of the committee of creditors and to receive the documents circulated for those meetings, including resolution plans, so that participation is meaningful.

That decision drew a line between being stripped of authority and being written out of the process. Chapter IV-A moves the line again. A board in a creditor-initiated process is not a spectator with participation rights; it manages the company, subject to rejection by someone who is not a director and owes no duty under section 166 of the Companies Act, 2013.

The Resolution Professional's Powers Have Always Been Administrative

The veto has to be read against what the Supreme Court has said about the office. In Swiss Ribbons Pvt. Ltd. v. Union of India [(2019) 4 SCC 17] the Court upheld the constitutional validity of the Code and characterised the resolution professional's powers as administrative rather than quasi-judicial, describing the professional as a facilitator with no adjudicatory power, functioning under the supervision of the committee of creditors and the Adjudicating Authority, which may replace him.

Section 58F does not disturb that characterisation so much as stretch it. For the first time the Code gives a resolution professional a power operating directly on an organ of company law, and the power is negative in form. It allows rejection of a resolution the board has passed. It does not allow the professional to pass a resolution, to direct the board to pass one, or to convene a meeting.

A Negative Power Creates a Deadlock the Statute Does Not Solve

The asymmetry matters most where the company needs a decision rather than the absence of one. Approval of financial statements, an urgent working capital facility, a borrowing resolution required by a lender: in each case rejection leaves a vacuum rather than an alternative, and no one has power to act in the board's place.

The Code's answer is indirect and blunt. Where the corporate debtor or its personnel fail to cooperate, the process converts into a full corporate insolvency resolution process, and the committee of creditors may resolve to convert by a 66 per cent vote in any event. Persistent disagreement is resolved not by adjudicating it but by removing the board: a strong incentive to compromise, and a poor substitute for a mechanism.

Void or Merely Ineffective? What a Vetoed Resolution Actually Is

Section 58F speaks of rejecting resolutions passed, in the manner to be prescribed. It does not say what a rejected resolution becomes. On one reading, rejection operates retrospectively and the resolution is void ab initio. On the other, it was validly passed and merely deprived of operative force, capable of reviving if the process is withdrawn or converted.

The difference is not academic for a counterparty who has already acted. Neither section 176 of the Companies Act, 2013, which saves acts done by a director whose appointment is later found defective, nor the indoor management rule addresses a statutory power of rejection vested in a third party, so a bank or a vendor cannot assume protection. Until the regulations resolve this, assume a rejected resolution produces no legal effect and retake any decision the company still needs.

The Veto Bites After the Resolution Is Passed, Not Before

A board resolution takes effect when passed unless it says otherwise. Because section 58F operates on resolutions passed at a meeting, the power is exercised after the fact, and a board that passes a resolution in the morning and acts on it that afternoon may find the foundation removed. The answer is a standing rule: nothing passed is implemented until the professional has confirmed a position or any prescribed period for rejection has run.

Directors' Duties Do Not Adjust Themselves to Accommodate a Veto

Nothing in Chapter IV-A modifies section 166 of the Companies Act, 2013. Section 166(2) requires a director to act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and the environment. Section 166(3) requires duties to be discharged with due and reasonable care, skill and diligence, and independent judgment to be brought to bear.

The friction is with section 166(3). A director who forms a view, records it, puts it to the meeting and is overruled has exercised independent judgment. A director who anticipates the veto and proposes only what the professional will accept has arguably surrendered it. That distinction is invisible in outcomes and visible only in the record, which is reason enough to minute the board's reasoning before any rejection is noted.

Section 66 Scrutinises Exactly the Window the Board Now Occupies

Section 166 does not name creditors among the interests a director must serve. Section 66 of the Code supplies the pressure from the other direction, and the 2026 Amendment sharpened it with effect from 26 May 2026 by inserting an express definition of fraudulent or wrongful trading, extending the power to initiate proceedings to liquidators, and letting avoidance and wrongful trading proceedings survive the conclusion of the process. A board managing a distressed company through a creditor-initiated process exercises judgment during precisely the period a later misfeasance inquiry examines.

Cooperation Is a Personal Obligation, Not a Corporate One

Section 58F places the duty to furnish complete and accurate information for the information memorandum on promoters and personnel individually, with liability for loss caused by an omission or misrepresentation. Because failure to cooperate is a conversion trigger, one director's obstruction can cost the whole board its position. Agreeing in advance who responds to the professional, within what time and with what sign-off, closes the most avoidable route to conversion.

Directors and Officers Exposure While the Board Remains in Office

Suspension has an incidental protective effect: a director stripped of authority makes few decisions capable of generating fresh liability. A director who keeps managing a distressed company generates a continuous record of decisions taken inside a formal insolvency process, and that record is the natural evidence base for avoidance proceedings under sections 43 to 51, for wrongful trading under section 66, and for section 164A on transactions defrauding creditors, which has been in force since 26 May 2026.

What to Test in the Policy Before the Process Begins

Insolvency-related exclusions in Indian directors and officers policies are usually drafted around a conventional insolvency resolution process or a winding up. Whether they respond where the board remains in office under a creditor-initiated process is a wording question to settle with the insurer in advance.

Side A cover, which responds where the company cannot indemnify, matters more than usual, because a company under creditor oversight may be unwilling to fund a director's defence. More particular to Chapter IV-A: a resolution authorising indemnity or advance of defence costs is itself a board resolution, and so itself capable of rejection. A board assuming it can vote itself defence funding after a dispute arises has not read section 58F closely enough.

Running Board Meetings While a Resolution Professional Holds a Veto

Section 173(3) of the Companies Act, 2013 requires not less than seven days' notice in writing of a board meeting to every director. The professional is not a director, so the Companies Act confers no notice right, and section 58F confers only a right to attend. Close the gap deliberately: serve the professional with the same notice, agenda and board papers as the directors, at the same time, and record that this was done.

Quorum, Voting and the Minute Book

Attendance does not make the professional part of the board. The quorum in section 174, one-third of the total strength or two directors, whichever is higher, is unaffected by the professional's presence, and the professional has no vote. Minutes under section 118 must be entered within thirty days and contain a fair and correct summary of proceedings, which raises a drafting question the Companies Act never anticipated.

Rejection is not a Companies Act concept, so the minute book needs a convention. Minute the resolution as passed, with the board's reasons, then record the professional's rejection, its date and any reasons given, as a separate later entry rather than as an amendment to the original. The sequence stays auditable, and a later inquiry can see what the board decided as distinct from what survived.

Committees of the Board Sit in an Unresolved Space

Section 58F refers to meetings of the members, directors or partners. An audit committee under section 177 or a nomination and remuneration committee under section 178 meets as a committee, not as the board, and whether a rejection reaches a committee resolution is not answered by the text. For a listed company the point has teeth, because the audit committee approves related party transactions in its own right.

Two responses reduce the risk without waiting for clarification: give the professional notice of committee meetings as for board meetings, and route material committee decisions through the board for ratification, which brings them within section 58F on any reading.

Comparing the Two Governance Models

The contrast is sharpest set out side by side.

Governance question	CIRP (sections 17 and 23)	CIIRP (section 58F)
Board powers	Suspended from the appointment of the interim resolution professional	Continue to vest in the board of directors or partners
Who manages the company	The interim resolution professional, then the resolution professional	The board of directors or partners
Resolution professional at board meetings	No functioning board to attend	Right to attend meetings of members, directors or partners
Power over board decisions	The professional takes the decisions	May reject resolutions passed, in the manner prescribed
Directors' position in the process	Notice of and participation in every meeting of the committee of creditors, with access to resolution plans	In office and managing, with the professional attending
Duties under section 166 of the Companies Act, 2013	Continue, though the powers are suspended	Continue, and are exercised actively

Frequently Asked Questions

Can a CIIRP be initiated against any company today?

No. Most of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 came into force on 26 May 2026 under notification S.O. 2625(E), but Chapter IV-A was excluded from that tranche and remains unnotified. Two further notifications are needed even after it commences: one specifying the categories of corporate debtors against whom a CIIRP may be brought, and one specifying the classes of financial institutions that may bring it.

Does the board stay in office during a CIIRP?

Yes. Section 58F leaves management vested in the board of directors or partners. The resolution professional has oversight, may attend meetings of members and directors, and may reject resolutions passed at those meetings in the prescribed manner. That is the reverse of a CIRP, where section 17 suspends the board's powers.

Is there a moratorium as soon as a CIIRP begins?

No. Section 58G makes the moratorium optional. The resolution professional must apply for it, with the approval of the committee of creditors or, before that committee exists, of financial creditors holding at least 51 per cent in value. It runs from the date of the application, subject to confirmation by the Adjudicating Authority. Assume litigation and enforcement against your company continue until then.

What can a company do in the thirty days before initiation?

The initiating creditor must tell you of its intention and give at least 30 days for representations, then re-obtain approval from creditors holding 51 per cent in value within 30 days. Your representation is aimed at that arithmetic rather than at a tribunal, so disputing the debt, showing that a cure period has not expired, or offering a workable restructuring proposal all serve one purpose: persuading enough of the notified group to withhold approval.

Can a CIIRP turn into a full CIRP?

Yes, in several ways. Conversion is mandatory if no resolution plan is approved in time, if the corporate debtor or its personnel fail to cooperate with the resolution professional, or if the Adjudicating Authority rejects the plan. The committee of creditors may also resolve to convert by a 66 per cent vote, and the tribunal may convert on an objection where a default occurred but the process was wrongly initiated. On conversion the CIIRP is deemed admitted as an application under section 7.

How long does a CIIRP run?

It must be completed within 150 days of the creditor-initiated insolvency commencement date, with one extension of up to 45 days granted by the Adjudicating Authority on the resolution professional's application with 66 per cent committee approval. The outer limit is 195 days, against 330 days for a CIRP.

Does recent insolvency history protect a company?

For three years, yes. A CIIRP cannot be initiated if the company has undergone a CIIRP, a pre-packaged insolvency resolution process or a CIRP within the preceding three years, or if proceedings under Part II of the Code are already pending. Once a CIIRP is running, no CIRP or pre-packaged application may be filed or admitted against the same company.

Does the resolution professional replace the board in a creditor-initiated process?

No. Section 58F leaves management vested in the board of directors or partners. The professional may attend meetings of members, directors or partners and may reject resolutions passed there. That is the opposite of section 17, under which board powers are suspended and the professional manages the company. Chapter IV-A was excluded from the 26 May 2026 commencement notification, so this remains prospective.

Can the resolution professional force the board to pass a resolution?

No. The power is negative. It allows rejection of a resolution the board has passed; it does not allow the professional to pass one, compel one, or convene a meeting. Where a board will not act, the practical remedy is conversion into a full insolvency resolution process, which the committee of creditors can drive by a 66 per cent vote and which follows in any event from a failure to cooperate.

Do directors' duties under section 166 of the Companies Act continue?

Yes, unchanged. Directors must act in good faith in the best interests of the company and exercise independent judgment with due and reasonable care, skill and diligence. A veto does not lower the standard, so record the board's own reasoning at the meeting rather than shaping proposals around what the professional is expected to accept.

Is a vetoed board resolution void, or merely ineffective?

The provision does not say, and the point awaits the regulations. It may be treated as never having had effect, or as validly passed but inoperative, and the readings produce different outcomes for a counterparty who has already acted. Until settled, treat a rejected resolution as producing no legal effect and retake the decision if the company still needs it.

Does the veto reach audit committee decisions?

Unclear. Section 58F speaks of meetings of members, directors or partners, and a committee meeting is none of those on a literal reading. The safer approach is to give the professional notice of committee meetings and bring material committee decisions to the board for noting or ratification, placing them within the section on any construction.

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 matters under the Insolvency and Bankruptcy Code, 2016 and its 2026 amendments, and represents parties in domestic and international commercial arbitrations seated in India and abroad.

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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.