"Pre-pack resolution plans are likely to facilitate adherence to the timelines prescribed under the IB Code", says Sonam Chandwani, Managing Partner, KS Legal & Associates

With the Indian economy currently grappling with mounting non-performing assets (NPA) and creditors including banks, financial institutions and other lenders are left high and dry with sluggish recoveries, pre-packs across jurisdictions are known to plug this wide recovery gap. In fact, pre-pack resolution plans are likely to facilitate adherence to the timelines prescribed under the IB Code. With the increase in threshold to 1 crore, numerous operational creditors especially MSMEs were deprived of remedies under the Code. However, the recent introduction of the pre-packaged insolvency framework is likely to support MSMEs – a major contributor to our GDP and employer to a sizeable Indian population. MSMEs have suffered the most during the pandemic and placing a strict timeline of 120 days on the pre-pack model is likely to soothe the distressed MSMEs. Additionally, the Ordinance is likely to provide a cost-effective and faster resolution process for MSMEs under the debtor in possession model, unlike the normal CIRP where it is RP in possession.