Quick answer: The creditor-initiated insolvency resolution process (CIIRP) lets notified financial creditors start insolvency out of court, with 51% creditor approval, while the board stays in charge. Parliament added it as Chapter IV-A of the IBC in 2026. However, as of late October 2026, the government has not notified it, so banks cannot use it yet.
The creditor-initiated insolvency resolution process is the biggest new tool the IBC (Amendment) Act, 2026 offers banks and NBFCs. It promises speed: no NCLT admission hearing, a 150-day timeline and a debtor-in-possession model. Yet many lenders still ask one question first. Can we use it today? This guide answers that and explains how the process will work.
Is the Creditor-Initiated Insolvency Resolution Process in Force?
No, not yet. The Act received Presidential assent on 6 April 2026. Later, the Ministry of Corporate Affairs issued S.O. 2625(E) dated 22 May 2026. That notification brought most of the Act into force from 26 May 2026. However, its list skips Section 40, which inserts Chapter IV-A (Sections 58A to 58K).
Some early news reports claimed the CIIRP became operational on 26 May. The notification text does not support that claim. In addition, the government has not yet notified the eligible classes of corporate debtors or financial institutions. The IBBI has also not finalised its CIIRP Regulations; it only issued a discussion paper, with comments closing on 28 April 2026.
So, for now, lenders must rely on a Section 7 IBC application, SARFAESI enforcement or RBI-framework restructuring.
How the CIIRP Will Work for Banks and NBFCs
Once notified, the process will follow the steps Parliament wrote into Sections 58A to 58K:
- Eligibility (Section 58A): Only a notified class of financial institutions can start it, and only against a notified category of corporate debtor. The route stays closed if the company faced a CIRP, pre-pack or CIIRP in the previous three years.
- Two approvals (Section 58B): Creditors holding at least 51% of the class’s debt must approve. The debtor then gets at least 30 days to respond. After that, creditors need a fresh 51% approval to proceed.
- Out-of-court start: The lenders appoint a resolution professional. The process begins on the date of the RP’s public announcement, and no Section 7, 9 or 10 application can follow.
- Debtor’s objection (Section 58C): The company may object before the NCLT within 30 days. The tribunal must decide within 30 days.
- Management stays (Section 58F): The board keeps running the company. However, the RP attends board meetings and can reject resolutions.
- No automatic moratorium (Section 58G): Instead, the RP must apply to the NCLT, which may grant or refuse it.
Key Case Law Behind the CIIRP Design
No court has yet ruled on Chapter IV-A. Still, three Supreme Court decisions shape how tribunals will likely read it.
First, in Swiss Ribbons v. Union of India (January 2019), the Court upheld the IBC and accepted its creditor-in-control logic. It also approved the 90% threshold for withdrawal, which the CIIRP now copies in Section 58I.
Second, in K. Sashidhar v. Indian Overseas Bank (2019), the Court held that tribunals cannot second-guess the CoC’s commercial decisions on a plan. Similarly, CoC of Essar Steel v. Satish Kumar Gupta (2020) 8 SCC 531 confirmed that commercial wisdom covers how creditors share proceeds. Therefore, a CIIRP plan approved by 66% of the CoC should get the same deference.
Practical CIIRP Timeline Checklist
The IBBI’s draft regulations propose a model timeline from commencement (T):
- T+7: creditors file claims.
- T+14: the RP verifies claims.
- T+19: the first CoC meeting takes place.
- T+45: the RP shares the information memorandum.
- T+50: the RP invites expressions of interest.
- T+90: applicants submit resolution plans.
- T+120: the CoC considers the plans.
- T+150: the NCLT approves the plan; the CoC may extend once by 45 days with 66% votes.
Meanwhile, banks can prepare now. Update information utility default records, map co-lenders’ exposure, and agree on an RP panel in advance.
FAQs on the Creditor-Initiated Insolvency Resolution Process
What is the creditor-initiated insolvency resolution process?
It is an out-of-court insolvency route under Chapter IV-A of the IBC. Notified financial creditors start it, and the company’s board stays in control under RP oversight.
Is CIIRP in force in India?
No. The 22 May 2026 commencement notification left out Section 40, and the eligibility notifications and IBBI regulations are still pending.
Who can initiate CIIRP?
Only financial creditors in a class the Central Government notifies can initiate it. Operational creditors cannot use this route.
How long does CIIRP take?
The law sets 150 days from commencement. The CoC can extend it once by up to 45 days with 66% of votes.
Does a moratorium apply automatically in CIIRP?
No. The RP must apply to the NCLT for a moratorium, and the tribunal decides whether one is needed.
Can CIIRP convert into a regular CIRP?
Yes. It converts if the CoC votes 66% for it, no plan arrives, the debtor fails to cooperate or the plan fails.
Lex Pleaders advises banks, NBFCs and businesses on insolvency strategy, Section 7 petitions and the new creditor-initiated insolvency resolution process. See our IBC and NCLT services. Write to us at lexpleadersindia@gmail.com to discuss your matter.
Disclaimer: This article offers general information only and does not constitute legal advice.
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