Module: General Practice
Q97: Scenario: "Delta Fabrication," a registered Small Enterprise, has defaulted on a loan repayment of Rupees 40 Lakh to its creditor bank. The default has persisted for 5 months. The promoter wants to resolve this insolvency while retaining management control.
Question: Which resolution route is most appropriate and legally available for Delta Fabrication under the IBC framework?
✅ Correct Answer: B
Based on the analysis of the scenario, the entity is an MSME (Small Enterprise) with a default amount of Rupees 40 Lakh.
The legal threshold for initiating a Pre-Packaged Insolvency Resolution Process (PPIRP) is a minimum default of Rupees 10 Lakh, and it is available for defaults up to Rupees 1 Crore.
Since the default falls within this range (Rupees 40 Lakh), and the promoter's specific goal is to "retain management control," PPIRP is the ideal route.
PPIRP is a "Debtor-in-Possession" model, which allows the existing management to continue running the company while submitting a resolution plan.
In contrast, the standard CIRP is a "Creditor-in-Control" model where the promoter loses control to a Resolution Professional.
The legal threshold for initiating a Pre-Packaged Insolvency Resolution Process (PPIRP) is a minimum default of Rupees 10 Lakh, and it is available for defaults up to Rupees 1 Crore.
Since the default falls within this range (Rupees 40 Lakh), and the promoter's specific goal is to "retain management control," PPIRP is the ideal route.
PPIRP is a "Debtor-in-Possession" model, which allows the existing management to continue running the company while submitting a resolution plan.
In contrast, the standard CIRP is a "Creditor-in-Control" model where the promoter loses control to a Resolution Professional.