Part II of the Code has assumed a centrality in the overall IBC scheme for the primary reason that its counterpart, Part III, has not been notified for all categories of individuals till date and is restricted in its application to the personal guarantors of the corporate debtors. In the present form of the Code, even Part III serves the purpose of Part II, i.e., resolution of corporate insolvency by resolving that of the personal guarantors.
Part II of the Code has eight chapters. Chapter I lays down the pecuniary limit for application of Part II and defines another set of words besides Part I.
There are five processes for resolving insolvency of corporate persons, which are discussed in:
a. Chapter II (Corporate Insolvency Resolution Process);
b. Chapter IIIA (Pre-Packaged Insolvency Resolution Process);
c. Chapter IV (Fast Track Corporate Insolvency Resolution Process);
d. Chapter III (Liquidation Process); and,
e. Chapter V (Voluntary Liquidation of Corporate Persons).
The author has deliberately arranged the five chapters in that order to indicate the flow of processes in practical application.
One of three processes in chapters II, IIIA and IV can be initiated against a corporate debtor (“CD”) at a time. If Corporate Insolvency Resolution Process (“CIRP”) succeeds, the insolvency is resolved and process is followed by implementation of the Resolution Plan under the supervision of the Monitoring Committee. Upon the failure of the process for any reason, Liquidation Process under chapter III is initiated at the order of the Adjudicating Authority.
The outcome of Pre-Packaged Insolvency Resolution Process (“PPIRP”) could be successful resolution and implementation of the resolution plan or the termination of the process. The ground for termination could be as provided under the Code . In a specific circumstance , where the ground is non-approval
Section 33, IBC, 2016.
Section 54N, IBC, 2016.
Section 54N(4), IBC, 2016.
of resolution plan or non-approval of resolution plan within the time limit even after vesting of management of the CD in the resolution professional , an order of liquidation shall be passed by the Adjudicating Authority. A PPIRP can be terminated before approval of the resolution plan and a CIRP can be initiated against the CD at the instance of the committee of creditors.
The Fast Track Corporate Insolvency Resolution Process (“Fast Track”) is a miniature form of CIRP. Though provisions of CIRP apply to this process as well , the applicability of the process is restricted to a small group of companies and the timeline is reduced to 90 days .
Liquidation is a natural consequence of failure of the above mentioned three processes, as the case might be. Whether liquidation is an equally valid mode of resolution is a debate which gained significant traction after Dr. M.S. Sahoo termed resolution as the “objective of IBC” and liquidation as the “anti-thesis of resolution” . Yet, the propensity of the insolvency ecosystem for liquidation has by no means diminished – more than 42% of all concluded CIRPs were closed by commencement of liquidation in the last three years, consistently across all quarters. Based on the data from the same time-period, the author has calculated the ratio of the CIRPs ‘closed by commencement of liquidation’ to those ‘closed by approval of resolution plan’. The following graph plots linear and non-linear trend of the ratio. Though the non-linear trend predicts that the ratio would hover around 2.1, by a linear trend, the ratio would reach 1.00 in Q1 2029:
Section 54N(1)(a), IBC, 2016.
Section 54N(1)(b), IBC, 2016.
Section 54J(2), IBC, 2016.
Section 57, IBC, 2016.
Section 55(2), IBC, 2016 and Notification No. S.O. 1911(E) dated 14.06.2017
Section 56(1), IBC, 2016.
Objective of IBC is resolution, not liquidation, says IBBI chief MS Sahoo, URL:https://www.business-standard.com/article/companies/objective-of-ibc-is-resolution-not-liquidation-says-ibbi-chief-ms-sahoo-118060900923_1.html
Liquidation is anti-thesis of resolution, says IBBI chief, URL:https://www.livemint.com/Companies/t2gs9RlCUIk3FNztUIySwK/Liquidation-is-antithesis-of-resolution-says-IBBI-chief.html
Quarterly reports for 2023, 2024 and 2025.
Liquidation is initiated under the order of the Adjudicating Authority. A liquidator is appointed thereafter. Voluntary Liquidation of Corporate Persons is unconnected with the other chapters in this Part.
Avoidance provisions of insolvency law permit transactions for the transfer of assets or the undertaking of obligations before insolvency proceedings to be cancelled or otherwise rendered ineffective and any assets transferred, or their value, to be recovered in the collective interest of creditors. At the heart of avoidance provisions is the doctrine of unjust enrichment. The Code recognizes Avoidance Transactions and Fraudulent Trading in Sections 43, 45, 50 and, Section 66 respectively. These provisions and others connected are spread across different chapters – Chapters II, III and VI – and are applicable to all the five processes in Part II.
Chapter VI lays down the jurisdiction of the National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT), and the Supreme Court. Chapter VII is summarized below as a table:
Section 33, IBC, 2016.
Section 34, IBC, 2016.
Recommendation 87, Consolidated List of Legislative Recommendations, UNCITRAL Legislative Guide on Insolvency Law.
The two terms have been distinguished by the Hon’ble Supreme Court in Piramal Capital and Housing Finance Ltd. v. 63 Moons Technologies Ltd., 2025 SCC OnLine SC 690.