Overview of Fast Track Corporate Insolvency Resolution Process (Fast Track CIRP)

The Insolvency and Bankruptcy Code, 2016 (IBC) is a new-generation legislation introduced with the objective of providing a time-bound, effective mechanism for the resolution of insolvency and bankruptcy of corporate persons, partnership firms, and individuals. One of its key features is the Fast Track Corporate Insolvency Resolution Process (Fast Track CIRP), which aims to provide a speedy and efficient revival mechanism for certain eligible corporate debtors. It addresses the need for quicker resolution, particularly for small businesses, startups, and other specified categories of companies.
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Statutory Basis and Introduction:
The Fast Track CIRP is governed by Chapter IV of Part II of the IBC, encompassing Sections 55 to 58. These provisions were notified by the Ministry of Corporate Affairs (MCA) vide notification dated 14th June, 2017. As per Section 55, a corporate insolvency resolution process carried out under this Chapter is known as a Fast Track Corporate Insolvency Resolution Process.
The aim of this process is to conclude the CIRP within a shorter timeline of 90 days, in comparison to the standard 180 days under regular CIRP, thereby saving time and cost, and enabling quicker resolution for suitable cases.
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Eligibility Criteria:
The application for Fast Track CIRP can only be made in respect of certain categories of corporate debtors, which include:
1. Small companies as defined under Section 2(85) of the Companies Act, 2013.
2. Startups (other than partnership firms) as defined in the notification issued by the Ministry of Commerce and Industry, Government of India, dated 23rd May, 2017, which states that an entity shall be considered a startup if:
o It is incorporated as a private limited company, registered partnership firm, or limited liability partnership (LLP) in India;
o Its period of existence is up to ten years from the date of incorporation/registration;
o Its turnover has not exceeded ₹100 crores in any financial year since incorporation;
o It is working towards innovation, development or improvement of products or services, or it has a scalable business model capable of employment generation or wealth creation;
o However, any entity formed by splitting up or reconstruction of an existing business is not considered a startup.
3. Unlisted companies with total assets not exceeding ₹1 crore, as per the financial statement of the immediately preceding financial year.
4. Corporate debtors with such class of creditors, amount of debt, or other specified categories as may be notified by the Central Government.
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Initiation of Fast Track CIRP:
As per Section 57 of the IBC, the manner of initiating a Fast Track CIRP is similar to the regular process. It can be initiated by either a creditor or the corporate debtor itself. The application must be accompanied by:
● Proof of the existence of default, as evidenced by records with an Information Utility or through such other means as may be specified by the Insolvency and Bankruptcy Board of India (IBBI);
● Any additional information required to establish that the corporate debtor is eligible for fast track CIRP.
The person initiating the process bears the onus of proving that the case is fit for Fast Track CIRP, and must support the application with relevant documentation and evidence.
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Time Period for Completion of Fast Track CIRP:
One of the most significant features of Fast Track CIRP is its strict time-bound nature, aimed at increasing efficiency in resolving insolvency.
1. Initial Time Period – 90 Days:
As per Section 56(1), the Fast Track CIRP must be completed within 90 days from the Insolvency Commencement Date. This is a significant reduction from the standard 180-day time limit under regular CIRP.
2. Extension of Time – One-Time Extension of 45 Days:
Under Section 56(2), if the Resolution Professional (RP) believes that the process cannot be completed within the prescribed 90 days, he/she may apply to the Adjudicating Authority (NCLT) for an extension. However, this can only be done if the Committee of Creditors (CoC) passes a resolution instructing the RP to do so, supported by a 75% vote of the voting share.
3. Discretion of Adjudicating Authority:
As per Section 56(3), on receiving such an application, the Adjudicating Authority may extend the duration of the process by a further period not exceeding 45 days, only if it is satisfied that the subject matter of the case cannot be resolved within the original time period.
4. Single Extension Only:
It is important to note that no further extension can be granted beyond the initial one-time extension, i.e., the maximum possible time available for completing Fast Track CIRP is 135 days (90 + 45 days).