Chapter XIX - Revival and Rehabilitation of Sick Companies

Current legal status

Chapter XIX exists only as an omitted chapter heading

Sections 253 to 269 are not operative provisions. They were omitted by section 255 and the Eleventh Schedule to the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016. A professional note must therefore begin with the omission, not with the historical sickness test.

CHAPTER XIX - REVIVAL AND REHABILITATION OF SICK COMPANIES Sections 253 to 269 - OMITTED with effect from 15 November 2016.

Do not apply

Do not file a sickness determination, seek an interim administrator or draft a rehabilitation scheme under these omitted sections.

Use current law

Test the IBC, section 230, regulatory restructuring, contractual workouts, liquidation and winding-up routes on their own conditions.

Keep historical context

The old architecture remains useful for examinations and for understanding why India moved to a creditor-led, default-based framework.

Red flag: any advice that cites section 253 as a current trigger for declaring a company sick is legally outdated.

Legislative migration

How the rehabilitation function moved to the IBC

Companies Act, 2013 designed Chapter XIX

The chapter contemplated determination of sickness, administrators, a committee of creditors, a rehabilitation scheme and eventual winding up if revival failed.

Provisions never became the durable operating regime

The intended model overlapped with the wider policy shift toward a consolidated insolvency code.

IBC section 255 amended the Companies Act

The Eleventh Schedule expressly omitted sections 253 to 269 and reworked the winding-up boundary.

Current focus is default and resolution

The IBC uses a collective creditor process, moratorium, insolvency professionals, a committee of creditors, resolution plans and liquidation as the fallback.

Professional memory: "sick company" is historical language for this chapter. Current analysis starts with default, viability, route eligibility and value maximisation.

Section map

Sections 253-269: exact operative position

Section	Original subject	Status	Current legal translation
253	Determination of sickness	Omitted	Current decision point is default/financial stress under applicable law, not a Companies Act sickness declaration.
254	Application for revival and rehabilitation	Omitted	Use the eligible IBC or Companies Act section 230 route.
255	Exclusion of certain time in limitation	Omitted	Limitation is assessed under the Limitation Act and current IBC jurisprudence.
256	Appointment of interim administrator	Omitted	IBC uses an IRP/RP; appointment rules arise under the Code and regulations.
257	Committee of creditors	Omitted	The operative CoC is constituted under the IBC.
258	Order of Tribunal	Omitted	NCLT orders arise under the chosen current process.
259	Appointment of administrator	Omitted	Current appointments include IRP, RP, liquidator or scheme chairperson, depending on route.
260	Powers and duties of company administrator	Omitted	Current powers are route-specific and cannot be borrowed from an omitted section.
261	Scheme of revival and rehabilitation	Omitted	Resolution plan, PPIRP base plan or section 230 scheme may perform the rescue function.
262	Sanction of scheme	Omitted	Plan approval is under IBC section 31; a Companies Act scheme is sanctioned under section 230.
263	Scheme to be binding	Omitted	Binding effect comes from the operative approval provision.
264	Implementation of scheme	Omitted	Implementation must be monitored under the approved plan/scheme and its legal framework.
265	Winding up on administrator report	Omitted	IBC liquidation or Companies Act winding up applies on its own grounds.
266	Damages against delinquent directors	Omitted	Current avoidance, fraudulent/wrongful trading and Companies Act liability provisions apply.
267	Punishment for certain offences	Omitted	Use current offence and penalty provisions.
268	Bar of jurisdiction	Omitted	Jurisdiction follows current NCLT/IBC and statutory provisions.
269	Rehabilitation and Insolvency Fund	Omitted	IBC section 224 contains the Insolvency and Bankruptcy Fund framework.

Archival framework I

Sections 253-255 - sickness, application and limitation

These provisions are studied only as legislative history. Their original policy idea was to identify financial sickness and move the company into a tribunal-supervised rehabilitation path.

253 - sickness

Historical concept: determine whether the company had failed to meet creditor demand and required revival examination.

254 - application

Historical concept: specified stakeholders could seek revival and rehabilitation before the Tribunal.

255 - limitation

Historical concept: exclude specified periods while computing limitation.

Why this matters now: none of these titles creates a present filing right. Limitation for an IBC application is tested under the current Code, the Limitation Act and binding jurisprudence. A balance-sheet acknowledgement, one-time settlement, recovery proceeding or decree may affect limitation only under the applicable legal rules and facts.

Example: a lender cannot revive a time-barred claim by calling the borrower a "sick company" under section 253. It must establish a legally enforceable default and limitation position under current law.

Archival framework II

Sections 256-260 - administrator and creditor architecture

The omitted model envisaged an interim administrator, creditor participation, a Tribunal order, a company administrator and defined powers. The current IBC has superficially similar roles but they are not interchangeable.

Historical role	Current closest analogue	Critical difference
Interim administrator	Interim resolution professional	The IRP derives authority from the IBC admission order and the Code; management powers and duties follow current provisions.
Committee of creditors	IBC committee of creditors	Constitution, voting share, related-party exclusion and decision thresholds arise under the IBC.
Company administrator	Resolution professional	An RP is an insolvency professional regulated by IBBI and acts within the Code, regulations and CoC decisions.
Tribunal rehabilitation order	NCLT orders under IBC or section 230	Jurisdiction and relief depend on the route actually invoked.

Do not transplant powers: an RP cannot claim a power merely because an omitted company administrator once had an analogous power.

Archival framework III

Sections 261-265 - scheme, sanction, implementation and failure

Historical rescue chain

Prepare scheme -> obtain sanction -> make it binding -> implement -> recommend winding up if revival fails.

Current rescue chain

Select route -> satisfy eligibility -> obtain required creditor/member approvals -> secure NCLT or statutory approval -> implement under monitored milestones.

Old concept	Current route performing similar function	Approval source
Rehabilitation scheme	CIRP resolution plan	CoC approval and NCLT approval under sections 30 and 31
Rehabilitation scheme	PPIRP base/competing plan	CoC and NCLT under Chapter III-A
Compromise with classes	Section 230 scheme	Class approval and NCLT sanction
Failure leading to winding up	IBC liquidation	Section 33 order and liquidation framework
Solvent closure	Voluntary liquidation	IBC section 59 and regulations

Implementation discipline: a rescue is not complete when the order is passed. Funding, security release, equity issuance, regulatory approvals, employee treatment, tax effects and monitoring must be tracked to closure.

Archival framework IV

Sections 266-269 - misconduct, offences, jurisdiction and fund

Omission did not create an accountability vacuum. Misconduct is now addressed through multiple operative provisions.

Avoidance transactions

Preference, undervalue, extortionate credit and transactions defrauding creditors are examined under the IBC framework.

Fraudulent or wrongful trading

Contribution and liability consequences may arise where business was carried on improperly or directors failed their duties.

Companies Act exposure

Fraud, false statements, breach of duty, related-party violations and record failures remain separately actionable.

Regulatory discipline

Insolvency professionals, valuers and other service providers are subject to registration and disciplinary frameworks.

Key principle: rescue law protects enterprise value, not misconduct. A resolution plan does not automatically immunise every individual responsible for prior wrongdoing.

Decision architecture

The modern rescue route should be selected before papers are drafted

Viable but stressed

Turnaround, fresh capital, covenant reset, asset sale or consensual restructuring may preserve control and avoid formal insolvency.

Collective binding needed

Section 230, PPIRP or CIRP may be required where dissenting classes, enforcement pressure or a moratorium problem cannot be solved consensually.

No credible rescue

Early sale, liquidation or winding-up analysis may protect value better than an underfunded rescue that deepens losses.

Early warning

A board should act before cash exhaustion

Indicator	What it may signal	Evidence/control
Repeated overdue creditors	Structural liquidity gap	13-week cash-flow forecast and ageing reconciliation
Interest servicing from new borrowing	Debt spiral	Sources-and-uses analysis and covenant forecast
GST, TDS, PF or wages delayed	Cash diversion and director exposure	Statutory dues dashboard with owner and due date
Receivables rising faster than sales	Quality-of-revenue or collection issue	Customer-level ageing and dispute map
Inventory or project WIP build-up	Obsolescence, execution delay or inflated assets	Independent physical and NRV review
Auditor going-concern emphasis	Material uncertainty	Board-approved viability and funding plan
Frequent cheque returns or account freezes	Acute payment stress	Daily liquidity and banking-control review
Promoter-related cash movements	Potential preference or value leakage	Related-party transaction register and legal review

Good governance response: convene the board, record facts without cosmetic language, preserve data, obtain independent advice, stop non-essential leakage and compare enterprise value under realistic alternatives.

Board and officer duties

Distress increases the need for disciplined decision-making

Information

Directors need reliable cash flow, debt, security, litigation, tax, employee, guarantee and related-party data.

Purpose

Decisions should preserve value for the company and its stakeholders, not merely delay an inevitable filing or favour insiders.

Records

Minutes should record alternatives, assumptions, dissent, conflicts, professional advice and reasons for the selected route.

Transactions

Extraordinary repayments, asset transfers, new security and promoter dealings require heightened review.

Director protection is evidence-based: a later tribunal will see contemporaneous board material, not the explanations prepared after collapse.

Consensual restructuring

Out-of-court rescue can be fastest, but it does not bind non-consenting parties

A consensual workout may include maturity extension, interest reset, standstill, additional security, equity infusion, debt conversion, asset monetisation, change in control or covenant waiver.

Strength	Limitation
Lower cost and business disruption	Requires sufficient creditor alignment
Management ordinarily remains in control	No statutory moratorium against all enforcement
Flexible commercial terms	Dissenting or non-participating creditors remain outside the deal
Can be completed before formal default	Regulatory, tax, securities and related-party rules still apply
Can preserve supplier/customer confidence	Weak information or unequal treatment may derail consent

Example: three banks holding 92% of secured debt agree to extend maturities, but a trade creditor obtains a decree and threatens attachment. The contractual workout may need a section 230 or IBC solution if the enforcement risk cannot be contained.

Section 230 rescue

A Companies Act scheme remains a powerful restructuring tool

Section 230 may be used for compromise or arrangement with creditors or members, including debt restructuring and capital reorganisation. It can bind a class after the statutory vote and NCLT sanction.

Best use

Complex class restructuring, debt/equity conversion, compromise with creditors or a broader corporate reorganisation.

Voting

Majority in number representing three-fourths in value of those voting in the relevant class, followed by Tribunal sanction.

Protection

Regulator notice, class analysis, valuation, disclosures, accounting certificate and creditor safeguards.

Limitation

No automatic IBC-style moratorium merely because scheme discussions or an application exist.

Route boundary: a section 230 scheme during liquidation or an insolvency process must be structured consistently with the IBC, the liquidator's authority and binding jurisprudence.

IBC gateway

Current CIRP begins with default, eligibility and an NCLT application

Threshold

The generally notified minimum default for Part II CIRP is Rs. 1 crore.

Applicants

Financial creditor, operational creditor or corporate applicant under sections 7, 9 and 10.

Forum

NCLT bench having territorial jurisdiction over the registered office.

Purpose

Resolution and value maximisation; liquidation is the statutory fallback, not the first commercial objective.

Not a recovery substitute: the IBC is not designed merely to pressure payment of a genuinely disputed claim. Malicious or fraudulent initiation carries risk.

Section 7

Financial-creditor initiation

A financial creditor may apply alone, jointly or through an authorised mechanism after a financial debt has defaulted. The application must prove debt and default and satisfy filing requirements.

Control point	Professional test
Nature of debt	Disbursement against consideration for time value of money or another statutory limb of financial debt
Default evidence	Information utility record, account statements, facility documents, acknowledgements and enforcement history
Limitation	Date of default, acknowledgements, settlement documents and prior proceedings
Security	Security is relevant commercially but is not necessary for every financial debt
Class applicants	Homebuyers and specified security/deposit-holder classes are subject to collective filing thresholds
Completeness	Correct form, proposed professional and supporting evidence

Stress test: an unsigned spreadsheet showing dues is not a substitute for a coherent debt-and-default record. Reconcile sanction, disbursement, repayment, interest, restructuring and default dates.

Sections 8 and 9

Operational-creditor initiation

Demand notice

The operational creditor serves the prescribed demand notice or invoice demanding payment.

Ten-day response window

The corporate debtor may show payment or bring an existing dispute to notice.

Section 9 application

If statutory conditions are met, the creditor may apply to NCLT.

Pre-existing dispute screen

A genuine dispute existing before receipt of demand notice can defeat admission; a manufactured defence may not.

Evidence file: contract, purchase order, delivery/acceptance, invoice, tax record, correspondence, debit notes, quality disputes, reconciliation, demand notice and proof of service.

Section 10

Corporate-applicant initiation

A corporate debtor may initiate its own CIRP through a corporate applicant, subject to statutory eligibility and approvals.

Board/shareholder authority

Confirm the required corporate approval, authorisation and filing responsibility.

True default

The filing should be based on an actual default, not a device to defeat a particular stakeholder.

Books and affairs

Prepare reliable financial statements, creditor list, security map, litigation and asset records.

Funding and continuity

Plan insolvency costs, key employees, utilities, insurance, critical suppliers and going-concern operations.

2026 change note: the 2026 Amendment Act revised filing information and admission mechanics for sections 7, 9 and 10. Use the current forms and regulations rather than an old checklist.

Admission consequences

Moratorium, public announcement and management shift

Consequence	Operational meaning
Moratorium	Specified suits, enforcement, security enforcement and asset recovery actions are stayed, subject to the Code and exceptions.
Public announcement	Creditors are invited to submit claims and the process becomes public.
IRP appointment	The interim professional takes statutory control functions.
Board powers suspended	Management powers are exercised by the IRP/RP during ordinary CIRP.
Going concern	Operations should be preserved and critical supplies managed under the Code.
Banking controls	Authorised signatories and cash-management processes change.

Day-one risk: unmanaged payroll, insurance, cyber access, licences, inventory custody and key-customer communication can destroy value before the first CoC meeting.

Claims and committee

IRP/RP must build a reliable creditor and voting record

Receive and verify

Claims are submitted in prescribed forms and verified against the corporate debtor's books and other evidence.

Determine value where needed

Contingent, unliquidated or disputed claims require reasoned treatment under the regulations.

Update

Claims and voting shares may change as evidence emerges; the list must be maintained transparently.

The 2026 amendments expressly strengthened the statutory basis for claim verification and value determination and aligned later liquidation claim handling to reduce duplication.

Control file: claimant identity, basis, principal, interest, security, related-party status, supporting documents, admission/rejection reasons and communication date.

CoC governance

Commercial wisdom requires process integrity

Decision	Indicative voting control
Approve resolution plan	At least 66% voting share
Replace resolution professional	Statutory CoC threshold and NCLT process
Approve specified major actions	At least 66% under section 28
Withdraw admitted process	90% voting share under section 12A framework
Liquidation decision	At least 66% voting share, subject to current law
Extend CIRP	At least 66% and NCLT approval within statutory framework

Voting share is generally linked to admitted financial debt. Related-party status, authorised representatives, class voting and inter-creditor disputes can materially affect outcomes.

Commercial wisdom is not procedural immunity: material non-disclosure, discrimination contrary to law, ineligible applicants or an unimplementable plan remain reviewable.

Timeline

CIRP is designed to be time-bound

180

Initial days

Statutory base period for CIRP.

Extension

One extension may be granted on the required CoC vote and NCLT order.

330

Outer statutory architecture

Includes time spent in legal proceedings, subject to constitutional and judicial treatment in exceptional facts.

Practical reality: a legal outer limit does not make delay harmless. Every month can reduce customer confidence, employee retention, working capital and bidder interest.

Resolution applicants

Eligibility and diligence under section 29A

Section 29A screens specified persons from submitting a resolution plan. The RP and CoC should not reduce eligibility to a self-declaration.

Diligence area	Evidence
Connected persons and control	Corporate structure, beneficial ownership, voting and management rights
NPA linkage	Lender confirmations, account classification and cure position
Convictions/disqualifications	Declarations and independent searches
SEBI and regulatory bars	Orders and current status
Guarantees invoked and unpaid	Guarantee documents, invocation and payment status
Prior plan implementation	Affidavit and verification of past resolution plans
MSME relaxation	Confirm corporate debtor's MSME status and exact statutory relaxation

Substance over labels: a nominee, relative, fund vehicle or newly incorporated company can still be connected if facts establish control or prohibited linkage.

Plan design

A resolution plan must be lawful, funded and executable

Financial terms

Upfront payment, deferred instruments, working capital, security treatment, contingencies and implementation funding.

Operational plan

Management, licences, contracts, employees, capex, technology, customers and supply chain.

Legal treatment

Claims, litigation, guarantees, avoidance proceedings, statutory dues, approvals and conditions precedent.

Monitoring

Escrow, performance security, monitoring committee, milestones, default consequences and reporting.

Bad plan: offers a headline amount but has no committed funding, assumes every licence transfers automatically and leaves tax and litigation treatment to future negotiation.

Plan approval

Sections 30 and 31 - creditor approval followed by NCLT scrutiny

The RP examines compliance and places eligible plans before the CoC. The CoC evaluates feasibility and viability and may approve a plan by the statutory voting threshold. NCLT then examines compliance with the Code.

Stakeholder	Minimum statutory protection - simplified
Insolvency resolution process costs	Priority payment in the manner required by the Code
Operational creditors	At least the statutory minimum based on liquidation/value-distribution tests
Dissenting financial creditors	At least the applicable statutory minimum
Employees/workmen	Treatment as creditors and preservation of applicable rights under the plan and law
Government authorities	Claims are dealt with under the binding plan framework, subject to the Code and current jurisprudence

Binding effect: once approved under section 31, the plan binds the corporate debtor and covered stakeholders. Clean-slate treatment is plan- and law-driven; it is not permission to hide claims or provide misleading information.

Settlement and withdrawal

Resolution can occur before or after admission, but the path changes

Stage	Typical route	Key control
Before admission	Bilateral or multi-creditor settlement	Document payment, release, security and withdrawal/closure of proceedings
After admission and before CoC constitution	Current regulation 30A process	Applicant and IRP documents; bank guarantee/security requirements may apply
After CoC constitution	Section 12A withdrawal	90% CoC voting share and NCLT approval
After plan approval	Implement approved plan	Private side arrangements cannot contradict the binding plan

The 2026 Amendment Act substituted section 12A and the regulations were amended. The current form and procedure must be checked at the filing date.

Settlement is not just receipt of money: address guarantees, securities, assignment, taxes, claims of other creditors, insolvency costs and pending appeals.

PPIRP

Pre-packaged insolvency for eligible corporate MSMEs

Eligibility

Corporate debtor must qualify as an MSME and satisfy Chapter III-A conditions.

Threshold

Minimum notified PPIRP default is Rs. 10 lakh.

Model

Debtor-in-possession with creditor and resolution-professional oversight.

Timeline

Designed for completion within 120 days, with the plan submission milestone within the statutory structure.

Pre-filing gate	Requirement - simplified
Director declaration	Process not initiated to defraud and filing proposed within the declared period
Member/partner approval	Special resolution or prescribed partner approval
Creditor approval	Unrelated financial creditors approve proposal by statutory threshold
RP report	Eligibility, approvals, base plan and compliance reviewed
Base resolution plan	Prepared before filing and evaluated under section 54K

Use case: viable MSME with lender support, credible books and a funded base plan that needs a statutory process but wants less disruption than ordinary CIRP.

Liquidation boundary

Liquidation is a value-realisation process, not a synonym for strike-off

Trigger	Result
No approved plan within CIRP timeline	NCLT may order liquidation
CoC resolves to liquidate	NCLT liquidation order subject to the Code
Plan rejected for statutory non-compliance	Liquidation consequence may follow
Approved plan contravened	Affected person may seek statutory relief; 2026 law also enables restoration of CIRP in specified circumstances

Going concern sale

Business or corporate debtor may be marketed as a going concern under the liquidation regulations.

Waterfall

Distribution follows section 53, not ordinary contractual preference alone.

2026 claim reform

Liquidation claim verification was reworked to reduce repeat invitation and verification for newer processes.

Value warning: delaying a non-viable rescue can convert a going-concern business into scrap-value assets.

Voluntary liquidation

A solvent exit is different from a distressed rescue

Section 59 is available to a corporate person that intends to liquidate voluntarily and has not committed default, subject to declarations, approvals and procedural requirements.

Question	Voluntary liquidation	CIRP/liquidation
Default	No default condition	Triggered by default or CIRP outcome
Purpose	Orderly solvent closure	Collective insolvency resolution/value realisation
Control	Members and creditors under section 59 framework	IRP/RP/CoC/NCLT and liquidator under the Code
Distribution	After settling claims under the voluntary process	Section 53 applies to insolvency liquidation
2026 update	Completion period is to be specified, capped by statute at not more than one year	Separate CIRP and liquidation timelines

Do not misclassify: a company with unresolved default cannot use a solvency declaration as a shortcut around creditors.

2026 operative amendments

What changed in the current IBC framework

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received assent on 6 April 2026. A substantial set of provisions was brought into force on 26 May 2026 and was followed by regulatory amendments.

Admission discipline

Revised section 7, 9 and 10 mechanics and reasons for delay where statutory admission periods are exceeded.

Withdrawal

Section 12A was substituted and regulations aligned to the new process.

Claims

IRP claim verification and value determination were expressly strengthened.

CoC/RP mechanics

Appointment, reporting and conduct provisions were updated.

Plan treatment

Changes addressed dissenting financial-creditor treatment and clarified effects on guarantors.

Failed plan

NCLT may restore CIRP to the invitation-of-plans stage in specified cases.

Liquidation

Claims, CoC supervision, liquidator appointment and distribution mechanics were revised.

Service providers

Inspection, disciplinary and penalty architecture was strengthened.

Current-document rule: filing teams should use regulations and forms amended through June 2026; a 2025 process checklist is no longer reliable.

2026 provisions not yet operative

CIIRP and group insolvency: enacted, but commencement must be checked

The 2026 Amendment Act contains a new creditor-initiated insolvency resolution process in sections 58A-58K and a group-insolvency enabling section 59A. However, the 26 May 2026 commencement notification did not bring the Act's sections 40 and 42 into force. As at 27 June 2026, these mechanisms should not be presented as live filing routes.

Enacted architecture	What the Act provides	Status at review date
CIIRP	Notified financial creditors, debtor-in-possession model, 51% initiation approvals, 30-day representation, 150 days plus one 45-day extension, conversion to CIRP in specified cases	Enacted text; not commenced under the reviewed notification
Group insolvency	Central Government may prescribe coordination and cooperation for group corporate debtors, including cross-border reach in the enabling text	Enacted enabling provision; not commenced under the reviewed notification

Publication control: say "enacted but not commenced" unless a later Gazette notification has brought the relevant provisions into force. Do not advertise CIIRP as currently fileable.

Avoidance transactions

Rescue planning must inspect value leakage before insolvency

Risk	Typical example	Control
Preference	Repaying a connected lender while similarly placed creditors remain unpaid	Review look-back period, relationship and ordinary-course defence
Undervalue	Selling land or IP below supportable value	Independent valuation, marketing and conflict approval
Transaction defrauding creditors	Moving valuable assets to frustrate recovery	Purpose, consideration, control and beneficiary analysis
Extortionate credit	Emergency funding with grossly oppressive terms	Pricing, security and commercial justification
Wrongful/fraudulent trading	Continuing transactions without reasonable prospect and with stakeholder harm	Board viability assessment and conduct record

Example: a promoter group company receives repayment of an unsecured loan two weeks before CIRP while employee dues and secured instalments are unpaid. The transaction requires preference and related-party scrutiny.

Personal and third-party exposure

Corporate rescue does not automatically release guarantors or wrongdoers

Personal guarantors

Proceedings and liability are governed by the guarantee, IBC provisions and binding jurisprudence. Corporate resolution does not automatically discharge the guarantor.

Directors and officers

Fraud, false records, non-cooperation, diversion and wrongful conduct may create civil, contribution, regulatory or criminal exposure.

Resolution applicant

Section 32A can protect the corporate debtor for specified prior offences after a qualifying change in control, but conditions matter and individuals remain liable.

Professionals

IRPs, RPs, valuers and advisors must maintain independence, working papers, disclosures and compliance with their regulatory frameworks.

Drafting caution: a plan clause cannot extinguish liabilities that the Code does not permit the plan to erase.

Evidence room

Minimum distress data room before selecting a route

Folder	Required content
Corporate	Charter, shareholding, beneficial ownership, board powers and group structure
Debt	Facility documents, security, guarantees, defaults, acknowledgements and inter-creditor terms
Financial	Audited accounts, monthly management accounts, 13-week cash flow, forecasts and working capital
Claims	Creditor ageing, disputes, litigation, decrees, tax and statutory dues
Assets	Title, charges, valuation, insurance, encumbrances and physical status
Operations	Customers, suppliers, licences, key contracts, order book and critical dependencies
People	Employees, workmen, PF/gratuity, key-person retention and ESOPs
Transactions	Related parties, asset transfers, new security, unusual payments and promoter flows
Technology/data	ERP access, backups, cyber controls, source code and data ownership

Single-source rule: reconcile every material number to a controlled data source. Competing creditor lists and untraceable spreadsheets are a major cause of delay and litigation.

Route comparison

Choosing among turnaround, scheme, PPIRP and CIRP

Factor	Consensual workout	Section 230	PPIRP	CIRP
Default required	No	No	Yes, notified threshold	Yes, generally Rs. 1 crore
Eligible entity	Contract-based	Company/class arrangement	Eligible corporate MSME	Corporate person under Part II, subject to exclusions
Moratorium	No statutory collective moratorium	No automatic IBC moratorium	Yes under Chapter III-A	Yes on admission
Management	Board remains	Board normally remains, subject to scheme	Debtor-in-possession with oversight	Creditor-in-control through IRP/RP
Dissent binding	Only contracting parties	Class binding after vote and sanction	Statutory plan process	Statutory plan process
Speed/cost	Potentially lowest	Moderate to high	Designed as faster/cost-effective	Formal and intensive
Best for	Aligned creditors and early stress	Complex class compromise	Supported viable MSME	Collective default resolution

Practical case studies

Route-selection problems

Case 1 - viable exporter, temporary liquidity shock

Orders remain strong, but one customer delayed Rs. 20 crore. Banks are supportive and no creditor is enforcing. Start with a funded cash-flow plan and consensual standstill; a formal process may destroy customer confidence.

Case 2 - MSME with lender support and tax arrears

Business is viable, promoter has a base plan and unrelated financial creditors support it. Test PPIRP eligibility, statutory approvals, tax claims and avoidance history.

Case 3 - 88% lenders agree, one secured lender enforces

A section 230 scheme may create class binding, but enforcement risk before sanction must be addressed. CIRP may offer a stronger moratorium but changes control.

Case 4 - assets transferred to promoter before default

Do not design a rescue around the transfer. Obtain independent valuation, preserve documents and assess avoidance, fraud and director exposure.

Case 5 - no working capital and negative enterprise value

A rescue without funding may only deepen losses. Compare immediate business sale or liquidation against delay.

Case 6 - proposed CIIRP filing in June 2026

The Act contains CIIRP, but the reviewed commencement notification did not activate the inserting provision. It is not yet a live route at the review date.

Exam case matrix

High-value questions and answers

Question	Answer
Are sections 253-269 currently enforceable?	No. All were omitted with effect from 15 November 2016.
Can NCLT appoint an interim administrator under section 256?	No. The section is omitted. Current appointments arise under the applicable operative law.
What replaced the sickness test?	There is no one-to-one replacement. Current analysis uses default, IBC eligibility, section 230 and other restructuring routes.
Can a viable company restructure before default?	Yes, through operational turnaround, contractual arrangements or a section 230 scheme, subject to law.
What is the general CIRP default threshold?	Rs. 1 crore under the current notification.
What is the notified PPIRP threshold?	Rs. 10 lakh for eligible corporate MSMEs.
Does section 230 create an automatic moratorium?	No.
Does an approved plan release personal guarantors automatically?	No; current guarantee and IBC law must be applied.
Is CIIRP operative on 27 June 2026?	The enacted provisions were not brought into force by the reviewed 26 May commencement notification.
Is group insolvency operative on that date?	The enabling provision was enacted but not brought into force by that notification.

Finin2min Q&A

Professional questions in simple language

Is "sick company" still a Companies Act filing category?

No. Chapter XIX is omitted. Use current distress and insolvency frameworks.

Can a company wait until it misses salaries?

It can legally encounter distress, but waiting destroys options. Boards should act on early-warning evidence.

Is IBC always the best rescue route?

No. A consensual workout or section 230 scheme may preserve value where creditor alignment exists.

Does filing automatically mean liquidation?

No. CIRP is designed for resolution, but liquidation follows if no compliant plan succeeds or the statutory conditions arise.

Can promoters buy back the company?

Only if eligible under section 29A and the applicable MSME relaxations or other law.

Can a plan ignore disputed government dues?

No. Claims must be invited, verified and treated under the plan and Code.

Can management move assets before filing?

Transactions can be challenged as preference, undervalue, fraud or wrongful conduct.

What is the first document to prepare?

A reliable 13-week cash flow linked to a complete debt, security, claim and asset map.

Professional workflow

90-day distress-response plan

Days 1-7 - stabilise

Cash control, critical payments, data preservation, board meeting, conflicts and professional team.

Days 8-21 - diagnose

Independent business review, debt/security map, claims, forecasts, valuation and avoidance scan.

Days 22-35 - choose route

Compare workout, section 230, PPIRP, CIRP, sale and liquidation against value, time and control.

Days 36-60 - negotiate and prepare

Term sheet, funding proof, stakeholder classes, approvals, filing documents and communication plan.

Days 61-90 - execute

File or close, monitor milestones, prevent leakage, report to stakeholders and update forecasts weekly.

Success test: the route must be legally available, commercially funded, operationally executable and better than the realistic alternative.

Visual revision

Distress route and liability map

DETECT EARLY -> PRESERVE VALUE -> SELECT LIVE LEGAL ROUTE -> APPROVE -> IMPLEMENT -> MONITOR -> ACCOUNT FOR MISCONDUCT

Source and update register

Primary materials used for the legal position

Primary source	Use in this chapter
India Code - Companies Act, 2013 consolidated text	Confirmed that sections 253-269 are omitted and identified every original section title.
Insolvency and Bankruptcy Code, 2016 - section 255 and Eleventh Schedule	Confirmed the statutory omission and migration of the insolvency framework.
IBBI legal framework - updated regulations	Checked current CIRP, PPIRP, liquidation and voluntary-liquidation materials through June 2026.
Insolvency and Bankruptcy Code (Amendment) Act, 2026	Reviewed operative changes and the enacted CIIRP/group-insolvency text.
MCA notification S.O. 2625(E), 22 May 2026	Confirmed which 2026 Amendment Act provisions commenced on 26 May 2026 and that sections 40 and 42 were not included.
MCA notification S.O. 1205(E), 24 March 2020	Confirmed the Rs. 1 crore general Part II default threshold.
PPIRP notification and IBBI materials	Confirmed the Rs. 10 lakh PPIRP threshold and MSME-focused architecture.

Update protocol: re-check Gazette notifications before publication or advice because commencement of CIIRP/group insolvency and thresholds can change after the review date.

Finin2min conclusion

The chapter is omitted; the rescue discipline is not

Chapter XIX no longer supplies a legal process. Its policy objective - saving viable businesses and closing non-viable ones responsibly - is now delivered through a combination of the IBC, section 230, contractual restructuring and liquidation law.

Law

Never cite omitted sections as operative rights or duties.

Finance

Compare enterprise value, funding requirement and downside under each route.

Governance

Act early, preserve records, disclose conflicts and stop value leakage.

NO LIVE SECTION 253-269 PROCESS CURRENT ANSWER = FACTS + VIABILITY + LIVE ROUTE + FUNDING + STAKEHOLDER APPROVAL + IMPLEMENTATION

Next chapter

Chapter XX - Winding Up