Creditor-Initiated Insolvency Resolution Process under the IBC: Sections 58A to 58K

The creditor-initiated insolvency resolution process is a third route into corporate insolvency under the Insolvency and Bankruptcy Code 2016, alongside the corporate insolvency resolution process (CIRP) in Chapter II and the pre-packaged process in Chapter III-A. It is set out in a new Chapter IV-A, Sections 58A to 58K, inserted by section 40 of the Insolvency and Bankruptcy Code (Amendment) Act 2026. Its defining feature is that it begins without an admission order: a notified financial creditor, after obtaining creditor approvals and hearing the debtor, appoints a resolution professional, whose public announcement commences the process.

It is not yet available. The commencement notification for the Amendment Act, S.O. 2625(E) dated 22 May 2026, brought most of the Act into force on 26 May 2026 but did not include section 40, and no later commencement notification appears in the list of notifications published by the Insolvency and Bankruptcy Board of India as on the date of this note. What follows describes the Chapter as enacted, so that lenders and borrowers know what it will require when it is notified.

Key points

• Chapter IV-A is on the statute book but not in force; its use also depends on government notifications, rules and IBBI regulations still to be made.
• Only a financial creditor of a notified class of financial institutions may start it, and only against a notified category of corporate debtor.
• Two creditor approvals of at least fifty-one per cent in value, with a thirty-day window for the debtor's representation in between, come before the resolution professional is appointed.
• Management stays with the board, but the resolution professional attends board and shareholder meetings and can veto resolutions.
• There is no automatic moratorium; one runs from the date the professional applies for it, subject to the Tribunal confirming it.
• The process must finish in 150 days (one extension of up to 45 days), failing which it converts into a regular CIRP.

Is the creditor-initiated insolvency process in force?

No, and three separate layers stand between the text and its first use.

The first is commencement. Section 1(2) of the Amendment Act allows different dates for different provisions. S.O. 2625(E) left out section 40, which inserts the Chapter, and also the provisions that wire it into the rest of the Code: section 7 (Section 11(ba)), sub-clauses (i) and (ii) of section 34(a) (Section 54A), sections 45 and 47 (Sections 65(3) and 67A), section 60 (Section 208), clause (b) of section 69 (the rule-making heads in Section 239(2)) and sub-clause (xx) of section 70(b) (the regulation-making heads in Section 240(2)).

The second is government notification. Section 58A(1) makes the process available only for corporate debtors in categories the Central Government notifies — by assets or income below specified levels, by class of creditors or amount of debt, or by any other category. Section 58B(1) confines the right to initiate to financial creditors belonging to a class of financial institutions the Central Government notifies, subject to conditions prescribed by rules.

The third is regulation. Almost every step — the manner of creditor approvals, the form of the debtor's representation, the period and form of the public announcement, the objection procedure, the professional's report — is "as may be specified" by the Board.

Which corporate debtors can be put into the process?

Section 58A(1) sets the outer boundary by reference to notifications, so the class of eligible companies will be known only when the government acts. Chapter IV-A itself states no minimum default; any debt-based criterion would come through a notification under Section 58A(1)(b).

Section 58A(2) adds two exclusions that apply regardless of the notification. The process cannot be initiated against a corporate debtor:

• for which an insolvency resolution or liquidation proceeding under Part II has commenced and is still continuing; or
• that has undergone a creditor-initiated process or a pre-packaged process, or completed a CIRP, in the three years before the creditor-initiated insolvency commencement date.

What must the creditor do before appointing a resolution professional?

Section 58B(2) prescribes a sequence, and each step is a condition of a valid start.

If the second approval is not obtained within thirty days of the representation, the proviso to Section 58B(2) requires the creditor to begin again with a fresh first approval. If the debtor makes no representation within the time given, the Explanation to Section 58B(2) allows the creditor to proceed to appoint the professional once that period expires.

Under Section 58B(4) the professional makes a public announcement and communicates it, with a report confirming whether the financial creditor meets the requirements of Sections 58A and 58B, to the Adjudicating Authority and the Board. The process is deemed to have commenced on the date of the public announcement, which the Explanation to Section 58B defines as the creditor-initiated insolvency commencement date.

From that date, Section 58B(5) bars any application for a CIRP or a pre-packaged process against the same corporate debtor from being filed or admitted for the duration of the process, notwithstanding Sections 7, 9, 10 and 54C. An operational creditor's Section 9 application is held off in the same way as a financial creditor's.

How can the corporate debtor object to the process?

Section 58C gives the corporate debtor thirty days from the commencement date to file an objection before the Adjudicating Authority, in the specified form and with the prescribed fee. The Authority must decide within thirty days of receiving it, recording reasons for any delay. The outcomes are fixed by Section 58C(2):

• No default. Where the Authority is satisfied that a default has not occurred, whether or not Sections 58A and 58B were also contravened, it may declare the commencement void ab initio.
• Default, but a defective start. Where a default has occurred but the initiation contravened Section 58A or 58B, the Authority must convert the process into a CIRP and pass the consequential orders listed in Section 58H(1).

The second outcome matters to anyone considering an objection. Showing that the approvals were defective, or that the debtor was outside the notified category, does not end the insolvency if default is established: it moves the company into a CIRP with the board suspended, which may be a worse result for the promoters than the process they objected to. Where default is shown and the initiation complied with Sections 58A and 58B, neither consequence is engaged and the process continues. An objection is therefore usually about default, which makes the debtor's own account records and any information utility record of default the decisive material.

Who runs the company during a creditor-initiated process?

Under Section 58F(1), management continues to vest in the board of directors or the partners, and Section 54H applies with necessary changes — the board must protect and preserve the value of the company's property and manage its operations as a going concern. This is the feature shared with the pre-pack in Sections 54A to 54P.

The control is real, though. Section 58F(2) entitles the resolution professional to attend meetings of the members, the board and its committees, or the partners, and to reject any resolution passed at them, subject to specified conditions; a rejected resolution cannot then be approved. Section 58F(3) requires the promoters and personnel to provide the information needed for the information memorandum, and makes those who omit material information or provide misleading or false information liable for the resulting loss, applying to them Section 54G(2) to (4) and Section 77A — the pre-pack provisions on compensation and on false information.

Section 58E sets the professional's own duties: calling for claims, preparing the information memorandum, preparing a report confirming that the process followed the procedural requirements and that the resolution plan complies with Sections 29A and 30, the duties in clauses (a) to (c) of Section 18 and clauses (e) to (j) of Section 25(2), and the powers of access to records in Section 54F(3) and (4). Section 58E(2) obliges current and former personnel, promoters, those associated with management and contractors to cooperate, with Section 19(2) and (3) available to enforce it.

Section 58K(1) then imports, with necessary changes, the Code's provisions on the committee of creditors (Section 21), its meetings (Section 24), authorised representatives of financial creditors (Section 25A), the treatment of avoidance applications (Section 26), replacement of the professional (Section 27), actions needing committee approval (Section 28), guarantor assets (Section 28A), the information memorandum (Section 29), appeals (Section 32), liability for prior offences (Section 32A), avoidance transactions (Sections 43 to 51), and Chapters VI and VII on adjudication, penalties and offences.

Is there a moratorium in a creditor-initiated process?

Not automatically, and this is the sharpest difference from a CIRP. Under Section 58G(1) the professional may, after obtaining the committee's approval, apply to the Adjudicating Authority for a moratorium for the purposes of Section 14(1) read with Section 14(3). Before the committee is constituted, the professional may apply with the approval of financial creditors of the notified class holding at least fifty-one per cent in value of the debt due to them.

Section 58G(2) makes the moratorium operative from the date of the application, continuing through the process period. The Authority may confirm it if satisfied that it is required for the proper and efficient conduct of the process, or reject the application. Both the filing of the application and any rejection must be publicly announced. Because Section 14(3) is imported, the moratorium would not extend to guarantors, and the Explanation to Section 14(3)(b) would bar a surety from suing the corporate debtor while it lasts — the same structure as in a CIRP, explained in the note on the Section 14 moratorium.

How long does the process last?

Section 58D(1) requires completion within 150 days from the commencement date. On the professional's application with the approval of sixty-six per cent of the committee's voting share, the Adjudicating Authority may extend it once, by not more than 45 days. If the committee approves no plan within the period, Section 58D(3) requires the Authority to pass a conversion order under Section 58H(1).

How is a resolution plan approved?

Section 58J requires the committee to approve a plan by at least sixty-six per cent of the voting share, in accordance with Section 30. The professional then submits it to the Adjudicating Authority with the compliance report under Section 58E(1)(c), and the Authority passes an order under Section 31, which applies with necessary changes. Through that link, the provisions of Section 31 — including the protection of licences in Section 31(5) and the extinguishment of prior claims in Section 31(6) — would govern an approved plan.

When does it convert into a regular CIRP?

Section 58H(1) requires conversion where the Authority does not receive a plan within the Section 58D period, is satisfied that the corporate debtor or its personnel have failed to assist or cooperate with the professional, or rejects the plan under Section 58J(2) read with Section 31(2). Under Section 58H(2), the committee may also resolve by sixty-six per cent, at any time during the process, to convert it.

The conversion order converts the process into a CIRP under Chapter II; decides the stage from which the CIRP begins, after considering any recommendation of the committee; appoints the existing professional as interim or resolution professional; declares a Section 14 moratorium; and treats the costs already incurred as insolvency resolution process costs. Under Section 58H(3), avoidance proceedings continue, the order is deemed an admission under Section 7 with the initiating financial creditor as applicant, and the look-back periods in Sections 43, 46 and 50 run from the creditor-initiated commencement date.

Can the process be withdrawn?

Section 58-I mirrors the new Section 12A. The Authority may allow withdrawal of the public announcement and close the process on the professional's application with the approval of ninety per cent of the committee's voting share. Withdrawal is barred before the committee is constituted and after the first invitation for resolution plans, and the order must be passed within fourteen days. The CIRP equivalent is discussed in the note on Section 12A withdrawal.

How does it compare with a CIRP and a pre-pack?

A note on scope

This article is general information on Chapter IV-A of the Insolvency and Bankruptcy Code 2016 as inserted by the Amendment Act of 2026, and is not legal advice. The Chapter is not in force, and the notifications, rules and regulations that will make it operational may narrow or add to what is described here. The wider set of changes is mapped in IBC (Amendment) Act 2026: What Changed, and the end-state for a company that cannot be resolved in Liquidation under the IBC after the 2026 Amendment.

The related practice areas are NPA resolution and institutional matters described on the banks and NBFCs page. Enquiries may be directed through the contact page.

Related reading: IBC Guide | Filing Claims in a CIRP | Legal Glossary