The pre-pack model of insolvency resolution for smaller firms has failed to gain traction due to concerns of impropriety by bankers. Only four companies have used the scheme since its introduction in April 2021.
Sudal Industries, an aluminium products manufacturer, has become the first Indian company to get a debt resolution from banks under the insolvency pre-pack mechanism introduced for micro, small and medium-sized businesses (MSMEs). Only six cases have been admitted by NCLT under the pre-pack insolvency resolution process that was introduced in 2021 for the MSME sector to ensure that financial stress faced by smaller companies is resolved quickly for the overall health of the economy.