Practical Limitations explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The role of an IRP has two parts — managing the corporate debtor as a going concern, and conducting the CIRP as the regulations require. Chapter 20 sets out, without euphemism, the conditions in which both usually have to be done.
The list of practical limitations
| Constraint | What it means in practice |
|---|---|
| Deep financial stress | The corporate debtor cannot meet the costs of running operations or the process costs |
| Senior management | Directors, KMPs and most senior employees are not cooperating, their loyalty being to the ex-management or ex-promoters; many have deserted the company |
| Junior employees | Available but disgruntled — wages unpaid for months, producing regular protest and agitation |
| Financial records | Statements not filed or incomplete for two to three years, with inadequate accounting or Tally backup |
| Security agency | Monthly dues unpaid; threatening to leave the factory unguarded |
| Insurance | Annual fire and burglary cover expired or falling due shortly |
| Electricity | Connections cut off for non-payment, or warning notices received |
| Statutory dues | PF, gratuity and ESI unpaid, with default notices received |
| TDS | Deducted but not deposited with the income tax department |
| GST | Returns not filed, input credit not availed |
| Suppliers | Past payments not made; refusing further credit, hampering production |
| Licences | Industry-specific licences lapsed or about to expire, requiring immediate payments and technical clearances |
| Bank accounts | No cash balances, or accounts frozen by the Enforcement Directorate or CBI |
| Financial creditors | Reluctant to contribute to CIRP or liquidation cost, squeezing operations further |
| Company secretary and staff | Not present or not cooperating |
Read individually, each item has an answer. The security agency can be paid; the insurance can be renewed; a section 19 application compels cooperation; the committee can be asked to fund the process.
Every one of those answers costs money, and the first line of the table says there is none. That is the structural difficulty: the professional's remedies for the operational problems all require the resource whose absence caused them.
It is also why the Regulation 31B Going Concern Assessment Report matters so much. Putting the working capital requirement in front of the committee at the first meeting is the only mechanism the Code offers for converting these constraints into a funded decision rather than a personal problem for the professional.
What can be done about each class of practical limitations
- Non-cooperation — a section 19(2) application, which the NCLT has treated as engaging contempt where the professional is obstructed, the professional being an officer of the court.
- Funding — a resolution of the committee allocating CIRP cost by voting share, and where a creditor refuses, an application for a direction; the Adjudicating Authority has held that a creditor unwilling to contribute may find its claim not considered.
- Interim finance — available under section 20(2)(c) with the consent of the committee.
- Frozen accounts — an application to the Adjudicating Authority; note that the extension of the section 14(1)(a) bar into liquidation under the 2026 Amendment potentially bars fresh PMLA proceedings against liquidation estate assets.
- Missing records — appoint professionals under section 20(2)(a), and record every attempt for the eventual application.
The cases behind the list
Chapter 21 records these practical limitations against named proceedings:
- Bank of Maharashtra v. Supertech Realtors Pvt. Ltd. — a dispute running since 2018 over failure to repay a Rs. 150 crore loan, with the CIRP initiated in June 2024 after the accounts were classified as non-performing. It illustrates hostility from creditors and the shift of management control to an external party.
- Punjab & Sind Bank v. Alpine Realtech Pvt. Ltd. — tensions between creditors and erstwhile management, arising where creditors consider management is not acting in their interests or allege mismanagement.
- Shriji Diamonds v. Badri Sarraf Jewels Pvt. Ltd. — lack of funds, and the inability to generate adequate revenue leading to creditor disputes.
- Jagal Pal Paliwal v. Jassum Propcorn Projects Pvt. Ltd. — lack of material data on financial health and operational status, hindering negotiation; and separately, inconsistency in law and SOPs among financial creditors.
- Shree Bhawani Paper Mills Limited — delay in adjudication by the NCLT, increasing financial strain on the debtor and dissatisfaction among creditors.
Practical points
- Triage on irreversibility: uninsured assets and an unguarded site come before record reconstruction.
- Take the funding question to the committee at the first meeting, with figures.
- File the section 19(2) application early; it is slow and its pendency is itself part of the record.
- Document every one of these practical limitations contemporaneously — it is the evidence for both the fee claim and any later allegation of delay.
Common mistakes
- Absorbing operational costs personally rather than seeking a committee resolution or a direction.
- Prioritising the reconstruction of records over the physical security of the assets.
- Treating creditor reluctance to fund as the end of the matter.
- Delaying the section 19(2) application until cooperation has clearly failed.