INSOLVENCY AND RESCUE MECHANISMS TAILORED TO MSMEs

In the dynamic ecosystem of India's economy, Micro, Small, and Medium Enterprises (MSMEs) stand as pillars of growth, innovation, and employment. Yet their susceptibility to economic turbulence be it pandemics, supply chain disruptions, or inflationary pressures often leads to distress that traditional insolvency frameworks fail to address adequately. The Insolvency and Bankruptcy Code, 2016 (IBC), while revolutionary in consolidating insolvency laws, adopts a uniform approach that burdens MSMEs with cumbersome procedures, exorbitant costs, and a pervasive cultural stigma around business failure. This paper, drawing from a doctrinal analysis intertwined with comparative insights, tackles the research question: 'What simplified legal mechanisms and cultural reframing in corporate insolvency laws could improve access to restructuring and rescue options for MSMEs, reducing stigma and enhancing survival rates in volatile economic environments? Through an examination of IBC's MSME-tailored provisions like the Pre-Packaged Insolvency Resolution Process (PPIRP) and Fast-Track Insolvency, alongside global models from the US, UK, and Singapore, the study identifies procedural bottlenecks and societal barriers. It proposes reforms such as streamlined thresholds, subsidized resolution fees, and campaigns to reposition insolvency as a strategic reset rather than defeat. Empirical data suggests these changes could elevate MSME survival rates by 25-35%, fostering resilience and aligning with India's 'Atmanirbhar Bharat' vision.