Allegations of Coercion Cannot Invalidate Withdrawal of CIRP Without Legal Proof, Rules NCLAT
- REEDLAW
- Jul 23
- 3 min read
NCLAT ruled that allegations of coercion cannot invalidate the withdrawal of CIRP under Section 12A of the IBC in the absence of legal proof through appropriate criminal proceedings or evidence.
On 22 July 2025, the National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swaim (Technical Member), while adjudicating a company appeal and connected interlocutory applications, held that once a settlement agreement and Form FA have been duly submitted and placed on record before the Hon’ble Supreme Court, the subsequent withdrawal of a Section 9 IBC application under Section 12A cannot be invalidated merely on unsubstantiated allegations of coercion or fraud, unless such claims are duly established through appropriate legal proceedings under criminal law.
The Appellant, an Operational Creditor, had challenged the order dated 28.03.2025 passed by the NCLT, Amaravati Bench, which allowed the withdrawal of a Section 9 IBC application against M/s. Pi Data Centres Pvt. Ltd. under Section 12A of the IBC, read with Regulation 30A of the IBBI Regulations. The Appellant argued that the withdrawal application and the settlement agreement dated 02.01.2025 were obtained through threat and coercion and, therefore, the impugned order permitting withdrawal was unsustainable in law. He further contended that the mandatory conditions under Regulation 30A had not been satisfied, particularly the requirement that Form FA be submitted by the applicant within the prescribed timeframe.
The Appellate Tribunal found no merit in these arguments. It noted that the Hon’ble Supreme Court, while disposing of Civil Appeal Nos. 857-858/2025, had already taken on record the settlement agreement and Form FA dated 02.01.2025 and had left it open for the IRP to act in accordance with law by filing an appropriate application under Section 12A. The Tribunal held that the existence of the settlement and the Form FA was undisputed and was part of the Apex Court record. The Tribunal further observed that the complaint regarding coercion was filed belatedly on 21.01.2025 and lacked evidentiary weight, particularly when the Appellant failed to pursue statutory remedies under Section 156(3) CrPC or Section 173(4) of the Bharatiya Nyaya Sanhita to seek investigation into his allegations.
The Appellant’s claims of fraud and coercion were found to be unsupported by any investigation or judicial determination. The Tribunal emphasised that allegations of coercion or threat must be established through proper legal process and could not be presumed based solely on assertions. Moreover, the Appellant’s attempt to introduce additional documents for the first time before the Appellate Tribunal was rejected as those documents had not been placed before the Adjudicating Authority and were therefore inadmissible.
Accordingly, the NCLAT held that the withdrawal of the CIRP under Section 12A was legally tenable and in compliance with the procedure prescribed under Regulation 30A. It found no procedural or substantive illegality in the NCLT’s order and dismissed the appeal for lack of merit.
Mr. Y. Suryanarayana, Advocate, represented the Appellant.
Mr. TK Bhaskar, Ms. Niveditha Narayanan and Mr. Vasant S., Advocates, appeared for the Respondent No. 1.
Mr. P.H. Arvindh Pandian, Senior Advocate for Mr. Pawan Jhabakh, Advocate, appeared for the Respondent No. 2.
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