Withdrawal of CIRP Post-CoC Constitution Requires 90% CoC Approval Under Regulation 30A(1)(b) of IBC
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REEDLAW Legal News Network reports: In a critical ruling on the statutory procedure governing settlement-driven withdrawal of insolvency proceedings, the National Company Law Appellate Tribunal (NCLAT), Chennai Bench, has reaffirmed that once the Committee of Creditors (CoC) is constituted, any withdrawal of the Corporate Insolvency Resolution Process (CIRP) must mandatorily comply with Section 12A of the IBC read with Regulation 30A(1)(b), requiring 90% CoC approval. The Tribunal clarified that private settlements entered into before the CoC constitution cannot bypass the statutory framework, thereby safeguarding creditor primacy and due process in CIRP withdrawals.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Jatindranath Swain (Technical Member), while adjudicating a batch of Company Appeals and connected Interlocutory Applications, held that once the CoC is constituted, withdrawal of CIRP can only be permitted under Section 12A of the IBC through Regulation 30A(1)(b), which requires approval of 90% of the CoC. The Bench rejected the contention that a settlement reached prior to CoC formation could bypass this statutory mandate and reiterated that creditor approval is indispensable to preserve the integrity of the insolvency resolution framework.
The order disposed of two appeals challenging the order passed by the National Company Law Tribunal, Bengaluru Bench, which had dismissed applications seeking withdrawal of CIRP of the Corporate Debtor under Section 12A of the Insolvency and Bankruptcy Code, 2016, in light of a settlement. The appeals emerged from decisions relating to multiple insolvency petitions filed by different creditors, including the Appellant, the Board of Control for Cricket in India (BCCI), and a financial creditor, Glass Trust Company LLC. The Tribunal had rejected the withdrawal applications on the grounds that they were filed after the constitution of the Committee of Creditors (CoC), thus invoking Regulation 30A(1)(b), which requires approval of 90% voting share.
The appellants argued that the settlement was reached before the CoC was constituted, and the withdrawal application was filed before the constitution, thus qualifying under Regulation 30A(1)(a), which does not necessitate CoC approval. The Tribunal, however, held that since the application was filed after the CoC’s constitution, the provisions of Regulation 30A(1)(b) applied. The appellants contended that the order of the Supreme Court, which had stayed the operation of the earlier order disallowing withdrawal, and the subsequent decision allowing the settlement, indicated that the application for withdrawal filed later was valid, as the settlement predated the CoC’s formation.
The Court noted that the Supreme Court’s order explicitly granted liberty to the parties to proceed as per the legal framework for settlement and withdrawal, and acknowledged that the CoC had been constituted before the withdrawal application was filed. It was observed that Regulation 12A of the Insolvency and Bankruptcy Code and Regulation 30A of the IBBI regulations clearly prescribe approval mechanisms for withdrawal, which are to be followed depending on whether the application is filed before or after the CoC’s formation. The Court emphasised that, since the application was made after the CoC’s constitution, it required adherence to Regulation 30A(1)(b), which mandated approval by 90% of the voting share, a condition not satisfied in this case.
Ultimately, the Court dismissed the appeals, holding that the applications for withdrawal filed after the CoC’s constitution are subject to the approval process under Regulation 30A(1)(b). It found no merit in the claim that the application was valid prior to CoC formation, as the facts and legal provisions clearly established that the necessary procedural requirements had not been met. The order reinforced that withdrawal of CIRP after the CoC’s constitution is a governed process requiring compliance with statutory approval mechanisms, and cannot be accepted purely on the basis of settlement or prior negotiations.
Mr. Arun Kathpalia, Senior Advocate Mr. Abhijeet Sinha, Senior Advocate Mr. Adarsh Ramanujan, Ms. Ananya Ghosh, Ms. Mrinalini Mishra, Ms. Doel Bose, Ms. Priscilla Carolyn, Mr. Rishab Gupta and Ms. Diksha Gupta, Advocates, represented the Appellant for Company Appeal (AT) (CH) (Ins) No. 89 of 2025 & IA Nos. 250, 251 and 390 of 2025.
Mr. C.K. Nandhakumar, Senior Advocate for Ms. Bhavya Mohan, Ms. Ann Pereira and Ms. Anjali Kutiyal, Advocates, represented the Appellant for Company Appeal (AT) (CH) (Ins) No. 130 of 2025 & IA. Nos. 349 and 350 of 2025.
Ms. Ann Pereira, Ms. Bhavya Mohan & Ms. Anjali Kutiyal, Advocates, appeared in Company Appeal (AT) (CH) (Ins) No. 130 of 2025 & IA. Nos. 349 and 350 of 2025, for R-2.
Mr. Vijay Narayan, Senior Advocate for Ms. Sneha Parthasarathy, Mr. Abishek Jenasenan & Ms. Aparajitha Vishwanath, Advocates, appeared in Company Appeal (AT) (CH) (Ins) No. 89 of 2025 & IA Nos. 250, 251 and 390 of 2025, for R-3.
Mr Kapil Sibal, Senior Advocate, Mr Krishnendu Datta, Senior Advocate for Mr. Prateek Kumar, Ms. Raveena Rai, Ms Moha Paranjpe, Mr Siddhant Grover, Advocates, appeared in Company Appeal (AT) (CH) (Ins) No. 89 of 2025 & IA Nos. 250, 251 and 390 of 2025, for R-4.
Mr. Abhinav Vasisht, Senior Advocate for Mr. Savar Mahajan, Ms. Arveena Sharma, Ms. Ichchha Kalash, Ms. Samridhi Shrimali, Ms. Lakshana Viravalli, Ms. S. Madhusmitha & Ms. Akshita Sachdeva Jaitly, Advocates, appeared in Company Appeal (AT) (CH) (Ins) No. 89 of 2025 & IA Nos. 250, 251 and 390 of 2025, for R-5.
Mr. V. Shyamohan, Ms. Sradhaxna Mudrika, Ms. Anshika Bajpai, Ms. Vrinda Baheti, Mr. Anirud C., Advocates, appeared in IA No. 390/2025.
Mr. Vijay Narayan, Senior Advocate, Ms. Aparajitha Vishwanath, Mr. Abhishek Jenasenan and Ms. Sneha Parthasarathy, Advocates, appeared in Company Appeal (AT) (CH) (Ins) No. 130 of 2025 & IA. Nos. 349 and 350 of 2025, for R-3.
Mr. Abhinav Vasisht, Senior Advocate, Mr. Shailendra Ajmera, Mr. Savar Mahajan, Ms. Arveena Sharma, Ms. Ichchha Kalash, Ms. Samridhi Shrimali, Ms. Lakshana Viravalli and Ms. S. Madhusmitha, Advocates, appeared in Company Appeal (AT) (CH) (Ins) No. 130 of 2025 & IA Nos. 349 and 350 of 2025, for R-5.
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