Supreme Court Leaves Settlement Dispute to Adjudicating Authority—Permits Consideration of Withdrawal under Section 12A of the IBC

The Supreme Court left the dispute concerning the settlement to be adjudicated by the Adjudicating Authority and permitted consideration of the withdrawal of the company petition under Section 12A of the Insolvency and Bankruptcy Code, 2016.

The Three-Judge Bench of the Supreme Court, comprising Chief Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice K.V. Viswanathan, reviewed a batch of appeals along with connected interlocutory applications and held that, without adjudicating the merits of the dispute, the matter should be remitted to the Adjudicating Authority to examine the validity of the settlement agreement and Form FA under Section 12A of the Insolvency and Bankruptcy Code, 2016, leaving all allegations of coercion and related contentions open for determination in accordance with law.

The Hon’ble Supreme Court disposed of the appeals filed by Kalyan Muppaneni, erstwhile Director of the corporate debtor, without adjudicating the matters on merits, in light of the appellant’s reliance on a settlement agreement dated 02.01.2025. Alongside the settlement, Form FA—being the application for withdrawal of the company petition under Section 12A of the Insolvency and Bankruptcy Code, 2016 (IBC)—signed on behalf of the operational creditor, M/s. K. Computers, and addressed to the Interim Resolution Professional (IRP), was placed on record.

The Court clarified that it would not examine the allegations raised by respondent No. 1, M/s. K. Computers contended that the settlement agreement and Form FA had been obtained under force, coercion, and threat. Such contentions, the Court observed, were to be adjudicated in accordance with the provisions of the IBC and left all related issues open for determination by the appropriate authority.

The Supreme Court further made it clear that the impugned judgment of the National Company Law Appellate Tribunal (NCLAT) would not preclude the Adjudicating Authority or the IRP from examining the validity of Form FA or from deciding whether the insolvency proceedings should be withdrawn under Section 12A of the IBC. Liberty was granted to the appellant to move an appropriate application before the Adjudicating Authority seeking stay, adjournment, or other reliefs as deemed necessary.

With these observations, the appeals and any pending applications were formally disposed of.

Mr. Navin Pahwa, Sr. Advocate, Mr. Dama Seshadri Naidu, Sr. Advocate with Mr. Pawan Jhabakh, Ms. Tanish Gupta, Ms. Iyer Shruti Gopal, Mr. Ravi Sehgal, Mr. Shantanu Singh, Advocates, Mr. Anandh K., AOR, Mr. Navin Pahwa, Sr. Advocate, Mr. Dama Seshadri Naidu, Sr. Advocate, Mr. Pawan Jhabak, Mr. K. Anandh, Mr. Shantanu Singh, Mr. Ravi Sehgal, Advocates and Mr. Pai Amit, AOR, represented the Appellant.

Mr. S. Niranjan Reddy, Sr. Advocate with Mr. Kondapalli Venkata Srinivas, Advocate, Mr. Raavi Yogesh Venkata, AOR, Mr. Kotte Venkata Pawan Kumar, Ms. Twinkle Rathi, Mr. Kondapalli Sai Sumed Yasaswi and Mr. Sahil Raveen, Advocates, appeared for the Respondents.

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