Supreme Court Sets Aside CIRP Admission on Settlement; Affirms Corporate Debtor’s Obligation to Pay CIRP Costs

The Supreme Court set aside the admission of the Corporate Insolvency Resolution Process (CIRP) in light of a settlement between the parties and affirmed that the Corporate Debtor remains obligated to pay the CIRP costs.

The Supreme Court Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan, while considering an appeal and an accompanying interlocutory application, held that once parties to a Section 9 IBC proceeding arrive at a full and final settlement, the insolvency proceedings—including orders passed by the NCLT and the NCLAT—may be set aside to give effect to such settlement. The Court further affirmed that the Corporate Debtor remains obligated to duly pay the costs incurred during the Corporate Insolvency Resolution Process (CIRP).

The Supreme Court of India dealt with a civil appeal arising from the order of the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dated 26.11.2024, in Company Appeal (AT) (Ins.) No. 1652 of 2023. The NCLAT had dismissed the appellant's plea and affirmed the order of the Adjudicating Authority admitting a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), thereby initiating the Corporate Insolvency Resolution Process (CIRP) against the appellant – Corporate Debtor.

The original Section 9 petition had been filed by the Operational Creditor on 27.12.2021 in CP (IB) 678/MB-IV/2022, claiming a total of ₹4,75,90,468.16, comprising a principal amount of ₹2,19,49,432.60 and interest of ₹2,56,41,036.00. The NCLT passed the admission order on 06.12.2023. The appellant challenged the same before the NCLAT, which initially stayed further steps in CIRP on 18.12.2023. However, the appeal was eventually dismissed by the NCLAT through its order dated 26.11.2024, prompting the present appeal before the Supreme Court.

During the course of the proceedings before the Supreme Court, the matter was not adjudicated on the merits, as the parties had reached a full and final settlement. The Court recorded the appearance of senior counsels representing both the Corporate Debtor and the Operational Creditor, as well as the counsel for the IRP. It was submitted that the entire outstanding dues of the Operational Creditor had been cleared, including those of another operational creditor, DARCL Logistics, who was part of the Committee of Creditors (CoC).

Pursuant to the settlement, payments were made by way of demand drafts on the date of hearing: ₹2.80 crores to the Operational Creditor and ₹21 lakhs to DARCL Logistics. Based on these developments, the Supreme Court held that no further action was required and accordingly set aside the impugned NCLAT order.

Additionally, the counsel for the IRP sought directions for CIRP costs. The Corporate Debtor’s counsel undertook to settle the necessary CIRP expenses. The Court also recorded that a counsel representing one of the financial creditors, who was not a party to the proceedings, had appeared online and was permitted to pursue remedies under law, if any. The appeal and pending applications were disposed of in these terms.

Mr. Soayib Qureshi, AOR, Mr. Navin Pahwa, Sr. Advocate, Mr. Sandeep Bajaj, Advocate, Mrs. Parijat, Advocate, Mr. Mayank Biyani, Advocate, represented the Appellant.

For the Respondent/ Defendant: Mr. Manish Raghav, AOR, Mr. Rhoit Gour, Advocate, Mr. Shivaansh Shekhar Dixit, Advocate, Ms. Aadya Mittal, Advocate, Mr. Balbir Singh, Sr. Advocate, Mr. Bipul Kedia, Advocate, Mr. Kumar Ankur, AOR, Mr. Karan Bindra, Advocate, Mr. Chayan Sarkar, Advocate, Mr. Anupam Prakash, Advocate, Mr. Shailendra Kumar, Advocate, Mr. Md Shakil, Advocate and Ms. Arshnit Sandhu, Advocate, appeared for the Respondents.

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