NCLT Mumbai held that CIRP cannot be withdrawn unilaterally if it adversely affects other creditors’ rights under IBC.
NCLT Bars Unilateral Withdrawal of CIRP Post-Approval
The National Company Law Tribunal (NCLT), Mumbai, has ruled that a corporate insolvency resolution process (CIRP) cannot be withdrawn at the instance of a single creditor or the resolution applicant if it prejudices the interests of other creditors.
The Tribunal relied on Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016, which allows withdrawal only with 90% voting share of the Committee of Creditors (CoC). Even then, the NCLT must be satisfied that withdrawal is not intended to defraud creditors or evade process.
Any attempt to bypass the CoC majority or judicial scrutiny undermines the collective creditor mechanism envisaged under IBC.
This decision strengthens creditor protection in insolvency. Practitioners must ensure that withdrawal applications are backed by full CoC compliance and transparency. Courts are likely to scrutinise withdrawal motives, especially in cases involving related parties.
Citations
- IBC, 2016, Section 12A