Chandra Prakash Lohia @ Nitesh Lohia vs West Bengal Agro Textile Corporation Ltd. & Anr.

“1.

The applicant states that the Operational Creditor has filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating corporate insolvency resolution process against the Corporate Debtor West Bengal Agro Textile Corporation Limited. The said application was admitted on 22nd August, 2025 appointing the applicant as Interim Resolution Professional and the Operational Creditor was directed to deposit a sum of Rs. 2,00,000/- with the applicant to meet the expenses arising out of issuing public notice and inviting claims. A copy of the order dated 22^nd August, 2025, is annexed hereto and marked with the Letter- "A".

2.

The Applicant states that he has not received any communication from the Registry of the National Company Law Tribunal. Kolkata Bench, regarding the order initiating the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. The Applicant became aware of the said order only upon receiving an electronic mail from the Operational Creditor, informing him about the withdrawal of the application that had been admitted for CIRP against the Corporate Debtor.

3.

On 23rd August, 2025, the applicant has received an electronic mail from the operational creditor along with a copy of Form FA under Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulations, 2016, seeking to withdraw the application bearing case number C.P. (IB) No. 207/KB/2023 which was filed by the operational creditor before this Hon'ble Tribunal under Section 9 of the Insolvency and Bankruptcy Code, 2016. A copy of the said Form FA is annexed hereto and marked with the Letter- "B".

4.

The applicant states that since he has received a request from the operational creditor to withdraw the application bearing case number C.P. (IB) No. 207/KB/2023, the applicant has not carried out any public announcements in Form A as prescribed under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulations, 2016.

5.

On 24th August, 2025, the applicant has sent an electronic mail to the operational creditor to provide the following documents:

a)

A copy of the settlement agreement

b)

Receipts of payments made by the corporate debtor to the applicant/operational creditor.

c)

Any other relevant documents necessary to be submitted before the Hon'ble Adjudicating Authority.

6.

The applicant states that on 25th August, 2025, he has received the settlement agreement dated 18th August, 2025 along with the copy of the receipt from the operational creditor, copy of the same are annexed hereto and collectively marked with the Letter- "C".

7.

The applicant states that the CIRP expenses to date have been paid and hence bank guarantee for CIRP expenses is not attached.

8.

The applicant states that since committee of creditor ("COC") has not been formed and therefore the instant application is filed under Regulation 30A(1)(a) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.”

“30A. Withdrawal of application.– (1) An application for withdrawal under section 12A may be made to the Adjudicating Authority –

(a)

before the constitution of the committee, by the applicant through the interim resolution professional;

(b)

after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be:

Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.

(2)

The application under sub-regulation (1) shall be made in Form FA of the 3[Schedule-I] accompanied by a bank guarantee-

(a)

towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub-regulation (1); or

(b)

towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1).

(3)

Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt.

(4)

Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt.”

“63.

In essence, after a series of deliberations by the legislature, the executive and nudges by this Court, the framework created by Rule 8 of the NCLT Rules and Section 12-A IBC read with Rule 30-A of the CIRP Regulations lays down an exhaustive procedure for the withdrawal of an application filed by creditors under Sections 7, 9, or 10 IBC. Withdrawal may be sought at four stages, all of which have a procedure prescribed under the existing framework. These may be summarised as follows:

63.1.

Before the application under Sections 7, 9 or 10 is admitted by NCLT : Such cases are squarely covered by Rule 8 of the NCLT Rules, which requires that the applicant approach NCLT directly. NCLT may then pass an order permitting the withdrawal of the application. At this stage, as CIRP process has not been initiated, the proceedings are still in personam, as between the applicant creditor and the corporate debtor. Therefore, while approving the withdrawal at this stage, NCLT may restrict its enquiry to only hear the applicant creditor and corporate debtor, and other potential creditors are not stakeholders at this stage.

63.2.

After an application under Sections 7, 9, or 10 is admitted, but before the CoC has been constituted : Although Section 12-A continues to be silent on this aspect, after the decision in Swiss Ribbons [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 : (2019) 213 Comp Cas 198] , Regulation 30-A was amended to provide for this eventuality. An application for withdrawal in such cases may be made by the applicant through the IRP. [ Regulation 30-A(1), CIRP Regulations, 2016.] The IRP will then place the application before NCLT, which may pass an order either approving or rejecting the application. As noted above, once the application has been admitted, the proceedings are no longer the sole preserve of the applicant creditor and the corporate debtor. They are now in rem and at this stage, NCLT must hear the parties concerned and consider all relevant factors before approving or rejecting the application for withdrawal. NCLT being a quasi-judicial body, must not act as a mere post office, which stamps and approves every settlement agreement, without application of judicial mind.

63.3.

After an application under Sections 7, 9 or 10 is admitted, the CoC has been constituted and the invitation for expression of interest has not been issued : Section 12-A read with Regulation 30-A provides exhaustively for this scenario. In such cases, the application for withdrawal is to be placed before NCLT, through the IRP or the RP. The application is first placed before the CoC and after ascertaining approval with a ninety per cent voting share, the RP shall submit the application to NCLT.

63.4.

After an application under Sections 7, 9 or 10 is admitted, the CoC has been formed and the invitation for expression of interest has been issued : The procedure is the same as that detailed in para 63.3 above, with the added requirement stemming from the proviso to Regulation 30-A(1); in such cases, the applicant must state the reasons for withdrawal at this belated stage.

“79.

In such cases, the legal framework mandates that:

(i)

an application for withdrawal be moved;

(ii)

the application has to be moved through the IRP; and

(iii)

it be placed before NCLT for approval.

None of these requirements were met in the present case. First and foremost, there was no formal application instituted to seek the withdrawal of CIRP. The settlement agreement was taken on record and approved by Nclat based on the submissions and assurances of the counsel before it and the affidavits/undertakings filed by the parties. Further, the first respondent, who is a former Director of the corporate debtor, did not move the application through the IRP and instead approached Nclat directly. Finally, the request to approve the settlement was moved before Nclat during the appellate proceedings, instead of being placed before NCLT. Despite these grave deviations, Nclat still proceeded with approving the settlement and setting aside CIRP by invoking its inherent power under Rule 11 of the Nclat Rules.”

“3.

Brief background facts necessary to be noticed for deciding the appeals are:

i.

Small Industrial Development Bank of India (SIDBI) has filed an application under Section 7 on 20.03.2020 against the Corporate Debtor, Kriti Prakashan Private Limited.

ii.

NCLT Allahabad Bench vide order dated 13.06.2022 admitted Section 7 application and initiated CIRP against the corporate debtor. Mr. Aditya Agarwal was appointed as IRP.

iii.

By order dated 15.06.2022, another IRP Anil Kumar Mittal was appointed.

iv.

On 19.06.2022, IRP made a publication inviting claim from all the creditors by 30.06.2022.

v.

On 21.06.2022, SIDBI sent an email to the IRP about corporate debtor’s willingness to repay and settle full and final outstanding amount payable by the corporate debtor.

vi.

On 22.06.2022, corporate debtor paid the amount i.e., Rs.1,58,70,199/- to the SIDBI, who issued a No-Objection Certificate (NoC).

vii.

On 23.06.2022, ‘Form-FA’ was given to the IRP by the financial creditor.

viii.

On 25.06.2022, IRP on behalf of the financial creditor, SIDBI filed I.A. No. 182/2022 under Section 12A of the Code for withdrawal of the Company Petition.

ix.

The Appellant, Himanshu Singh, Suspended Director of the corporate debtor also filed a Comp. App. (AT) (Ins.) No. 708/2022 challenging the order initiating CIRP against the corporate debtor, which appeal was disposed of on 29.06.2022 accepting the request of the counsel for the appellant for withdrawal of the Company Appeal. This Tribunal also noticed that Section 12-A application has already been filed by the IRP. Appellate Tribunal directed that till the disposal of the I.A. under Section 12A, the implementation of the impugned order shall remain stayed.

x.

On 30.06.2022, HDFC Bank, another financial creditor of the corporate debtor submitted a claim of Rs.4,30,74,985/- to the IRP. HDFC’s claim was not being collated by the IRP, in view of the Order dated 29.06.2022 passed by this Tribunal, HDFC Bank filed an I.A. 200/2022 before the Adjudicating Authority praying for permitting intervention of the applicant.

xi.

It was further prayed that the application filed by the IRP for withdrawal of the CIRP be rejected. Both the applications i.e., I.A. No. 200/2022 & I.A. No. 182/2022 were heard by the Adjudicating Authority and by separate order dated 13.02.2025, I.A. No. 200/2022 was allowed whereas by Order of the same date dated 13.02.2025, I.A. No. 182/2022 filed under Section 12A by the IRP has been rejected.

xii.

The Appellant, Suspended Director of the corporate debtor aggrieved by both the aforesaid orders have filed these appeals.”

“24.

We are of the view that Adjudicating Authority has rightly allowed the I.A. No. 200/2022 filed by the HDFC Bank opposing the 12A application for withdrawal. The claim was filed by HDFC within the time given by the IRP is a relevant factor and any objection raised by the HDFC Bank to the 12A application cannot be said to be meritless. The Adjudicating Authority has taken into consideration all relevant factors including the quantum of the claim admitted and the quantum of the claim settled with the SIDBI. Adjudicating Authority is not mere post office who has to allow the withdrawal filed under 12A which is filed before the constitution of the CoC which is the ratio of the judgment of the Hon’ble Supreme Court in ‘GLAS Trust Company LLC’ (Supra).

25.

We, however, hasten to add that mere fact that a stakeholder of the corporate debtor before constitution of the CoC has filed an objection, itself may not be a reason to reject 12A application. Adjudicating Authority has to advert to the relevant factors which may include the nature and quantum of claim of the stakeholders. In a case where Adjudicating Authority finds that substantial and majority of claim has already settled with the corporate debtor that may be a factor which may weigh to the Adjudicating Authority in allowing 12A application. No straight jacket formula can be laid down for adjudication by the Adjudicating Authority of a 12A application and the objections filed therein. Facts of each application under 12A and objection therein need to be looked into before taking a decision as to whether the application under 12A be allowed or rejected.”

“3.

During the pendency of the application i.e. CP (IB) No. 36/CB/2022, the CD paid the principal amount to the Operational Creditor/MSTC. However, before the matter could have been finally settled between the CD and OC/MSTC, the application under Section 9 filed by the OC/MSTC was admitted on 12.06.2025.”

“27.

We do not agree with the contention of the Appellant that since the FC has already filed CP No. 58 of 2024, therefore, he may pursue the said petition instead of intervening in the present case. At this stage, we would observe that in the present case the claim set up by the FC is more than the threshold amount of Rs. 1 Cr., therefore, he is in a position to file the application under Section 7 but in case, the claim of the FC, hypothetically, is less than 1 Cr. then he would not be in a position to file his own petition under Section 7 and in that situation the only course available to the FC is to file the claim on Form C before the IRP. In that scenario, he would be a ‘concerned person’ as observed by the Hon’ble Supreme Court in 63(ii) of the judgment in the case of Glass Trust Company LLC (Supra), therefore, in our considered opinion, in the presence of the FC/concerned person, this matter cannot be disposed of by this Court by way of a settlement with the other three OCs and the procedure which has been laid down under the Code and Regulation i.e. resorting to Section 12A and 30A has to be followed as held by the Hon’ble Supreme Court in the case of Glass Trust Company LLC (Supra).

28.

With these observations, we do no find any merit in the contention of the Appellant, however, while disposing of this appeal, we relegate the Appellant to take its remedy in accordance with law much less by filing an appropriate application through IRP before the Tribunal in terms of Section 12A and 30A. If any such effort is made by the Appellant within a period of 15 days, the IRP may file the application before the Tribunal. The order of stay dated 18.06.2025 shall continue till the application, intended to be filed by the Appellant through the IRP, is decided in one way or other. The said FC shall also be at liberty to file an appropriate application before the Tribunal to contest the said application in accordance with law.”

“3.

The OCs filed a petition under Section 9 IBC before NCLT, stating a total outstanding amount of Rs 1,31,00,825 against the CD. This was registered as CP (IB) No. 503 of 2019.

4.

NCLT by order dated 1-3-2021 [Huhtamaki PPL Ltd. v. Manpasand Beverages Ltd., 2021 SCC OnLine NCLT 18318] passed an order admitting the petition and initiating CIRP. Two days thereafter i.e. 3-3-2021, the OCs and the CD entered into a settlement wherein the CD was required to pay an amount of Rs 95.72 lakhs. The above settlement was arrived at even before the Committee of Creditors (in short “CoC”) could be constituted.

5.

On 4-3-2021, the OCs received Rs 50 lakhs and again on 8-3-2021, it received the balance amount of Rs 45.72 lakhs. Thus, the total amount to be paid as per the settlement, was paid to the OCs. The interim resolution professional (in short “IRP”) on 10-3-2021 moved an application under Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (in short “the IBBI Regulations”) seeking withdrawal of CIRP against the CD. Along with it the application of OCs dated 9-3-2021 was also attached which was moved under Section 12-A IBC. The application for withdrawal was registered as IA No. 196 of 2021.”

“37.

Section 12-A IBC permits withdrawal of applications admitted under Sections 7, 9 and 10 IBC. It permits withdrawal of such applications with approval of 90% voting share of CoC in such manner as may be specified. The role of CoC and 90% of its voting share approving the said withdrawal would come into play only when CoC has been constituted. Section 12-A did not specifically mention withdrawal of such applications where CoC had not been constituted but at the same time it does not debar entertaining applications for withdrawal even before constitution of CoC. Therefore, the application under Section 12-A for withdrawal cannot be said to be kept pending for constitution of CoC, even where such application was filed before constitution of CoC. IBBI which had the power to frame regulations wherever required and in particular Section 240 IBC for the subjects covered therein had accordingly substituted Regulation 30-A dealing with the procedure for disposal of application for withdrawal filed under Section 12-A IBC. The substituted Regulation 30-A of the IBBI Regulations as it stands today clearly provided for withdrawal applications being entertained before constitution of CoC. It does not in any way conflict or is in violation of Section 12-A IBC. There is no inconsistency in the two provisions. It only furthers the cause introduced vide Section 12-A IBC. Thus, NCLT fell in error in taking a contrary view.

42.

Both the parties have relied upon para 82 of the judgment in Swiss Ribbons [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 : (2019) 213 Comp Cas 198] . According to the appellant, NCLT ought to have exercised its inherent powers under Rule 11 of the NCLT Rules whereas for the interveners it is submitted that this Court had observed that power under Rule 11 would be exercised after hearing all parties concerned. It may be noted that at the time when the application for withdrawal of the proceedings was filed the CoC was not constituted as such there could not have been any other parties concerned except the OC, CD and IRP. It was only because of the delay caused by NCLT in disposing of the applications under Section 12-A IBC and Regulation 30-A of the IBBI Regulations that large number of creditors filed their claims. The inherent powers are to be invoked in order to meet the ends of justice which, in our opinion, NCLT failed to invoke.”

“43.

Regulation 30-A of the IBBI Regulations provide a complete mechanism for dealing with the applications filed under such provision. The issue raised by the IRP regarding its claim for expenses is well taken care of under the said provision. Various safeguards have been provided in Regulation 30-A of the IBBI Regulations to be fulfilled by the OC which apparently have been fulfilled as there is no complaint in that regard either by the IRP nor it is apparent from the impugned order [Huhtamaki PPL Ltd. v. Manpasand Beverages Ltd., 2021 SCC OnLine NCLT 9952] of NCLT. Thus, the objection raised by the IRP does not merit any consideration in this appeal.

44.

For all the reasons recorded above, the impugned order [Huhtamaki PPL Ltd. v. Manpasand Beverages Ltd., 2021 SCC OnLine NCLT 9952] of NCLT cannot be sustained. The application filed under Regulation 30-A of the IBBI Regulations deserves to be allowed.”

“85.

The decision of this Court in Abhishek Singh [Abhishek Singh v. Huhtamaki PPL Ltd., (2025) 5 SCC 465 : 2023 SCC OnLine SC 349] rendered by a two-Judge Bench of this Court speaking through Vikram Nath, J. correctly identifies the legal framework. However, it is distinguishable from the present factual situation and the findings of this Court do not support the case of the respondents. The facts are comparable vis-à-vis the stage of the proceedings — the petition had been admitted, but the CoC had not been constituted. However, in that case, the IRP had moved an application under Regulation 30-A of the CIRP Regulations. Instead of adjudicating upon the application under Regulation 30-A, NCLT took the view that Regulation 30-A is a mere directory provision and dismissed the application. NCLT vacated the stay on the constitution of the CoC and directed that the application under Section 12-A be decided directly (i.e. including for compliance with the requirement of a ninety per cent voting share of the CoC). This Court set aside the order of NCLT on the ground that Regulation 30-A provides a complete mechanism for dealing with the applications filed under such a provision, and it is not necessary to get the approval of a ninety per cent voting share of the CoC if the application for withdrawal is moved before the constitution of the CoC.

On the other hand, in the present case, there was no application filed through the IRP before NCLT under Regulation 30-A at all. Therefore, this decision is not applicable to the present case.”