NCLAT Refuses To Set Aside CIRP Admission On Post-Admission Settlement, Directs IRP To Approach NCLT

The National Company Law Appellate Tribunal (NCLAT) at New Delhi has refused to set aside an insolvency admission order solely on the basis of a settlement reached after the Corporate Insolvency Resolution Process (CIRP) had begun.

A bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha held that a settlement reached after admission of a Section 9 application cannot by itself efface the admission order or bring the CIRP to an end.

"The fact that Respondent No. 1, being the Operational Creditor, has given its unconditional consent to the settlement and to the setting aside of the admission order is undoubtedly a relevant subsequent circumstance. Likewise, the fact that the settlement amount has been agreed to be accepted in full and final satisfaction of the operational debt and that the CoC has not yet been constituted are circumstances which may be considered by the Adjudicating Authority while examining the appropriate application under Section 12A.However, these circumstances do not warrant this Appellate Tribunal bypassing the statutory mechanism which has been specifically provided for withdrawal of an admitted insolvency application,” the bench observed.

It held that the appropriate course was for the Interim Resolution Professional (IRP) to place the settlement before the National Company Law Tribunal (NCLT) and seek appropriate orders under Section 12A of the Insolvency and Bankruptcy Code, 2016 (IBC).

The appeal was filed by Vijaybhai Dhanjibhai Detroja, a shareholder and suspended director of Sanford Vitrified Pvt. Ltd., against the NCLT Ahmedabad Bench order admitting a Section 9 application filed by Vidres India Ceramics Pvt. Ltd. and initiating CIRP against the company.

Vidres India had claimed ₹2,26,40,900 as unpaid operational debt for bills raised between September 18, 2024 and March 12, 2025. ₹1,13,36,501 was paid during the proceedings, leaving ₹1,13,04,399.

During the appeal, the parties entered into a September 12 settlement for the remaining amount. Detroja entered into it in his individual capacity, not on behalf of Sanford Vitrified. Vidres India agreed to accept the amount in full and final settlement and consented to setting aside the admission order.

The NCLAT held that the settlement could not, by itself, end the CIRP. It relied on Section 12 of the Code.

Section 12A(2) provides that an admitted application cannot be withdrawn before the CoC is constituted or after the first invitation for submission of a resolution plan has been issued.

The bench relied on its recent ruling in Aayush Prashant Agarwal, Suspended Director of EPIC Yarns Private Limited v. Uma Export Limited & Anr., where a settlement reached after commencement of CIRP did not result in the NCLAT itself terminating the insolvency process. The IRP was instead permitted to approach the NCLT under Section 12A.

The NCLAT rejected the argument that the operational creditor's consent and the fact that the CoC had not yet been constituted allowed it to directly set aside the admission order.

“The statutory position governing withdrawal after admission, therefore, cannot be disregarded merely because the settlement is consensual between the parties before this Appellate Tribunal,” the bench observed.

The tribunal said the question was not merely whether the parties had settled their dispute, but how a CIRP that had already commenced could lawfully be brought to an end.

It therefore took the settlement on record but declined to directly set aside the admission order under Rule 11 of the NCLAT Rules, 2016. The IRP was given liberty to approach the NCLT under Section 12A with the settlement and the operational creditor's consent.

The NCLT was asked to consider the application in accordance with the amended Section 12A and take into account the circumstances of the settlement. It was requested to dispose of the application expeditiously, preferably within 15 days of receiving it.

The appeal and the Rule 11 application were disposed of accordingly. No costs were imposed.

For Appellant: Advocate Keith Varghese, 

For Respondents: Advocate Pranav,  Advocate Chetan Patel,  for IRP