NCLT Chandigarh Allows Kay Bee Cotgin CIRP Withdrawal, Says Amended IBC Sec. 12A Applies Prospectively

The National Company Law Tribunal (NCLT) at Chandigarh, on 20 August held that the restrictions introduced by the substituted Section 12A of the Insolvency and Bankruptcy Code, 2016, apply prospectively to Corporate Insolvency Resolution Processes (CIRPs) initiated on or after 26 May 2026.

A Bench comprising Judicial Member Khetrabasi Biswal and Technical Member Kaushalendra Kumar Singh allowed Resolution Professional Sandeep Kumar Chitkara's application to withdraw the CIRP against Kay Bee Cotgin Pvt. Ltd., holding that the erstwhile Section 12A would govern CIRPs admitted before 26 May 2026. The Tribunal observed:

“In other words, in all those continuing CIRPs, where Application under Section 7, 9 and 10 were admitted prior to 26.05.2026, whether the withdrawal of the CIRPs under Section 12A would be in accordance with the old provision or the new provision. The question has relevance as there could be a situation where the settlement was made between the original Applicant and the Corporate Debtor prior to 26.05.2026, the Form FA, as per the Regulation 30A was also filed before that date and the matter was placed for the consideration of the CoC, but by the time decision could be taken by the CoC, the provision for allowing withdrawal i.e. section 12A got amended.”

Punjab & Sind Bank filed a Section 7 application against Kay Bee Cotgin, and the Tribunal admitted it on 10 March 2026. The Bank, the sole financial creditor holding 100% voting share in the Committee of Creditors (CoC), subsequently settled the matter with the suspended management. It filed Form FA seeking withdrawal of the CIRP on 29 April 2026.

The CoC approved the withdrawal with 100% voting share on 6 June 2026. By then, Section 12A had been substituted with effect from 26 May 2026. The substituted provision bars withdrawal of an admitted application under Sections 7, 9 or 10 before constitution of the CoC or after the first invitation for submission of a resolution plan.

The Tribunal held that the substituted Section 12A could not apply retrospectively to CIRPs admitted before 26 May 2026. It observed that retrospective application could take away the settlement-based exit available to parties under the law applicable when the CIRP commenced.

Further, the Bench relied on Brilliant Alloys (P) Ltd. v. S. Rajagopal, Swiss Ribbons (P) Ltd. v. Union of India and Vallal RCK v. Siva Industries and Holdings Ltd. It also relied on Section 6 of the General Clauses Act, noting that accrued rights and remedies ordinarily survive repeal.

Accordingly, the NCLT allowed the withdrawal, closed the CIRP and directed the Resolution Professional to hand over control of Kay Bee Cotgin to the suspended management.