Settlement With One Creditor Doesn't Prove Ability To Resolve Overall Financial Distress: NCLT Mumbai
The National Company Law Tribunal at Mumbai has refused to permit withdrawal of insolvency proceedings against Dharan Infra-EPC Limited, holding that settlement with one financial creditor does not establish the company's ability to resolve its overall financial distress when substantial dues to other creditors remain unpaid.
A Bench of Judicial Member Vinay Goel and Technical Member Charanjeet Singh Gulati dismissed the Interim Resolution Professional's application seeking withdrawal of the Corporate Insolvency Resolution Process along with a similar application filed by the company's suspended director.
"The ability of the Corporate Debtor to resolve its financial liabilities vis-a-vis its creditors is a relevant consideration while determining an application for withdrawal of CIRP. A settlement with one Financial Creditor, in the wake of significant larger amount pertaining to the other creditors remaining outstanding, does not, by itself, establish the Corporate Debtor's ability to resolve its financial distress.", the Tribunal observed.
Tata Capital Housing Finance Ltd had initiated CIRP against Dharan Infra EPC after the company defaulted on repayment of ₹28.04 crore. The NCLT admitted the insolvency petition on December 12, 2025 and appointed an IRP. Subsequently, the suspended director settled Tata Capital's dues by paying ₹10 crore.
Tata Capital confirmed full and final settlement through Form FA dated January 1, 2026, and consented to withdrawal. However, six other financial creditors opposed the move, claiming substantial outstanding dues. The IRP had informed the NCLAT that claims aggregating approximately ₹600 crore had been received.
The Tribunal observed that once CIRP is admitted, the proceedings become collective and concern all creditors, not merely the creditor who initiated insolvency.
It noted that several other creditors had submitted claims after their independent Section 7 petitions were dismissed following admission of the CIRP. Allowing withdrawal could require revival or fresh filing of those proceedings, resulting in multiplicity of litigation and delay.
The Tribunal further held that the Insolvency and Bankruptcy Code is intended to facilitate resolution in the interests of all creditors, rather than permit individual settlements to their exclusion. Questions concerning limitation of claims would be examined by the IRP and CoC during verification.
"The collective framework of the Code is intended to facilitate resolution in the interests of all creditors, rather than permit individual enforcement or settlement to the exclusion of other creditors. As regards the question of limitation of enforcement of claims, if any, the same shall be considered by the IRP and the CoC, as applicable, at the stage of verification and consideration of claims."
Since the CoC had not been constituted, tribunal said the statutory requirements were not satisfied.
Accordingly, both withdrawal applications were dismissed.
For the Applicants: Senior Advocate Vikram Nankani, Advocates Swapnil Balajiwale, Shawn Fernandes and Prachi Wazalwar
For the Intervenors: Advocates Akhil Sarathy, Shadab Jan, Shadab Jain, Narpat Singh, Rukshin Ghiara and Ishwar Ahuja I/b Raghavan Sarathy, ANM Global, AVM Global and Saga Legal.
For Tata Capital Housing Finance Limited: Advocates Sanjeev Singh, Sandipa Bhattacharjee, Anshita Argal and Kartik Sharma.
For the Resolution Professional: Advocates Kunal Kanungo, Tanushree Sogani and Atishay Jain