Post-2026 IBC Amendment, CIRP Withdrawal Barred Before CoC Formation Or After Plan Invitation: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently clarified that the 2026 amendment to the Insolvency and Bankruptcy Code has made withdrawal of an admitted insolvency case more stringent.

An admitted case cannot be withdrawn before the Committee of Creditors is constituted or after the Resolution Professional issues the first invitation for resolution plans.

The bench of Officiating Chairperson Justice Yogesh Khanna, Technical Member Barun Mitra and Technical Member Ajai Das Mehrotra observed:

“The procedure for withdrawal of application for CIRP has now been made more stringent. The sub-Section 2 of Section 12A begins with a non obstante clause and states that application admitted under Section 7, 9 and 10 shall not be withdrawn prior to the constitution of CoC or after the first invitation for submission of resolution plan has been issued by the Resolution Professional.”

The tribunal was hearing an appeal filed by Aayush Prashant Agarwal, suspended director of Epic Yarns Private Limited, seeking closure of the Corporate Insolvency Resolution Process, or CIRP, initiated against the company on an application filed by its operational creditor, Uma Exports Limited.

The Mumbai Bench of the National Company Law Tribunal admitted Epic Yarns into CIRP on July 23, 2026, and appointed Klass Insolvency Resolution Professionals Private Limited as the Interim Resolution Professional.

A public announcement was made on July 25. It was published in two Mumbai-based newspapers the following day and uploaded on the designated website of the Insolvency and Bankruptcy Board of India. The company was a going concern with around 600 workers.

The suspended director, Epic Yarns and Uma Exports Limited, later entered into a tripartite settlement agreement on August 6. The order records that Rs 50 lakh was paid on July 23, followed by about Rs 2.57 crore on August 6.

By August 12, the Interim Resolution Professional had received only one claim, from the Employees' Provident Fund Organisation, for about Rs 1.29 crore. The Committee of Creditors had not yet been constituted. The Committee of Creditors is the body of financial creditors that takes key decisions during the insolvency process.

Agarwal argued that the operational creditor's dues had been fully settled and that continuing CIRP would serve no useful purpose. He also pointed out that the Committee of Creditors had not yet been constituted and that the claim of the company's sole financial creditor, State Bank of India, had not been received.

The tribunal distinguished the earlier decisions relied upon by Agarwal. In both cases, the settlement or payment had taken place before the company was admitted into CIRP. Here, Epic Yarns was admitted into CIRP on July 23, while the settlement agreement was executed on August 6.

It also noted that one of the earlier decisions relied upon by Agarwal had been decided before the 2026 amendment to the withdrawal provision. The amendment was enforced from May 26, 2026, and the amended provision restricts when an admitted insolvency case can be withdrawn.

The settlement agreement itself acknowledged that any withdrawal or closure of CIRP would be subject to compliance with the Insolvency and Bankruptcy Code and the regulations framed under it. It also provided that Uma Exports Limited would cooperate in submitting and executing the required forms and documents.

In view of the amended legal position, the tribunal held that the Interim Resolution Professional was at liberty to make an appropriate application before the National Company Law Tribunal under the Insolvency and Bankruptcy Code.

It requested the NCLT to dispose of such an application within 15 days of receiving it, in accordance with law.