Operational Creditor as dominus litus may withdraw Section 9 proceedings upon settlement despite third-party intervention.

In brief

The question

1. Whether a Section 9 petition can be withdrawn during the appellate stage based on a settlement agreement between the Corporate Debtor and the Operational Creditor

The court held

The NCLAT held that the settlement between the parties rendered the impugned admission order dated 24.02.2026 insignificant

It also directed

The request for impleadment by the third party was rejected due to lack of standing and procedural non-compliance

Consequently, the Tribunal allowed the withdrawal of the Company Petition (CP(IB) No. 88/2024) in terms of the MoU dated 13.03.2026 and dismissed the Company Appeal as withdrawn

01Facts

The Appellant (Corporate Debtor) challenged an order dated 24.02.2026 passed by the NCLT, Chennai Bench-II, which admitted a Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC) filed by Respondent No. 1 (Operational Creditor)

pp. 1-2

Following the initiation of the Corporate Insolvency Resolution Process (CIRP), the parties entered into a Memorandum of Understanding (MoU) dated 13.03.2026 to settle the outstanding dues for a total sum of ₹1.80 Crores

pp. 2-4

Under the terms, Respondent No. 1 received a part payment of ₹1.30 Crores and post-dated cheques for the balance, subsequently expressing its willingness to withdraw the original Company Petition

pp. 4-5

During the appellate proceedings, a third party, M/s. Ishaan Solar Power Ltd., sought impleadment to oppose the settlement, despite not being a party to the original Section 9 proceedings

p. 6

02Issues

i.1. Whether a Section 9 petition can be withdrawn during the appellate stage based on a settlement agreement between the Corporate Debtor and the Operational Creditor

p. 2

ii.2. Whether a third party, who was not a party to the original proceedings before the Adjudicating Authority, has the standing to be impleaded in the appeal to oppose the withdrawal of the main petition

pp. 7-8

03Law Applied

Section 9 of the Insolvency and Bankruptcy Code, 2016, which governs the initiation of CIRP by an operational creditor

p. 2

Procedural requirements under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016

p. 6

Legal principle of Dominus Litus, which designates the petitioner as the master of the suit with the inherent right to withdraw the proceedings

p. 8

Provisions in the judgment · 1 · Linked ones open on LawLens

Insolvency and Bankruptcy Code, 2016. Section 9

04Reasoning

The Tribunal observed that the Operational Creditor (Respondent No. 1), as the initiator of the Section 9 application, had voluntarily reached a settlement and recorded a "No Objection" to the closure of the case

p. 2, 5

The Tribunal reasoned that if the original applicant intends to withdraw the petition, the legal basis for continuing the CIRP against the Corporate Debtor evaporates

p. 2, 9

Addressing the intervention by M/s. Ishaan Solar Power Ltd., the Tribunal noted that the entity was neither a party to the Section 9 application nor had it filed a formal impleadment application in the registry

p. 6, 8

Invoking the doctrine of Dominus Litus, the court held that since Respondent No. 1 is the master of its own proceedings, no third party can impose itself as a petitioner or obstruct the withdrawal of the petition, especially when such a party was not part of the litigation at the first instance

p. 8

05Holding

The NCLAT held that the settlement between the parties rendered the impugned admission order dated 24.02.2026 insignificant

pp. 8-9

The request for impleadment by the third party was rejected due to lack of standing and procedural non-compliance

p. 8

Consequently, the Tribunal allowed the withdrawal of the Company Petition (CP(IB) No. 88/2024) in terms of the MoU dated 13.03.2026 and dismissed the Company Appeal as withdrawn

p. 9

LawLens.National Company Law Appellate Tribunal

Original Court PDF