Post-admission settlements must follow Section 12A IBC procedure and cannot be summarily allowed.

The Appellant, a partner of the Corporate Debtor (an LLP), challenged the Adjudicating Authority’s order dated 08.05.2025, which admitted the partnership firm into the Corporate Insolvency Resolution Process (CIRP).

During the pendency of the appeal, a settlement was reached between the parties on 21.08.2025.

On 13.10.2025, the Tribunal passed an order setting aside the admission order and remanding the matter to the Adjudicating Authority to consider the settlement.

the Financial Creditor (Respondent) moved the present application (I.A. No. 869 of 2026) seeking clarification, arguing that the phrase "the Appeal is allowed" in paragraph 7 of the previous order was legally inconsistent with the procedure required for post-admission settlements.

1. Whether the phrase "the Appeal is allowed" in the Tribunal’s earlier order was legally appropriate given that CIRP had already commenced.

2. Whether the settlement and withdrawal of CIRP must strictly follow the statutory route prescribed under the Insolvency and Bankruptcy Code (IBC).

Section 12A of the Insolvency and Bankruptcy Code, 2016, which governs the withdrawal of an application admitted under Sections 7, 9, or 10.

Glas Trust Company LLC v. Byju Raveendran & Others [(2025) 3 SCC 625], which establishes that once CIRP has commenced, any settlement or withdrawal must comply with the prescribed legal route to protect the interests of all claimants, rather than being summarily decided by the Appellate Tribunal.

The Tribunal noted that once a Corporate Debtor is admitted into CIRP, the IRP may have received multiple claims that cannot be ignored through a private settlement between the primary parties.

Referring to the Glas Trust precedent, the Tribunal acknowledged it does not have the authority to simply "allow" an appeal and terminate CIRP based on a settlement concession; instead, the parties must move the Adjudicating Authority through the Section 12A route.

The Tribunal admitted that the use of the phrase "the Appeal is allowed" in the order dated 13.10.2025 was an "inadvertent error" that did not align with the law or the facts of the case, as the matter was meant to be relegated to a pre-admission stage for settlement processing.

It held that the appeal is "closed" (not "allowed") and the Adjudicating Authority’s order dated 08.05.2025 is set aside.

The matter is remanded to the Adjudicating Authority to allow the parties to move a plea for settlement as per law.

The Tribunal further ordered that if the settlement process fails, the Appellant is entitled to revive the appeal.

No costs were awarded.