Pre-CoC CIRP withdrawal requires hearing all creditors and judicial evaluation of the Corporate Debtor’s solvency.

The Appellant, a suspended director of the Corporate Debtor (CD), challenged the Adjudicating Authority’s (NCLT, Mumbai) order dated 13.01.2026, which admitted the CD into Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC).

During the appeal, the Appellant and the Operational Creditor (Respondent No. 2) reached an amicable settlement.

Although an Interim Resolution Professional (IRP) had collated claims, the Committee of Creditors (CoC) had not yet been constituted.

The Appellant sought a withdrawal of the CIRP based on the settlement reached before the CoC's formation.

1. Whether the Adjudicating Authority is required to consider specific factors beyond the settlement between the petitioning creditor and the Corporate Debtor when an application for withdrawal is filed under Regulation 30A(1)(a) before the constitution of the CoC.

2. What illustrative factors should the Adjudicating Authority examine to satisfy the "relevant factors" requirement as mandated by the Supreme Court in the context of CIRP as a proceeding in rem?

Section 12A of the IBC, which allows for the withdrawal of an application admitted under Section 7, 9, or 10, and Regulation 30A(1)(a) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which governs withdrawals prior to the constitution of the CoC.

The precedent set in Glas Trust Company LLC v. Byju Raveendran [(2025) 3 SCC 625], which established that even in pre-CoC settlements, the NCLT must hear all "parties concerned" and consider "all relevant factors" because CIRP assumes the character of a proceeding in rem.

References were made to Uttara Food Feeds (P) Ltd. v. Mona Pharmachem [(2018) 15 SCC 587] and Swiss Ribbons v. UOI [(2019) 4 SCC 17] regarding the evolution of settlement laws under the Code.

The Tribunal reasoned that since CIRP is a proceeding in rem, a settlement with a solitary creditor does not automatically entitle the CD to a withdrawal, as other creditors' interests are at stake.

The Court interpreted the phrase "consider all relevant factors" from Glas Trust as a mechanism to balance the CD’s right to exit the process with the protection of other creditors.

The Tribunal noted that while the IBC presumes insolvency upon a single default, this may not always reflect the CD's actual solvency.

To bring objectivity to Section 12A applications under Regulation 30A(1)(a), the Tribunal enumerated several illustrative factors for the NCLT to consider: (i) NPA classification status; (ii) "wilful defaulter" or "fraud" tags; (iii) existing decrees for money realization; (iv) the status of debts to other creditors; (v) pending litigation affecting solvency; and (vi) overall creditworthiness/solvency based on balance sheets.

The Tribunal emphasized that these factors act as a "small window" for a solvent CD to exit the "padmavyuham" (entrapment) of insolvency proceedings.

The IRP is directed to file an application under Section 12A via Regulation 30A(1)(a) before the Adjudicating Authority, provided the IRP’s fees are paid in advance.

The Adjudicating Authority must then consider the application in light of the illustrative factors identified by the Tribunal.

The Appellant is granted the liberty to revive the appeal should the Section 12A proceedings fail.

No costs were awarded.