### Regulation 12-A permits "updation" of claims, which includes the right of a creditor to withdraw.

In brief

The question

Whether a financial creditor has the right to withdraw its admitted claim from the CIRP.

The court held

The NCLAT set aside the NCLT’s order, holding that a creditor may update their claim by withdrawing it under Regulation 12A.

It also directed

The appeal was allowed, and the matter was remanded to the Adjudicating Authority to dispose of the application afresh.

The NCLT must specifically examine the legality of the claim satisfaction vis-à-vis the Section 14 moratorium and determine the liability for CIRP costs.

01Facts

The Corporate Debtor (CD) entered Corporate Insolvency Resolution Process (CIRP) on 28.04.2023.

¶ 2

The Appellant (Kotak Mahindra Bank) filed a financial claim on 26.05.2023, which was admitted by the Interim Resolution Professional (IRP), making the Appellant the sole member of the Committee of Creditors (CoC).

¶ 2-3

On 29.05.2023, the Appellant sought to withdraw its claim, stating it had taken a "commercial call" to stay out of the CIRP as the process was not cost-effective and it intended to pursue remedies under SARFAESI independently.

¶ 4-5, 9

The IRP moved an application (IA 3965/2023) seeking directions on whether the Appellant could withdraw.

The Adjudicating Authority (NCLT) dismissed the application on 11.03.2024, observing there is no provision in the Insolvency and Bankruptcy Code (IBC) to permit a claimant to withdraw its claim.

¶ 1, 13

02Issues

i.Whether a financial creditor has the right to withdraw its admitted claim from the CIRP.

¶ 12, 39

ii.Whether the term "updation of claim" under Regulation 12A of the CIRP Regulations, 2016, includes the power to withdraw a claim upon full satisfaction.

¶ 39-41

03Law Applied

Regulation 12A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, mandates a creditor to update its claim when satisfied partly or fully.

¶ 30, 39

Sections 18, 21, and 25 of the IBC regarding the duties of the IRP/RP regarding the collation of claims and constitution of the CoC.

¶ 26-27

The Supreme Court's ruling in *Swiss Ribbons Pvt. Ltd. v. Union of India*, which established that the RP possesses administrative rather than quasi-judicial or adjudicatory powers.

¶ 34

04Reasoning

Under Regulation 12A (introduced via amendment in 2021), a creditor is legally obligated to update their claim if it is satisfied from any source.

¶ 39

The literal and purposive interpretation of "updation" must include "withdrawal" in instances where a claim is fully satisfied.

¶ 39

Earlier precedents, like *Mr. K.N. Rajakumar*, were distinguished as they were decided prior to the notification of Regulation 12A.

¶ 38

A creditor with a fully satisfied claim would have zero voting share; therefore, compelling their continued participation in the CoC is illogical as they no longer hold a financial interest in the CD’s resolution.

¶ 40

While the IRP lacks the adjudicatory power to unilaterally permit withdrawal, the Adjudicating Authority is empowered to pass such orders upon an application.

¶ 41-42

05Holding

The NCLAT set aside the NCLT’s order, holding that a creditor may update their claim by withdrawing it under Regulation 12A.

¶ 42

The appeal was allowed, and the matter was remanded to the Adjudicating Authority to dispose of the application afresh.

¶ 43

The NCLT must specifically examine the legality of the claim satisfaction vis-à-vis the Section 14 moratorium and determine the liability for CIRP costs.

¶ 44

LawLens.NCLAT

Original Court PDF