India: Wıthdrawal Of Applıcatıons Under The Insolvency And Bankruptcy Code, 2016

Last Updated: 13 February 2019
Article by Nikhil Khurana and Nisarg Mehta

The National Company Law Tribunal, Mumbai ("NCLT") in the case of  Satyanarayan Malu vs SBM Paper Mills Limited ("Corporate Debtor") vide its Order dated 20th December, 2018 deliberated upon two questions of law viz., (i) whether an applicant who has filed an application for initiation of Corporate Insolvency Resolution Process ("CIRP") under Section 10 of the Insolvency Bankruptcy Code ("Code") on behalf of the Corporate Debtor can withdraw the same? and (ii) whether a resolution applicant who has submitted a resolution plan which has been approved by the Committee of Creditors of the Corporate Debtor can withdraw the same when the plan is placed before the NCLT for approval?


In the aforementioned case, the Corporate Debtor was under financial distress and was unable to repay its debts to Allahabad Bank ("Financial Creditor"). The Corporate Debtor through one of its director viz., Mr. Satyanarayan Malu ("CIRP Applicant") filed an application for initiation of CIRP under Section 10 of the Code.  The said petition was admitted by the NCLT vide its order dated 17th October, 2017 ("CIRP Order"). In pursuance thereof, CIRP was initiated, a moratorium was imposed and an Interim Resolution Professional ("IRP") was appointed by the NCLT.

In accordance with Section 21 of the Code, the Committee of Creditors ("CoC") of the Corporate Debtor was constituted comprising only one member, i.e the aforesaid Financial Creditor. The IRP in accordance with the Code, proceeded to publish an advertisement inviting 'Expression of Interest' ("Expression of Interest") from prospective Resolution Applicants.

The resolution plan filed by one M/s Khandesh Roller Floor Mills ("Resolution Applicant") was accepted by 66% of the Financial Creditors in the CoC. Thereafter in accordance with Section 30(6) of the Code, the IRP submitted the said resolution plan before NCLT for approval of the resolution plan which had been accepted by the CoC.

Simultaneously, the CIRP Applicant himself filed a withdrawal application under Section 12A of Code since the Corporate Debtor had made an offer of a one time settlement to the Financial Creditor, wherein the Corporate Debtor stated that it was agreeable to pay an amount greater than the amount offered by the Resolution Applicant.

Interestingly, the Resolution Applicant also filed an application for withdrawal of the Resolution Plan before the NCLT.


  1. Whether a Corporate Debtor who has filed a petition for initiation of CIRP (through its Director) under Section 10 is entitled to withdraw the same under Section 12A of the Code, especially when an Expression of Interest inviting resolution plans had already been published?


  • Based on the facts and circumstances as stated above, the NCLT observed that the CIRP Applicant is a Director of the Corporate Debtor and the application for initiation of CIRP under Section 10 is signed by him and now the CIRP Applicant himself is the signatory to the withdrawal application and thus, the CIRP Applicant is entitled to withdraw the same.

Before reaching this conclusion, the NCLT referred to Section 12A of the Code and Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 introduced vide notification dated 3rd July, 2018 ("Notification")

Section 12A of the Code:

"Withdrawal of Application under Section 7,9 and 10.

The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified.".

Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016

"Withdrawal of application.

(1) An application for withdrawal under section 12A shall be submitted to the interim resolution professional or the resolution professional, as the case may be, in Form FA of the Schedule before issue of invitation for expression of interest under regulation 36A.

(2) The application in sub-regulation (1) shall be accompanied by a bank guarantee towards estimated cost incurred for purposes of clauses (c) and (d) of regulation 31 till the date of application.

(3) The committee shall consider the application made under sub-regulation (1) within seven days of its constitution or seven days of receipt of the application, whichever is later.

(4) Where the application is approved by the committee with ninety percent voting share, the resolution professional shall submit the application under sub-regulation (1) to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

(5) The Adjudicating Authority may, by order, approve the application submitted under subregulation (4)."

After going through the above provisions, the NCLT held that the date of enforcement of the said Notification is from the date of publication in the official gazette and shall apply only to prospective CIRP commencing on or after the date of the Notification i.e. on or after 3rd July, 2018. The present CIRP commenced prior to 3rd July, 2018, and therefore, the application for withdrawal is maintainable since the Notification was not retrospective in nature.

  • The NCLT further held that rules / regulations of the Insolvency and Bankruptcy Board of India ("IBBI") do not control the provisions of the Code, but in fact it was vice-versa. Since, Section 12A of the Code does not require that a withdrawal application has to be made before an Expression of Interest has been published, the present withdrawal application is maintainable.
  • The aforesaid position has now also been affirmed by the Hon'ble Supreme Court of India in the order dated 14th December 2018 in the matter of Brilliant Alloys Private Limited vs Mr. S. Rajagopal & Ors.1 wherein the Hon'ble Supreme Court held that Regulation 30A has to be read along with Section 12A, which does not mention that an application for withdrawal is to be filed before invitation for expression of interest and therefore the condition under Regulation 30A can only be considered as directory in nature which would further depend on the facts and circumstances of each case as to whether a withdrawal application would be admissible or not after the invitation of expression of interest.
  1. Whether a withdrawal application filed by a Resolution Applicant, after approval of the resolution plan by majority vote of Committee of Creditors, is maintainable?


  • The NCLT answered this in the negative. The NCLT held that withdrawal of application by the Resolution Applicant at the stage when the resolution plan has already been approved by the CoC is to essentially thwart the CIRP. It is not appropriate for the Resolution Applicant to first bid and thereafter on its own, withdraw its application. However, based on the fact and circumstances in the above case, as the CIRP Applicant was granted the permission to withdraw the application, the present application of withdrawal by Resolution Applicant had become otiose. The NCLT held that since the main petition did not survive on account of withdrawal, then there was no requirement of restructuring the financial position the Corporate Debtor.
  • While referring to Section 33(1) of the Code, the NCLT observed that, in case if the NCLT did not receive a Resolution Plan under section under Section 30(6) of the Code or rejected the Resolution Plan under Section 31 of the Code, then in such case only left with the NCLT was to order the liquidation of the Corporate Debtor. 
  • Therefore, in the present case, the NCLT held that withdrawal application by such Resolution Applicant could not be entertained as the petition for withdrawal of CIRP by the CIRP Applicant has already been accepted by the NCLT.


  • In addition to the issues discussed above, the NCLT was posed with the question as to what would take precedence between the One Time Settlement (as proposed by the Corporate Debtor) or the resolution plan (as approved by the Committee of Creditors). The NCLT adopted the golden rule of interpretation of statutes and interpreted the Code keeping in mind the basic intent for which the Code has been formulated. The preamble to the Code mentions that the Code is enacted inter alia 'to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders'. The NCLT took a practical approach, to protect the interest of all stakeholders and to ensure the recovery of the debt, since the amount offered by the Corporate Debtor to the Financial Creditor under the One Time Settlement exceeded the amount proposed to be paid by the Resolution Applicant and thus decided to accept the withdrawal application filed by the CIRP Applicant.
  • This view of the NCLT has also been affirmed by the Hon'ble Supreme Court in the matter of Brilliant Alloys Private Limited vs Mr. S. Rajagopal & Ors., wherein it stated that the requirements laid down in the regulations are directory in nature.
  • In light of the ratio of the Apex Court in the above, it is highly likely that there may be a surge in the number of withdrawal applications under Section 12A of the Code. It is now for the consideration of the legislature as to whether it would be prudent to insert a time frame in Section 12A itself, to deter misusing the valuable time of an already overburdened judiciary and all the stakeholders.
  • Further, as regards the Resolution Applicant, the NCLT rightly decided to impose costs on the Resolution Applicant by retaining an amount of Rs. 25,00,000/- (Rupees Twenty Five Lakhs only) out of the earnest money deposited by the Resolution Applicant as deterrence, to be utilized towards the cost of CIRP and other expenses. An acceptance of a withdrawal application at a stage where the CIRP is over and the resolution plan has already been accepted by the CoC would be a blatant disregard of the precious time of courts/tribunal. It was necessary to discourage such an action and dismiss the withdrawal application filed by the Resolution Applicant by setting a compelling precedent.


1 Petitions for Special Leave to Appeal (C) No. 31557/2018

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions