IDBI Bank and Operational Creditors Reach Full and Final Settlement; Tribunal Permits Closure of Insolvency Proceedings Without Prejudice to Other Creditors' Rights
In a significant development under the Insolvency and Bankruptcy Code, 2016 (IBC), the National Company Law Tribunal (NCLT), Principal Bench, New Delhi, on September 30, 2026, allowed the withdrawal of the Corporate Insolvency Resolution Process (CIRP) initiated against M/s HIL (India) Limited, a Government of India enterprise. The application for withdrawal was filed under Section 12A of the IBC by the Interim Resolution Professional (IRP), following a comprehensive settlement reached between the financial creditor IDBI Bank Limited, the corporate debtor, and all operational creditors who intervened in the proceedings.
The CIRP against HIL (India) Limited was admitted on July 30, 2025, based on an application filed by IDBI Bank under Section 7 of the IBC. The Insolvency Resolution Professional appointed was Mr. Rohit Sehgal. During the pendency of the appeal before the National Company Law Appellate Tribunal (NCLAT), the suspended director of the company and the financial creditor negotiated a settlement. The NCLAT upheld the admission order but granted liberty to the parties to apply for withdrawal of the CIRP under Section 12A.
Pursuant to this direction, the IRP filed the withdrawal application on April 2, 2026. The NCLT also included M/s Wanksons Chemical Industries Pvt. Ltd., an operational creditor with a substantial claim, as a respondent after it initially objected to the withdrawal. However, following negotiations, Wanksons Chemical Industries also settled its claim in full and withdrew its objections.
The Tribunal noted that the settlement agreements with all intervening creditors, including Associated Road Carriers Ltd., ATO (I) Ltd., Sekai Private Limited, and M/s Wanksons Chemical Industries Pvt. Ltd., were in full and final settlement of claims, with clear repayment schedules and closure terms. This facilitated the IRP's application for withdrawal of the CIRP before the constitution of the Committee of Creditors (CoC), as permitted by the pre-amendment provisions of Section 12A and Regulation 30A of the Insolvency and Bankruptcy Board of India (IBBI) Regulations, 2016.
The NCLT emphasized that the withdrawal order and settlements recorded with the intervening creditors do not extinguish the rights of other creditors who had either filed claims but not intervened or who may still file claims in the future. Such creditors are free to pursue their remedies as per law.
The Tribunal directed the IRP to hand over all records, documents, and information collected during the CIRP to the suspended Board of Directors and discharged the IRP from further duties related to the CIRP. Additionally, IDBI Bank was directed to bear all expenses and pay fees incurred by the IRP from the commencement of the CIRP until the date of the order.
Consequently, the company petition CP(IB)-404(PB)/2024 filed by IDBI Bank was dismissed as withdrawn.
This judgment underscores the efficacy of negotiated settlements in insolvency proceedings and clarifies procedural aspects of withdrawal applications under Section 12A of the IBC, especially prior to constitution of the CoC.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Withdrawal of CIRP under Section 12A before constitution of Committee of Creditors - Where financial creditor settled with corporate debtor and all intervening operational creditors also settled their claims, application through IRP is maintainable and liable to be allowed - Such withdrawal does not extinguish rights of other non-intervening creditors to pursue remedies in accordance with law - IRP to hand over records to suspended board and applicant financial creditor directed to bear CIRP expenses and IRP fees.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 7, Section 12A; IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 Regulation 30A
