Corporate Insolvency Resolution Process (CIRP) withdrawal under amended Section 12A is prospective; NCLT permits withdrawal in case of Kay Bee Cotgin Pvt. Ltd. as per erstwhile provisions
In a significant judgment dated August 20, 2026, the National Company Law Tribunal (NCLT), Chandigarh Bench, presided over by Members Kaushalendra Kumar Singh (Technical) and Khetrabasi Biswal (Judicial), clarified the applicability of the amended Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016 introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2026. The ruling came in the matter of Sandeep Kumar Chitkara (Resolution Professional) versus Punjab & Sind Bank concerning the withdrawal of the Corporate Insolvency Resolution Process (CIRP) initiated against Kay Bee Cotgin Pvt. Ltd.
The case arose from an application filed by the Resolution Professional seeking withdrawal of the CIRP which was admitted on March 10, 2026, prior to the amendment. The CIRP was initiated on a Section 7 petition filed by Punjab & Sind Bank. The bank and the suspended management had entered into a settlement before the amendment came into force on May 26, 2026. The bank filed Form FA for withdrawal before the Committee of Creditors (CoC) and obtained 100% voting approval for the withdrawal after the amendment date. The critical question was whether the new embargo on withdrawal under the amended Section 12A applied retrospectively to this case or if the withdrawal should be governed by the erstwhile law.
The NCLT extensively analyzed the legislative intent, statutory provisions, and Supreme Court precedents including Brilliant Alloys (P) Ltd. v. S. Rajagopal (2022), Swiss Ribbons (P) Ltd. v. Union of India (2019), and Vallal RCK v. Siva Industries and Holdings Ltd. (2022). The Tribunal highlighted that the 2026 amendment introduces a stringent embargo on withdrawal of CIRP applications which prohibits withdrawal before constitution of the CoC and after issuance of the first invitation for resolution plans. However, this amendment is prospective and applies only to CIRPs admitted on or after May 26, 2026.
The Tribunal reasoned that applying the new provision retrospectively would unjustly extinguish the right to withdraw under the old provision, a right that vested with the admission of the CIRP prior to amendment. It also noted that the General Clauses Act, 1897, protects rights and remedies accrued under repealed enactments. Furthermore, the amendment Act expressly provides transitional provisions for other sections but deliberately omits such for Section 12A, indicating a legislative intention of prospective application.
Concluding, the NCLT held that the withdrawal of CIRP in cases admitted prior to the amendment date must be governed by the erstwhile Section 12A. Since the settlement and Form FA were filed before May 26, 2026, and the CoC approved the withdrawal with requisite voting share, the Tribunal allowed the withdrawal application. Consequently, the CIRP initiated against Kay Bee Cotgin Pvt. Ltd. stands terminated and closed. The Resolution Professional was directed to hand over control to the suspended management and the Registrar of Companies was instructed to update the corporate debtor's status accordingly on the MCA portal.
This ruling affirms the principle that beneficial amendments that affect substantive rights are generally prospective unless expressly stated otherwise. It also reinforces the Code's objective of encouraging consensual resolution over liquidation by preserving the remedy of withdrawal in appropriate cases.
Bottom Line:
Withdrawal of Corporate Insolvency Resolution Process (CIRP) under Section 12A of the Insolvency and Bankruptcy Code, 2016 - Applicability of amended Section 12A introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 is prospective and does not apply to CIRPs admitted prior to the amendment.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 12A, Section 7, Section 9, Section 10, Section 21, Section 60(5)(c); Insolvency and Bankruptcy Code (Amendment) Act, 2026; IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 Regulation 30A; General Clauses Act, 1897 Section 6
Sandeep Kumar Chitkara v. Punjab & Sind Bank, (NCLT)(Chandigarh Bench) : Law Finder Doc Id # 2980725
