Failure to Comply with Mandatory Statutory Requirements Leads to Dismissal and Imposition of Costs
In a significant decision, the National Company Law Tribunal (NCLT) Kochi Bench, on July 21, 2026, dismissed an application filed by Union Bank of India for the withdrawal of insolvency proceedings against M/s. Air Travel Enterprises India Ltd. The application, filed under Rule 11 of the NCLT Rules, 2016, was rejected due to non-compliance with the mandatory statutory requirements under Section 12A of the Insolvency and Bankruptcy Code, 2016 (IBC).
The tribunal, comprising Shri Vinay Goel, Member (Judicial), and Shri Ravichandran Ramasamy, Member (Technical), highlighted the failure of the applicant, Union Bank of India, to adhere to the prescribed procedure for withdrawal of insolvency proceedings. The application was filed following a private settlement between the financial creditor and the corporate debtor. However, it did not fulfill the necessary statutory conditions, including obtaining the approval of ninety percent of the voting share from the Committee of Creditors (CoC).
The tribunal emphasized that the inherent powers under Rule 11 cannot be used to bypass or substitute the express statutory procedures provided under the IBC. The application’s lack of necessary pleadings regarding the stage of the Corporate Insolvency Resolution Process (CIRP) and the absence of required approvals from the CoC rendered it fundamentally defective.
The NCLT also criticized the casual and negligent approach of Union Bank of India in preparing the application. It pointed out glaring inconsistencies and material defects, reflecting a lack of due diligence. Consequently, the tribunal imposed a cost of Rs. 1,00,000 on the applicant, payable to the National Defence Fund, for wasting judicial time.
This ruling underscores the importance of strict compliance with statutory requirements in insolvency proceedings and highlights the collective nature of such proceedings, where private settlements cannot override the prescribed legal framework.
Bottom line:-
Application for withdrawal of insolvency proceedings filed under Rule 11 of NCLT Rules, 2016 dismissed due to failure to comply with mandatory statutory requirements under Section 12A of the Insolvency and Bankruptcy Code, 2016.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 12A, National Company Law Tribunal Rules, 2016 Rule 11
