Insolvency Process Can Be Withdrawn After Admission but Before CoC Formation, NCLT Chennai Reaffirms
Pranav B Prem
The National Company Law Tribunal (NCLT) Chennai Bench has reaffirmed that a corporate insolvency resolution process can be withdrawn even after admission but before the formation of the Committee of Creditors (CoC), while allowing the withdrawal of CIRP in respect of Vees Properties Limited. A coram of Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam relied on the Supreme Court’s ruling in Glas Trust Company LLC v. BYJU Raveendran, and held that in cases where the CoC has not yet been constituted, the NCLT may exercise its inherent powers under Rule 11 of the NCLT Rules, 2016, to permit withdrawal of insolvency proceedings after hearing all stakeholders. The Tribunal reiterated that withdrawal before formation of the CoC cannot be declined merely because the CIRP has been admitted, provided that the applicant substantiates settlement and no stakeholder raises objections.
The CIRP against Vees Properties began on 3 September 2025 on the basis of an application filed by Reliance Value Services Pvt Ltd, pursuant to which a public announcement was made on 6 September inviting claims until 17 September. As reflected in the IRP’s breakup of admitted claims, five claims were received and claims totalling ₹48.48 crore were admitted. Reliance Value Services was the only secured financial creditor, with 100 percent voting share, and therefore would have been the sole member of the CoC had it been constituted. After admission, the suspended promoters of the corporate debtor and the financial creditor reached a settlement on 23 September 2025 for payment of ₹48.48 crore, confirming that ₹3 crore had already been paid and the balance would be paid via post-dated cheques issued by the promoters in their individual capacity. The consent for withdrawal was submitted on 22 September, and the IRP subsequently moved an application under Section 12A, stating that insolvency costs and fees had been satisfied and no stakeholder had objected to the withdrawal.
While considering the application, the Tribunal emphasised that although settlements are relevant, the NCLT must independently apply judicial scrutiny rather than acting as a mere approving authority. It noted that the present case squarely falls under the category recognised by the Supreme Court—where the CIRP has been admitted but the CoC has not yet been formed—and therefore withdrawal may be considered upon hearing all concerned parties. The Tribunal also took note of the clarifications submitted by the IRP regarding settlement performance, including the financial creditor’s confirmation of receipt of ₹3 crore and the restructuring of post-dated cheques in compliance with insolvency law so that they were not issued in the name of the corporate debtor during CIRP.
The Tribunal observed that the financial creditor, being the sole secured creditor, would have constituted the entire CoC, and therefore no stakeholder’s interest would be prejudiced by allowing withdrawal. It further noted that no objections were raised by any party, and that the CIRP cost and IRP fees had been settled in accordance with the regulations. The Bench recorded that it was appropriate to invoke inherent powers under Rule 11 to meet the ends of justice, since the CoC had not been constituted and the withdrawal application was filed promptly following the settlement.
In conclusion, the Tribunal allowed the withdrawal application. The insolvency petition against Vees Properties Limited was dismissed as withdrawn, the company was released from the rigours of the Code, management was directed to be handed back to its Board of Directors, and the Interim Resolution Professional was discharged from his responsibilities.
Appearance
For Applicant: Advocate Gowthaman
For Corporate Debtor: Advocate Sanjay
Cause Title: Reliance Value Services Pvt Ltd Vs Vees Properties Ltd
Case No: CP(IB)/127(CHE)/2025
Coram: Judicial Member Sanjiv Jain, Technical Member Venkataraman Subramaniam
