Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that if a full settlement is reached between the corporate debtor and the sole financial creditor, and no other claims have been received in the Corporate Insolvency Resolution Process (CIRP), then the requirement to file an application under Section 12A of the Insolvency and Bankruptcy Code, 2016 (IBC) can be dispensed with. Relying on the Supreme Court’s decision in GLAS Trust Company LLC v. BYJU Raveendran & Ors., the Tribunal exercised its inherent powers to close the CIRP and set aside the order admitting the insolvency petition.

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The matter arose from an appeal filed by Sachin Malde, suspended Director of the Corporate Debtor, challenging the NCLT Mumbai’s order dated 02.01.2024 that had admitted a Section 7 application filed by Financial Creditor Hemant Nanji Chheda. The Appellant argued that the Section 7 application was admitted without affording an adequate opportunity to present a defence, and that a modification application seeking correction of certain incorrect factual observations was pending before the Adjudicating Authority at the time of admission.

The NCLAT had initially stayed the admission order by way of an interim order dated 19.01.2024. The Appellant was directed to deposit ₹5 crore to demonstrate bona fide intent, and notice was issued to the respondents. The said amount was duly deposited before the Tribunal.

Subsequently, the Appellant filed an interlocutory application (IA No. 1617 of 2025), bringing on record the settlement terms between the parties dated 02.01.2024, under which the Financial Creditor agreed to accept the deposited amount of ₹5 crore in full and final settlement of its claim. Based on these developments, the Appellant sought closure of the insolvency proceedings.

The Resolution Professional (RP), through counsel, confirmed that although a public notice inviting claims had been issued following admission of the CIRP, no claims were received other than that of the Financial Creditor. On this basis, the Appellant argued that requiring the Financial Creditor to file a formal application under Section 12A of the Code would be an unnecessary formality.

Agreeing with this submission, the Tribunal observed that since no other creditors had come forward and the claim of the sole Financial Creditor stood fully settled, the requirement of a Section 12A application was not mandatory in such circumstances. It held: “We are of the view, that in the facts of the case as noticed above, there is no necessity to ask the Financial Creditor to file 12A Application.”

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The Tribunal placed reliance on the Supreme Court’s ruling in GLAS Trust Company LLC v. BYJU Raveendran & Ors. (Civil Appeal No. 9986 of 2024), which had upheld the use of inherent powers to close CIRP proceedings where appropriate, particularly when the insolvency process is no longer required due to a complete and undisputed settlement.

Accordingly, the NCLAT set aside the impugned order admitting the Section 7 application. The Tribunal directed that the amount deposited with the Registry under the interim order be released to the Financial Creditor in terms of the settlement. The Tribunal also clarified that the IRP’s expenses, including publication costs, would be borne jointly by the Financial Creditor and the Corporate Debtor, and that the IRP must communicate his expenses within two weeks, to be reimbursed within four weeks thereafter. The appeal was thus disposed of, marking the closure of CIRP proceedings against the Corporate Debtor without invoking Section 12A, based purely on the inherent powers of the Appellate Tribunal in a situation where the insolvency process was rendered unnecessary by a full and final settlement.

Appearance

For Appellant: Mr. Krishnendu Datta, Sr. Advocate with Mr. Anish Agarwal, Mr. Tejas Agarwal and Mr. Pratik Chakma, Advocates

For Respondent: Mr. Rishi Kumar Singh Gautam, Advocate for R-2. Mr. Kartik Pandey, Advocate for R-1.

Cause Title: Sachin Malde v. Hemant Nanji Chheda & Anr.

Case No: Company Appeal (AT) (Insolvency) No. 123 of 2024

Coram: Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]

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