Pre-CoC settlement allows withdrawal of an insolvency application; admission order and related insolvency steps were set aside.

Where a settlement is reached between the operational creditor and the corporate debtor before constitution of the Committee of Creditors, the NCLAT may invoke its inherent powers under Rule 11 to permit withdrawal of a Section 9 insolvency application. Once withdrawal is allowed at that pre-CoC stage, the admission order and all consequential insolvency measures cannot survive, including appointment of the Interim Resolution Professional, moratorium, freezing of accounts and publication of notice. The insolvency proceeding was therefore closed and the earlier process steps were set aside.

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Issues: Whether, after settlement between the operational creditor and the corporate debtor before constitution of the Committee of Creditors, the insolvency application admitted under Section 9 of the Insolvency and Bankruptcy Code, 2016 could be withdrawn by invoking the Tribunal's inherent powers under Rule 11 of the NCLAT Rules, 2016, and whether the consequential orders passed in the insolvency process were liable to be set aside.

Analysis: The settlement was reached before the Committee of Creditors was constituted. In such a situation, the Tribunal could exercise its inherent powers to permit withdrawal of the application, consistent with the principle recognised for settlement at a pre-Committee stage. Once withdrawal was allowed, the admission order and all consequential steps taken pursuant to it, including appointment of the Interim Resolution Professional, moratorium, freezing of accounts, and publication of notice, could not survive.

Conclusion: The withdrawal was permitted, the admission order and consequential insolvency ures were set aside, and the insolvency proceeding stood closed.

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