Section 9 insolvency admission can be withdrawn after pre-CoC settlement, with inherent powers used to give effect to compromise.

A Section 9 insolvency admission may be set aside where the parties have entered into a full and final settlement before the Committee of Creditors is constituted. The note states that, because the operational creditor accepted the compromise and the record showed the settlement preceded constitution of the CoC, the Appellate Tribunal could invoke its inherent powers under Rule 11 of the NCLAT Rules, 2016 to give effect to the settlement. The insolvency application was treated as withdrawn and the corporate insolvency process was brought to an end.

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Issues: Whether the admission order under Section 9 of the Insolvency and Bankruptcy Code, 2016 could be set aside and the insolvency application withdrawn on the basis of a settlement reached before constitution of the Committee of Creditors, by invoking the inherent powers under Rule 11 of the NCLAT Rules, 2016.

Analysis: The settlement deed showed that the parties had arrived at a full and final settlement before the Committee of Creditors was constituted. The record also showed that the constitution of the Committee of Creditors took place after the settlement, and the operational creditor had accepted the compromise. In these circumstances, the admitted insolvency process no longer required continuation, and the inherent powers of the Appellate Tribunal could be exercised to give effect to the settlement and prevent further proceedings on a dispute that had already been resolved.

Conclusion: The impugned admission order was set aside, the Section 9 application was treated as withdrawn, and the insolvency proceedings against the corporate debtor were brought to an end.

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