Insolvency withdrawal before CoC can be sought directly, but after constitution it must follow the Section 12A process.

Before constitution of the Committee of Creditors, withdrawal or settlement of a corporate insolvency process may be pursued directly before the adjudicating authority using its inherent powers, alongside the regulatory route under Regulation 30A. Once the Committee of Creditors is constituted, withdrawal must proceed through the statutory Section 12A mechanism and be considered by the Committee. In the stated facts, the matter was remitted for urgent consideration of the withdrawal request through that statutory process, with the appellant allowed to pursue settlement and further progress in the insolvency process restrained until the decision was taken.

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Issues: (i) Whether, before constitution of the Committee of Creditors, an application for withdrawal or settlement could be pursued directly before the adjudicating authority in addition to the mechanism under Regulation 30A; (ii) Whether, in the facts of the case, the matter required remand with directions enabling consideration of withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether, before constitution of the Committee of Creditors, an application for withdrawal or settlement could be pursued directly before the adjudicating authority in addition to the mechanism under Regulation 30A.

Analysis: The legal framework recognised that once the insolvency process is admitted, the proceeding is collective in nature. Before the Committee of Creditors is constituted, a party may approach the adjudicating authority directly and seek withdrawal or settlement by invoking its inherent powers, while also resorting to the regulatory withdrawal mechanism. The later constitution of the Committee of Creditors changes the position, because withdrawal thereafter requires consideration by the Committee under the statutory threshold. The IRP is expected to place the withdrawal request promptly and assist in the process.

Conclusion: Yes. Before constitution of the Committee of Creditors, a withdrawal or settlement request could be pursued directly before the adjudicating authority alongside the prescribed regulatory route.

Issue (ii): Whether, in the facts of the case, the matter required remand with directions enabling consideration of withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016.

Analysis: As the Committee of Creditors had already been constituted, the proper course was to proceed through the statutory withdrawal procedure under Section 12A. The appeal was not treated as warranting interference with the impugned order, but the process required urgent consideration by the Committee of Creditors, with participation of the appellant and cooperation of the IRP, and no further steps in the CIRP were to be taken until that decision was made.

Conclusion: The matter was remitted for urgent consideration of the withdrawal request through the statutory process.

Final Conclusion: The appeal was disposed of with directions that the withdrawal request be considered urgently through the Committee of Creditors, while preserving the appellant's opportunity to pursue settlement and limiting further progress in the insolvency process until that decision.

Ratio Decidendi: Before constitution of the Committee of Creditors, withdrawal or settlement in a corporate insolvency process may be pursued directly before the adjudicating authority using its inherent powers, but once the Committee of Creditors is constituted, withdrawal must move through the statutory Section 12A mechanism.

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