Withdrawal of insolvency application after settlement must follow the statutory process before CoC constitution; admission was unsustainable.

Withdrawal of a section 9 insolvency application after full settlement, where Form FA was filed before constitution of the Committee of Creditors, had to be processed under section 12A of the Insolvency and Bankruptcy Code read with Regulation 30A. The interim resolution professional was required to act within the prescribed withdrawal mechanism, and proceeding with constitution of the Committee of Creditors after settlement was inconsistent with the statutory scheme. Continuing business dealings and compliance directions concerning the underlying project were noted as relevant circumstances. The admission order could not be sustained, and the insolvency proceedings were set aside.

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Issues: Whether the admission of the section 9 insolvency application could be sustained after the operational debt had been settled and withdrawal was sought before constitution of the Committee of Creditors, and whether the interim resolution professional acted in accordance with the statutory scheme governing withdrawal.

Analysis: The settled amount had been paid, Form FA had been furnished, and the parties had moved for withdrawal before the Committee of Creditors was constituted. The withdrawal mechanism under section 12A of the Insolvency and Bankruptcy Code, 2016 read with Regulation 30A of the Insolvency and Bankruptcy Board of India (Corporate Insolvency Resolution Process for Corporate Persons) Regulations, 2016 required the interim resolution professional to process the withdrawal application within the prescribed time. The record also showed continuing business dealings between the parties and compliance directions issued by the Supreme Court concerning the underlying real estate project, both of which were material circumstances bearing on whether insolvency was warranted. The conduct of the interim resolution professional in proceeding with constitution of the Committee of Creditors after settlement was found to be inconsistent with the statutory framework.

Conclusion: The admission order under section 9 could not be sustained, the appeal was allowed, and the insolvency proceedings were set aside.

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