Pre-admission settlement closed the insolvency process, as the default had ceased before the Section 9 admission order.

Settlement reached before admission of a Section 9 application was treated as removing the subsisting default on the relevant date, so continuation of the corporate insolvency resolution process was found unwarranted. The tribunal noted that the settlement deed had been accepted by the operational creditor before the admission order was pronounced, and that the settlement had not been placed before the Adjudicating Authority in time. On that basis, the corporate insolvency resolution process was ordered to be closed, notwithstanding steps already taken by the interim resolution professional.

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Issues: Whether the corporate insolvency resolution process initiated on a Section 9 application was liable to be closed in view of the settlement reached between the parties before the admission order was passed.

Analysis: The settlement deed dated 28.06.2025 was accepted by the operational creditor, and the affidavit explained that the settlement could not be brought to the notice of the Adjudicating Authority when the order was pronounced on 30.06.2025. The record showed that the settlement had been concluded before the order admitting the Section 9 application, so the default no longer subsisted on the relevant date. In these circumstances, continuation of the corporate insolvency resolution process was found unwarranted, notwithstanding the steps already taken by the interim resolution professional pursuant to the admission order.

Conclusion: The corporate insolvency resolution process was ordered to be closed and the appeal succeeded.

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