Insolvency withdrawal based on an incorrect claim statement can be corrected where a creditor's timely claim was prejudiced.

An insolvency withdrawal order obtained under Section 12A of the Insolvency and Bankruptcy Code on an incorrect statement that no claim had been received could not stand where the Financial Creditor had in fact filed its claim within time. The erroneous representation to the Adjudicating Authority led to prejudice against the creditor, and that prejudice was not cured by later dismissal of the revival application. The NCLAT held that a withdrawal order based on a materially misleading factual foundation is open to correction, and revival of the corporate insolvency resolution process was justified.

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Issues: Whether the application seeking revival of the Corporate Insolvency Resolution Process was wrongly dismissed after withdrawal of the main petition had been obtained on an incorrect statement that no claim had been received from any claimant.

Analysis: The record showed that the Financial Creditor had submitted its claim before the last date for filing claims, but the Resolution Professional represented to the Adjudicating Authority that no claim had been received and no claim was outstanding. That statement was later admitted to have been erroneous. The withdrawal order under Section 12A of the Insolvency and Bankruptcy Code, 2016 was thus passed on a misleading factual foundation, and the resulting prejudice to the Financial Creditor could not be ignored. The dismissal of the revival application, despite the admitted error and the consequent prejudice, did not cure the injustice caused by the earlier withdrawal.

Conclusion: The dismissal of the revival application was unsustainable and was set aside. Revival of the insolvency process was warranted in favour of the Appellant.

Ratio Decidendi: An insolvency withdrawal order obtained on a materially incorrect statement regarding receipt of claims cannot be insulated from correction, and revival is justified where the misrepresentation prejudices a creditor whose claim had already been submitted.

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