NCLAT Dismisses Appeal, Grants Liberty to Seek Withdrawal of CIRP Under Section 12A; CoC Constitution Deferred for Two Weeks [Read Order]

The Delhi Bench of the National Company Law Appellate Tribunal (NCLAT), dismissed an appeal filed by Lal Chand Morani against an order of the Adjudicating Authority admitting a Section 7 insolvency application initiated by Kotak Mahindra Bank Limited and granted the Appellant liberty to file an application under Section 12A of the Insolvency and Bankruptcy Code (IBC) for withdrawal of the Corporate Insolvency Resolution Process (CIRP), provided such an application is submitted within two weeks.

In the order dated 4-2-2025, the Adjudicating Authority admitted Kotak Mahindra Bank’s application under Section 7 after concluding that both the existence of debt and default had been clearly established. The Authority appointed an Interim Resolution Professional (IRP) to oversee the process. Lal Chand Morani, the Appellant, challenged this order, contending that he was prepared to liquidate the amount as indicated in Part IV of the Section 7 application.

During the proceedings, HDFC Bank, another financial creditor, sought and was permitted to intervene. The Tribunal noted that no settlement had been reached between the parties despite earlier discussions. The appellant’s counsel submitted that a proposal had been sent to Kotak Mahindra Bank and was under consideration by its Board of Directors. The HDFC Bank’s counsel informed the Tribunal that they had rejected a proposal submitted by the Appellant the previous night.

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The NCLAT relied on the Supreme Court’s decision in GLAS Trust Company LLC vs. BYJU Raveendran & Ors. in Civil Appeal No. 9986 of 2024, noted that if the suspended directors reach a settlement with the financial creditors, the appropriate course would be to file a Section 12A application before the Adjudicating Authority for withdrawal of the CIRP.

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The Tribunal observed that there was no reason to keep the appeal pending and dismissed it, granting the Appellant two weeks to file the Section 12A application.

The Tribunal also directed that the Committee of Creditors (CoC) need not be constituted during this two-week period, provided the Section 12A application is filed within the stipulated time. If no such application is filed, the CIRP will proceed as per law.

The bench, comprising Justice Ashok Bhushan (Chairperson), Justice N Sesha Sayee (Member-Judicial), and Arun Baroka (Member-Technical), dismissed the appeal.

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