Case Note & Summary
The appeal was filed by the suspended director of Prolific Papers Pvt. Ltd., challenging the order admitting the company into Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The operational creditor, Mangal Sales Corporation, alleged that the appellant defaulted on an operational debt of Rs. 1,69,48,652.14. The Adjudicating Authority reserved the petition for orders on 15.12.2025. Subsequently, on 23.03.2026, the parties entered into a Settlement Deed, agreeing on a payment plan to settle the claim, which included a provision for withdrawal of the petition. The last installment was paid on 23.03.2026, and an application for withdrawal was filed on 26.03.2026. However, the Adjudicating Authority admitted the Corporate Debtor into CIRP on 09.04.2026, despite the settlement. The appellant argued that the admission was unfortunate as the dues were settled before the order. The first respondent's counsel supported this claim, confirming receipt of the full amount prior to the order. The Tribunal noted that the application for withdrawal was filed before the final order and criticized the Adjudicating Authority for not considering the settlement. The Tribunal concluded that the admission into CIRP was inappropriate given the complete settlement of dues and set aside the order, allowing the withdrawal of the CIRP. No costs were awarded, and all pending interim applications were disposed of.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Admission into CIRP - Corporate Debtor's admission into CIRP was challenged on grounds of prior settlement of dues - Insolvency and Bankruptcy Code, 2016, Section 9 - The court held that since the entire amount was paid before the order was pronounced, the petition should have been allowed to be withdrawn, and the order admitting the Corporate Debtor into CIRP was set aside (Paras 6-7).
Issue of Consideration
Whether the Corporate Debtor's admission into Corporate Insolvency Resolution Process (CIRP) was justified despite the settlement of dues.
Final Decision
The appeal was allowed, the order dated 09.04.2026 passed by the Adjudicating Authority was set aside, and the CIRP wrongly initiated against the Corporate Debtor was directed to be withdrawn. No costs were awarded, and all pending interim applications were disposed of.
Law Points
- Corporate Insolvency Resolution Process
- Settlement Deed
- Operational Debt
- Withdrawal of Petition
