top of page

NCLAT Clarifies Timing for Filing Section 12A of the IBC Applications Post-Liquidation

Prefatory Note

In the case of Asha Chopra v. Hind Motors India Limited[i], the National Company Law Appellate Tribunal, New Delhi (‘NCLAT’) has, while critically examining the issue of withdrawal of application admitted for the initiation of the corporate insolvency resolution process (‘CIRP’) under section 12A of the Insolvency and bankruptcy code, 2016 (‘Act’), clarified the applicability of withdrawal applications filed after the initiation of the liquidation process and obligatory constitution of stakeholders’ consultation committee (‘SCC’) under reg. 31A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (‘IBBI Regulations’).

Brief Facts

  • The adjudicatory authority (‘AA’) had passed an order of commencement of the CIRP via order dated 09.03.2017, under s. 10 of the Act, and subsequently, the AA passed an order for liquidation vide order dated 12.09.2017.

  • The Applicants claiming to be the depositors of the corporate debtor (‘CD’) filed an application dated 24.05.2021 under s. 12A of the Act, thereby seeking a direction to the liquidator to arrange for the meeting of the committee of creditors (`CoC’) in relation to reg. 30A of the IBBI Regulation.

  • The Appellants also filed an interim application (‘IA’) thereafter, praying that the sale notice date 02.12.2022 be stayed. However, the AA rejected the IA vide order dated 31.05.2024. The AA dismissed the IA as not maintainable under s. 12A of the Act.

Aggrieved by such dismissal thus, the Appellant filed the present Appeal.

Issues

  • Whether an application for withdrawal of the CIRP be filed subsequent to the commencement of the liquidation proceedings?

  • Whether, in the facts of the present case, it was obligatory for the liquidator to constitute the SCC as per reg. 31A of the IBBI Regulations inserted in liquidation regulation with effect from 25.07.2019?

Held

While adjudicating upon the aforementioned issues, the NCLAT made the following  observations:

  • Under the Act’s statutory scheme, the IA could be withdrawn only during the CIRP period with the approval of 90% of the CoC’s vote shares. Moreover, the liquidation regulations do not address withdrawals under s. 12A of the Act.

  • Further, the NCLAT observed that compromise and arrangement under reg. 2B of the IBBI Regulations also negated submission of an application under s. 12A of the Act. Additionally, even the third Respondent was not inclined to compromise with the CD.

  • The NCLAT, while contemplating the second issue, held that the explanation to reg. 31A of the IBBI Regulations provided a complete answer to the submission of the Appellant that there was no requirement for the constitution of SCC in light of the facts of the present case, as liquidation had commenced on 12.09.2017. At the same time, reg. 31A was inserted by the notification dated 08.04.2022, which came into effect on 20.04.2022.

  • The explanation clarified that reg. 31A of the IBBI Regulations applies only to liquidation processes initiated on or after the regulation's effective date, clearly defining the liquidator's obligations.

Our Analysis

The NCLAT highlighted the critical distinctions between filing an application under s. 12A of the IBC during the CIRP and after the commencement of liquidation. It was held that a withdrawal application is permissible only during the CIRP, clearly segregating the operational phases of CIRP and liquidation. This demarcation underscores the procedural boundaries that govern insolvency proceedings. Furthermore, the NCLAT clarified that reg. 31A of the IBBI Regulations, which mandates the formation of a SCC, applies prospectively. This regulation applies only to liquidations initiated after its effective date, reinforcing the principle that regulatory changes are not retroactive. The NCLAT’s decision thus emphasizes the distinct procedural frameworks for CIRP and liquidation. It highlights the non-retroactive application of new regulations, offering critical guidance for insolvency professionals and legal practitioners.









End Note

[i] Company Appeal (Insolvency) No. 1425 -1428 of 2025 & I.A. No. 5180 – 5183 of 2024 dated 29.08.2024.









Authored by Arjun Singh Tamang, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.

Comments


bottom of page