NCLAT Confirms CIRP Withdrawal Barred Before CoC Constitution and After Form G Invitation Under IBC Amendment Act 2026

The National Company Law Appellate Tribunal (NCLAT) at Delhi has delivered one of the first significant rulings interpreting the substituted Section 12A of the Insolvency and Bankruptcy Code (IBC) as amended by the IBC Amendment Act 2026. The tribunal has confirmed that withdrawal from a Corporate Insolvency Resolution Process (CIRP) is now barred during two distinct phases: before the Committee of Creditors (CoC) is constituted and after the Resolution Professional issues the first invitation for resolution plans in Form G.

Background: Why Section 12A Was Overhauled

The IBC Amendment Act 2026, which received Presidential assent on April 6, 2026, and came into effect on May 26, 2026, entirely substituted Section 12A of the Code. The earlier provision, introduced in 2018, had allowed withdrawal at any stage with 90% CoC approval. In practice, this created a loophole: by March 31, 2026, the Insolvency and Bankruptcy Board of India (IBBI) recorded that 1,292 admitted CIRPs (roughly 14% of all admitted cases) had been withdrawn under Section 12A. Of these, 871 were initiated by operational creditors, reinforcing concerns that CIRP was being used as a coercive debt-recovery tool rather than as a genuine insolvency resolution mechanism.

In practice: Corporate lawyers advising operational creditors had developed a pattern of filing insolvency applications primarily to pressure corporate debtors into settling outstanding dues. Once payment was made, the application would be withdrawn. The 2026 amendment directly targets this misuse by narrowing the withdrawal window.

What the Amended Section 12A Provides

The substituted Section 12A now creates a three-phase framework:

• Phase 1 (Pre-CoC constitution): Withdrawal is barred. The applicant cannot withdraw the insolvency application once it has been admitted by the Adjudicating Authority (NCLT) and before the CoC is formed.

• Phase 2 (Post-CoC constitution, pre-Form G): Withdrawal is permitted with 90% CoC voting share approval. The CoC-approved application must be filed before the Resolution Professional issues the first invitation for resolution plans under Form G.

• Phase 3 (Post-Form G): Withdrawal is permanently barred. Once the Form G invitation has been issued, no withdrawal application can be entertained, regardless of settlement between the parties.

The NCLAT Ruling: Key Holdings

In its September 2026 order, the NCLAT Delhi bench comprising Judicial Member Mohd Faiz Alam Khan and Technical Member Naresh Salecha addressed an appeal where a corporate debtor sought withdrawal of CIRP proceedings on the ground that a settlement had been reached with the financial creditor after admission but before CoC constitution.

The tribunal held:

• No pre-CoC withdrawal: The substituted Section 12A(1) expressly bars withdrawal before the CoC is constituted. The earlier judicial practice of permitting pre-CoC settlements under the erstwhile Section 12A read with Rule 11 of the NCLT Rules is no longer available.

• Settlement does not override statutory bar: Even where parties reach a genuine settlement, the statutory framework does not permit withdrawal outside the designated window (Phase 2). The tribunal observed that Parliament deliberately closed both ends of the withdrawal window to prevent tactical use of CIRP.

• RP must continue duties: The Resolution Professional must continue to discharge CIRP responsibilities pending any disposal of a withdrawal application by the Adjudicating Authority, removing earlier ambiguity on this point.

Practical Implications for Stakeholders

For Operational Creditors

The ruling reinforces that filing a CIRP application as a pressure tactic for debt recovery carries significant risk. Once an application is admitted, the operational creditor cannot withdraw until after the CoC is constituted, which typically takes 30 to 45 days. During this period, the corporate debtor's management loses control to the Interim Resolution Professional, creating irreversible consequences for the debtor's business.

For Financial Creditors

Financial creditors holding at least 10% of the voting share in the CoC now have a narrow window to negotiate settlement-driven withdrawal. The 90% CoC threshold remains steep, and the window closes permanently once Form G is issued. This means financial creditors seeking withdrawal must move quickly and secure near-unanimous support.

For Resolution Professionals

The NCLAT's confirmation that the RP must continue working pending withdrawal applications removes the practical uncertainty that had earlier led some RPs to slow-walk the CIRP process while awaiting settlement outcomes.

How This Differs from the Pre-2026 Position

Under the erstwhile Section 12A, the Supreme Court in Brilliant Alloys Pvt. Ltd. v. S. Rajagopal (2024) had recognized that withdrawal could be sought at any stage, including before CoC formation, through an application under the inherent powers of the NCLT (Rule 11 of the NCLT Rules). The 2026 amendment legislatively overrules this position by introducing the express pre-CoC bar.

Similarly, there was no post-Form G bar under the earlier framework. Parties could theoretically seek withdrawal even after resolution plans had been invited, though such applications rarely succeeded. The 2026 amendment now makes this a statutory impossibility.

Wider Context: IBBI Proposed Regulations

The NCLAT ruling aligns with the IBBI's July 2026 Discussion Paper proposing amendments to the CIRP Regulations. Among other proposals, the IBBI recommended inserting a clarification in Regulation 30A confirming that the Resolution Professional shall continue to discharge responsibilities until a Section 12A withdrawal application approved by the CoC is decided by the Adjudicating Authority. The NCLAT's ruling effectively anticipates this regulatory clarification.

Sources and References

• Insolvency and Bankruptcy Code (Amendment) Act, 2026, Section 12A (substituted), effective May 26, 2026

• NCLAT Delhi, September 2026 (Judicial Member Mohd Faiz Alam Khan, Technical Member Naresh Salecha)

• LiveLaw report on NCLAT ruling

• IBBI Discussion Paper on Strengthening the Regulatory Framework, July 2, 2026

• IBBI Annual Data: 1,292 CIRP withdrawals under Section 12A as of March 31, 2026

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult qualified legal professionals before acting on any information contained herein.