Written By: Apoorv Agarwal, Sanchit Aggarwal
1. Scope and Object of Insolvency and Bankruptcy Code
The Insolvency and Bankruptcy Code, 2016 is built on a simple but powerful shift, which is, insolvency is not a private recovery action, but a collective process for resolution of financial distress. Once a petition under Section 7, 9 or 10 is admitted, the proceeding ceases to remain a dispute only between the applicant creditor and the corporate debtor. It becomes a proceeding in rem. That is why the Code places the corporate debtor under moratorium, invites claims, constitutes a Committee of Creditors and then lets the statutory process move towards resolution or liquidation.
Yet, hard cases continue to test the limits of this principle. One such hard case arises where the corporate debtor has only one creditor in the process, that creditor is also the applicant who triggered CIRP, no other claims are received, and the suspended management deposits the entire amount claimed with interest. If the sole creditor still refuses to accept the money and insists that CIRP must continue, is the Tribunal helpless? Or can such insistence be treated as an abuse of the insolvency process?
This question lies at the heart of the recent order of the National Company Law Appellate Tribunal in Achal Kumar Jindal v. Sanjay Kumar Bhuwalka & Anr., Company Appeal (AT) (Ins) No. 2341 of 2024, decided on 30 June 2026. The NCLAT terminated CIRP against Sulojay Realty Private Limited after noticing that the Committee of Creditors consisted of only the petitioning financial creditor, the IRP had received no other claims, and the amount claimed by that creditor had been deposited before the Appellate Tribunal. The creditor refused to accept the amount. The NCLAT viewed this refusal, in the facts of a one-creditor CIRP, as an attempt to misuse the Code and its process.
The order is significant not because it lays down a broad rule that CIRP must end whenever debt is paid. That would be too wide and unsafe. It is significant because it raises a narrower and more difficult question: whether, after GLAS Trust Co. LLC v. BYJU Raveendran (2025) 3 SCC 625, there remains any residual space for the Appellate Tribunal to terminate a single-creditor CIRP on the ground of abuse of process where the Section 12A route is practically blocked by the very creditor whose claim has been fully secured.
2. The Statutory Frame: Section 12A is the Rule, Not a Technicality
Section 12A was introduced to provide a statutory route for withdrawal of an admitted insolvency application. The provision permits withdrawal of an application admitted under Sections 7, 9 or 10, but only with the approval of ninety per cent voting share of the Committee of Creditors, in the manner prescribed. Regulation 30A of the CIRP Regulations supplies the procedural mechanism.
The reason for this high threshold is not difficult to understand. After admission, the insolvency process does not remain the property of the original applicant. Other creditors may have claims. Employees, operational creditors, financial creditors, homebuyers and statutory authorities may all be affected. A private settlement between the applicant creditor and the corporate debtor may therefore not be sufficient to bring the entire process to an end. The law insists on the CoC’s approval because the process has acquired a collective character.
The Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, upheld the validity of Section 12A and recognised the logic of requiring overwhelming CoC approval. The Court treated the high threshold as a safeguard once the proceeding had crossed the stage of a bilateral dispute. Earlier, in Brilliant Alloys Pvt. Ltd. v. S. Rajagopal, 2018 SCC OnLine SC 3154, the Supreme Court had treated the then restriction in Regulation 30A regarding withdrawal after issuance of invitation for expression of interest as directory in appropriate facts. But that did not dilute the central position that withdrawal after admission has to be considered within the statutory structure.
That position became sharper after GLAS Trust Co. LLC v. BYJU Raveendran, (2025) 3 SCC 625. The Supreme Court disapproved the use of NCLAT’s inherent powers under Rule 11 to approve a settlement and close CIRP when the Code and the Regulations provided a specific mechanism under Section 12A and Regulation 30A. The Court emphasised that inherent powers cannot be used to bypass an express statutory route, especially in a process that affects creditors beyond the original applicant.
The general law after GLAS Trust is not that a Tribunal can freely invoke Rule 11 whenever settlement is offered. The general law is the opposite, where the Code provides a route, that route must ordinarily be followed. The real question is whether the NCLAT order falls within that general rule, or whether it carves out a fact-specific exception where the statutory route is rendered commercially meaningless by the conduct of a sole creditor.
3. What Makes the NCLAT Order Different
The facts before the NCLAT were not routine. The corporate debtor, Sulojay Realty Private Limited, had been admitted into CIRP on an application under Section 7. During the appeal, the focus shifted from the correctness of admission to the advisability of continuing CIRP. The NCLAT noticed three facts which appear to have driven the result. First, the CoC had only one member, namely the petitioning financial creditor. Secondly, the IRP stated that no other claims had been received. Thirdly, the appellant had deposited the entire amount claimed, together with interest, pursuant to the interim order of the Appellate Tribunal.
The creditor’s objection was legally orthodox. He argued that once debt and default were established, admission under Section 7 could not be faulted; that any post-admission withdrawal had to follow Section 12A; that GLAS Trust barred recourse to inherent powers; and that there was no concluded settlement because the creditor had never agreed to accept the money. The creditor also argued that Section 65 could not be invoked in appeal without proper pleadings and that refusal to settle could not be treated as malicious initiation of CIRP.
The NCLAT accepted the wider legal architecture but refused to let it produce what it considered an unjust result. It reasoned that the case involved only one creditor, who was also the sole member of the CoC. The money due to him had already been deposited and was being offered towards satisfaction of his claim. No other creditor had come forward. In that setting, the creditor’s refusal to accept repayment was not treated as an ordinary commercial decision. It was seen as a sign that the process was being pursued for something other than insolvency resolution.
This is the narrow point on which the order turns. The NCLAT did not say that every payment or deposit after admission must terminate CIRP. It did not say that Section 12A is optional. It did not say that the corporate debtor’s solvency is a general defence at the Section 7 stage. Rather, it asked whether the refusal of the only creditor, in a one-creditor CoC, to accept full repayment could be allowed to keep CIRP alive when the statutory purpose of resolution had practically disappeared.
The language of the order is strong. The NCLAT viewed the creditor’s insistence on continuation as an abuse of the Code, its philosophy and the judicial process. It invoked the idea underlying Section 65, which penalises fraudulent or malicious initiation of insolvency proceedings for a purpose other than resolution. The Tribunal’s reasoning was that if malicious intent becomes evident during the course of proceedings, the Tribunal need not wait passively and can act to prevent misuse of the Code.
4. The Grey Area After GLAS Trust
This is where the difficulty begins. GLAS Trust is a serious obstacle to any easy defence of the NCLAT order. The Supreme Court was clear that Rule 11 cannot become a parallel route for settlement where Section 12A and Regulation 30A specifically govern withdrawal. If the present order is read as a simple Rule 11 settlement order, it becomes vulnerable. A court may say that the NCLAT has done indirectly what GLAS Trust prohibits directly.
However, the present order may also be read differently. It may not be a settlement order at all. There was no concluded settlement because the creditor refused to accept the amount. It may instead be understood as an abuse-of-process order in an exceptional factual matrix where the sole creditor’s conduct destroyed the resolution purpose of CIRP. On this reading, Section 12A was not bypassed to approve settlement; rather, the Tribunal intervened because the statutory process was being used for a purpose alien to the Code.
This distinction is attractive, but not free from doubt. Section 65 speaks of fraudulent or malicious initiation of proceedings. The word “initiation” matters. If, on the date of filing and admission, there was a genuine financial debt and default, can later refusal to settle retrospectively convert the initiation into a malicious one? The creditor will say no. He will argue that a validly admitted Section 7 proceeding cannot become malicious merely because he refuses a post-admission offer. He may also say that the Code gives a creditor the right to participate in CIRP and that insistence on statutory process cannot, by itself, be treated as malice.
The answer may lie in keeping the exception narrow. There is a difference between a creditor refusing a haircut in a multi-creditor insolvency and a sole creditor refusing full payment when no other claims exist. There is also a difference between a corporate debtor making a vague settlement proposal and a deposit of the entire claimed amount with interest before the Tribunal. Likewise, there is a difference between terminating CIRP after third-party rights have crystallised and terminating it at an early stage where no resolution applicant or other creditor has entered the field. The NCLAT order is defensible only if confined to these exceptional features.
The decision in M. Suresh Kumar Reddy v. Canara Bank, (2023) 8 SCC 387, also needs careful handling. That case confirms that, at the admission stage, once financial debt and default are established, the Adjudicating Authority has very limited discretion to refuse admission on grounds such as solvency. But the NCLAT order does not really reopen the admission test. It proceeds on subsequent events during appeal. The controversy is therefore not whether Section 7 admission was correct, but whether continuation of CIRP remained legitimate after the only creditor’s claim had been fully secured and no other claim had surfaced.
The philosophy of the Code also cuts both ways. On one side, IBC is not a recovery mechanism. Courts have repeatedly cautioned against using insolvency as a pressure tactic or as a substitute for ordinary debt recovery. On the other side, the moment CIRP is admitted, the process serves wider institutional purposes: certainty, timelines, collective decision-making and creditor equality. An exception based on “abuse” must therefore be drawn with a thin brush. If drawn broadly, it may encourage promoters to deposit the applicant’s claim and seek exit from CIRP even where other claims are likely to arise or where the company is genuinely distressed. If drawn too narrowly, it may allow a sole creditor to weaponise the Code despite receiving complete commercial satisfaction.
That is why the order should be treated as opening a grey area, not closing one. It does not settle the law in the sense of creating a general right to terminate CIRP upon payment. It tests the outer edge of GLAS Trust by asking whether the statutory insistence on Section 12A can be applied mechanically where the CoC is a one-person body and that one person is the very creditor refusing full repayment.
5. Conclusion
The NCLAT order in Achal Kumar Jindal is important because it exposes a practical gap in the Section 12A framework. Section 12A works comfortably where there is a genuine CoC exercising collective commercial wisdom. It becomes more complicated where the CoC consists of only the applicant creditor and that creditor refuses full repayment for reasons that appear unrelated to insolvency resolution.
The safer way to understand the order is this, it does not create a broad proposition that CIRP can be terminated whenever debt is paid. It suggests, at most, a narrow abuse-of-process exception in a single-creditor CIRP where the entire claim is deposited, no other claims are received, no third-party rights have intervened, and the creditor’s refusal to accept payment appears to serve no insolvency purpose.
Even that proposition remains open to debate. GLAS Trust (Supra) has strengthened the discipline of Section 12A and has limited the use of inherent powers. Section 65 is textually directed at fraudulent or malicious initiation, not every hard bargain or refusal to settle. A higher court may therefore prefer a stricter statutory approach. Equally, a higher court may recognise that no insolvency statute should be allowed to become an instrument of punishment in the hands of a fully secured sole creditor.
For now, the decision is best read as a fact-sensitive intervention at the boundary between Section 12A, Section 65 and Rule 11. Its value lies not in announcing a settled rule, but in asking a difficult question: when the only creditor has been offered full satisfaction and no collective insolvency interest remains, does continuation of CIRP still advance the Code, or does it begin to defeat it?
