Insolvency Process Can Be Withdrawn Before Formation of CoC, NCLT Chennai Reaffirms

The National Company Law Tribunal at Chennai has recently reaffirmed that a corporate insolvency resolution process (CIRP) may be withdrawn after admission but before the Committee of Creditors (CoC) is formed, while allowing the withdrawal of insolvency proceedings against Vees Properties Limited.

The tribunal relied on the Supreme Court's ruling in Glas Trust Company LLC v. BYJU Raveendran, which held that withdrawal may be permitted after admission but before constitution of the CoC, invoking its inherent powers under the NCLT Rules, 2016.

A coram of Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam observed,

“As per law, NCLT can consider withdrawal of CIRP Application, before formation of CoC, after hearing all the concerned parties.”

The proceedings began when Reliance Value Services Pvt Ltd initiated insolvency against Vees Properties, resulting in admission of the case on September 3, 2025. A public announcement was issued on September 6, 2025, inviting claims until September 17.

Five claims were filed, and claims totalling Rs 48.48 crore were admitted. Of these, Reliance Value Services was the only financial creditor, making it the sole claimant eligible to sit on the CoC with 100 percent voting share under the insolvency framework.

After admission, the financial creditor and the suspended promoters reached a settlement on September 23, 2025, for Rs 48.48 crore, including confirmation that Rs 3 crore had already been paid. The balance was secured through post-dated cheques issued personally by the promoters. Consent for withdrawal was submitted on September 22, 2025, following which the Interim Resolution Professional sought termination of the CIRP, stating that no stakeholder had objected and that insolvency costs and fees had been paid.

Given the submissions before it and the structure of the admitted claims, the tribunal noted that Reliance Value Services was the only financial creditor and therefore would have been the sole member of the Committee of Creditors had it been formed.

The tribunal stressed that it must independently assess requests for withdrawal and cannot simply endorse settlements as a formality without applying judicial scrutiny. Subsequently, on November 4, 2025, the tribunal allowed the withdrawal request and released the company from the rigours of the Code and handing over the control back to its board.