Mere Allegation Of Coercion, Threat, Or Fraud Without Prima Facie Proof Cannot Invalidate Withdrawal Of CIRP U/S 12A Of IBC: NCLAT Chennai

The National Company Law Appellate Tribunal, Chennai Bench, comprising Justice Sharad Kumar Sharma (Member-Judicial) and Jatindranath Swain (Member-Technical), has held that the withdrawal of the Corporate Insolvency Resolution Process (CIRP) u/s 12A of the IBC cannot be set aside on the mere allegation of coercion or threat unless that has been proved by sufficient evidence. Background of the Case The operational creditor filed an application before the adjudicating authority u/s 9 of the IBC, seeking initiation of CIRP against the corporate debtor. The adjudicating authority (NCLT, Amravati) admitted the application and appointed an interim resolution professional. The respondent approached the NCLAT against the decision of the adjudicating authority, but the same was dismissed by this tribunal. Aggrieved by that, the respondent approached the Apex Court in Civil Appeal No. 857-858/2025, Kalyan Muppaneni vs. M/s. K. Computers & Another. The Hon'ble Apex Court did not venture into the merits of the order, which was the subject of the challenge, and passed an order on 22.01.2025, disposing of the Civil Appeal, by observing that the parties have entered into a settlement agreement to withdraw the CIRP. The appellant (respondent in civil appeal) claimed that the settlement for withdrawal was executed under threat and coercion. However, the apex court observed that the claim of M/s. K Computers that the settlement agreement and Form FA were obtained under force, coercion, and threat are aspects to be adjudicated and decided in terms of provisions of the I & B Code. Contention of the Parties Before the NCLAT The appellant contended that the impugned order was passed based upon the settlement agreement, which was obtained by the respondent through “threat” and “coercion,” and hence the resultant order cannot be permitted to be sustained. It also contended that the impugned order doesn't satisfy the parameters prescribed under Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016. It argued that Rule 30A(1)(a) of the IBC lays down that the withdrawal application must be made on behalf of the applicant and that too within three days of its receipt. However, he was never an applicant to the application u/s 12A of the IBC; hence, the entire procedure would be vitiated in the eyes of the law. The appellant also contended to place on record certain additional documents, which was opposed by the respondent, saying that it cannot be taken on record as it has not been placed for scrutiny before the adjudicating authority. Respondent also highlighted that no reference to the alleged criminal complaint was made before the adjudicating authority; therefore, that cannot be taken into consideration while deciding this appeal. It also highlighted that no FIR or criminal proceeding had been initiated by the appellant. Judgment of the NCLAT The tribunal observed that the argument pertaining to the 'threat' and 'coercion' has been raised by the appellant before this tribunal for the very first time, and it has not been contended before the adjudicating authority. Also, the alleged offense would act with no sanctity, as its complaint to the police authority has been made post ruling of the Hon'ble Apex Court. The bench also observed that the appellant neither lodged any FIR nor proceeded with the procedure prescribed u/s 173(4) of the Bharatiya Nyaya Sanhita (2023). Hence, the contention with regard to the commission of an act of threat, fraud, or coercion cannot be accepted. The tribunal observed the appellant's contention cannot be accepted merely on the basis of an averment or by way of filing a complaint, which is being developed by the appellant, until and unless the same is established prima facie by way of a criminal investigation. The bench lastly observed that the additional documents, through which the appellant intends to establish the act of commission of fraud, threat, and coercion, cannot be accepted by the Tribunal to be placed on record for consideration because these documents are being placed before the Tribunal for the first time without the same being considered by the adjudicating authority. Case Title: M/s. K Computers vs. Mr. Pesaladinne Madhusudhan Reddy (IRP) & Mr. Kalyan Muppaneni Case Number: Company Appeal (AT) (CH) (Ins) No. 227/2025 For Appellant: Mr. Y. Suryanarayana, Advocate For Respondent: Mr. TK Bhaskar, Advocate; Ms. Niveditha Narayanan, Advocate; Mr. Vasant S., Advocate for R1; Mr. PH Arvindh Pandian, Senior Advocate; For Mr. Pawan Jhabakh, Advocate for R2 Bench: Justice Sharad Kumar Sharma and Jatindranath Swain (Member-Technical), Judgment Date: 22.07.2025 Click Here To Read/Download The Order

Mere Allegation Of Coercion, Threat, Or Fraud Without Prima Facie Proof Cannot Invalidate Withdrawal Of CIRP U/S 12A Of IBC: NCLAT Chennai

Mohd.Rehan Ali

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