Section 12A IBC Withdrawal After Settlement: 90% CoC & Power Trust Case (2026)
- shubhamtulsian05
- 7 days ago
- 6 min read
Can a promoter or creditor stop an insolvency process simply because a settlement offer is better than the resolution plan? The Supreme Court’s 18 February 2026 judgment in Power Trust v. Bhuvan Madan answers that question with an important reminder: once CIRP is underway, settlement is governed by the Insolvency and Bankruptcy Code, 2016 and Regulation 30A—not by an open-ended judicial power to substitute a preferred bargain.
For companies, promoters, lenders and insolvency professionals, the practical rule is straightforward. After constitution of the Committee of Creditors (CoC), withdrawal under Section 12A ordinarily requires approval of 90% of the CoC voting share. A court cannot compel creditors to accept a settlement merely because the promoter says it offers more money.
Why this topic matters for IBC settlements in 2026
PGT & Associates’ recent Google Search data shows emerging visibility for “IBC cases”, while our existing landmark-IBC and oppression/mismanagement pages are already receiving impressions. Rather than duplicate those pages, this article addresses a distinct, commercially important question that commonly arises after admission: how can CIRP be withdrawn after settlement, and who controls that decision?
1. Section 12A: the statutory exit route after admission
Section 12A of the IBC allows the Adjudicating Authority to permit withdrawal of an application admitted under Sections 7, 9 or 10. Where the CoC has been constituted, the provision requires approval of 90% of the CoC voting share. This high threshold reflects the change in character of insolvency proceedings after admission: the process is no longer merely a bilateral recovery dispute between the original applicant and the corporate debtor.
The Supreme Court has repeatedly emphasized that CIRP is a collective process. A private settlement can still end CIRP, but it must travel through the statutory framework designed to protect the interests of all creditors and stakeholders.
2. Regulation 30A and Form FA: procedure matters
The current IBBI framework under Regulation 30A prescribes the procedural route for a Section 12A withdrawal. The resolution professional files the withdrawal application before the NCLT after the required approval, and Form FA is the prescribed application format. The current regulation also links withdrawal to payment/security of specified CIRP expenses.
Before the CoC is constituted, the statutory/regulatory framework allows withdrawal without the 90% CoC voting requirement because there is no CoC yet.
After the CoC is constituted, Section 12A requires approval by 90% of the CoC voting share.
The resolution professional should follow Regulation 30A and submit the prescribed withdrawal documentation to the Adjudicating Authority.
Where a settlement is negotiated late in CIRP, timing, CIRP costs, the status of a resolution plan and creditor voting become especially important.
3. The 2026 Supreme Court case: Power Trust v. Bhuvan Madan
In Power Trust (Promoter of Hiranmaye Energy Ltd.) v. Bhuvan Madan, 2026 INSC 166, Civil Appeal No. 2211 of 2024, the Supreme Court considered a challenge to the admission of Hiranmaye Energy Ltd. into CIRP and repeated settlement proposals made by its promoter.
The underlying financial exposure was substantial. The judgment records an original term loan of ₹1,859 crore for a thermal power project and an additional facility of ₹446.97 crore. The financial creditor’s Section 7 application stated an outstanding claim exceeding ₹2,183 crore as of 5 June 2021. NCLT Kolkata admitted the Section 7 application on 2 January 2024, and NCLAT upheld that admission on 25 January 2024.
4. What happened to the promoter’s settlement offers?
While the appeal was pending, the promoter submitted multiple settlement proposals. The Supreme Court recorded offers of ₹1,101.56 crore, ₹1,450 crore and ₹1,601.29 crore, followed by later proposals of ₹1,606.86 crore and ₹1,671.86 crore. The CoC rejected them by overwhelming majorities. On 29 October 2024, the CoC also approved the resolution plan of Damodar Valley Corporation by 99.92% voting share.
The promoter argued that its later settlement proposal offered more value than the approved resolution plan and asked that CIRP be kept in abeyance. The Supreme Court refused to second-guess the CoC’s commercial decision.
5. Supreme Court ruling: 90% CoC approval cannot be bypassed
The Court reiterated that the commercial wisdom of the CoC in choosing between a resolution plan and a settlement proposal is ordinarily not justiciable. It explained that Section 12A and Regulation 30A now provide the statutory framework for post-admission withdrawal and settlement.
Importantly, the Court referred to GLAS Trust Co. LLC v. BYJU Raveendran and observed that, once this statutory framework exists, resort to inherent powers under Rule 11 of the NCLT/NCLAT Rules to direct a post-admission withdrawal or settlement does not arise merely to bypass Section 12A. The Court also clarified that this does not amount to a complete bar on the Supreme Court’s constitutional power under Article 142 in an appropriate case.
On the facts, the Court declined to stall CIRP for further promoter settlement attempts and dismissed the appeal. The stay on CIRP was vacated.
6. Does this change the earlier Seya Industries / Ashok G. Rajani position?
The 2022 Supreme Court decision in Ashok G. Rajani v. Beacon Trusteeship Ltd. is often cited for the proposition that, before constitution of the CoC, withdrawal can be facilitated because the statutory 90% voting requirement cannot yet operate. That remains important for understanding the pre-CoC stage.
However, professionals should read older inherent-power observations in light of later Supreme Court jurisprudence, including GLAS Trust and the 2026 Power Trust judgment. The safer current approach is to use the express Section 12A / Regulation 30A mechanism rather than treating Rule 11 as a parallel settlement route.
7. Practical decision matrix for promoters, creditors and RPs
Settlement before admission: seek withdrawal of the pending Section 7/9/10 petition under the applicable procedural rules before CIRP is triggered.
Settlement after admission but before CoC constitution: move promptly through Regulation 30A and the prescribed withdrawal process; the 90% CoC threshold is not applicable because no CoC exists.
Settlement after CoC constitution: obtain at least 90% of the CoC voting share and proceed under Section 12A and Regulation 30A.
Settlement after a resolution plan has been selected: expect heightened scrutiny of timing and process; a promoter cannot demand that NCLT or a court replace the CoC’s commercial choice with the promoter’s preferred proposal.
Document CIRP costs and withdrawal expenses carefully because Regulation 30A expressly addresses payment/security of specified process costs.
8. What should lenders and CoC members evaluate before voting?
Certainty of funds and enforceability of the settlement offer.
Timing and the cost of delaying an advanced CIRP.
Comparative recovery under the settlement and the approved/competing resolution plan.
Past performance of the promoter or settlement proponent, including previous restructuring defaults.
Impact on all creditor classes rather than only the original applicant.
Whether the proposal complies with Section 12A, Regulation 30A and applicable IBBI requirements.
9. What promoters should not assume
A settlement proposal is not automatically entitled to preference because it carries a higher headline number. Value, feasibility, payment certainty, timing, past conduct and process finality can all influence creditor decision-making. Power Trust is particularly useful because the Supreme Court accepted that repeated settlement proposals cannot be used to indefinitely interrupt a time-bound CIRP after the CoC has exercised its commercial judgment.
10. Frequently asked questions
Can an IBC case be withdrawn after NCLT admission?
Yes. Section 12A provides the statutory route for withdrawal of an application admitted under Sections 7, 9 or 10, subject to the prescribed procedure.
Is 90% CoC approval always required?
The 90% voting-share requirement applies once the CoC has been constituted. Before CoC constitution, Regulation 30A provides the pre-CoC withdrawal mechanism.
Can NCLT force the CoC to accept a promoter settlement?
Ordinarily, no. The commercial wisdom of the CoC receives substantial judicial deference, and the Supreme Court in Power Trust refused to substitute the promoter’s preferred settlement for the CoC’s decision.
What is Form FA?
Form FA is the prescribed application format under the CIRP Regulations for withdrawal of CIRP under Regulation 30A.
Can Rule 11 inherent powers be used instead of Section 12A?
Current Supreme Court guidance strongly favors the express statutory framework. Power Trust, referring to GLAS Trust, states that the existence of Section 12A and Regulation 30A means inherent powers should not be used as a parallel route to direct post-admission settlement.
11. Key takeaways
Section 12A is the principal statutory route for withdrawing CIRP after admission.
After CoC constitution, 90% voting-share approval is the critical threshold.
A promoter cannot compel acceptance of a settlement merely by offering a higher amount.
Power Trust v. Bhuvan Madan (18 February 2026) reinforces CoC commercial wisdom and the need to follow the statutory withdrawal framework.
Early settlement is procedurally simpler; late settlement must account for CoC voting, process costs and the stage of the resolution process.
Official sources and further reading
Primary sources used for this analysis: Supreme Court of India, Power Trust v. Bhuvan Madan, 2026 INSC 166 (18 February 2026); Supreme Court of India, Ashok G. Rajani v. Beacon Trusteeship Ltd. (22 September 2022); Insolvency and Bankruptcy Board of India, CIRP Regulations and Form FA; IBBI NCLT orders database showing current Section 12A withdrawal orders.
Related PGT & Associates reading: “5 Landmark NCLT & Supreme Court Cases Under IBC That Every Business Owner Must Know”; “NCLAT: IBC Appeal Limitation Starts from Pronouncement — Sumit Chakraborty Case (2026)”; and “NCLAT on IBC vs PMLA: Value Wise Consultancy Case Explained (2026)”.
How PGT & Associates can help
Section 12A settlements can become time-sensitive once CIRP has been admitted. PGT & Associates assists businesses, promoters, creditors and professionals with IBC strategy, settlement documentation, creditor-process analysis and NCLT/NCLAT matters. Advice should always be tailored to the specific stage of CIRP and the facts of the case.
Disclaimer: This article is for general professional information and does not constitute legal or financial advice. Case-law and regulatory positions should be reviewed against the latest official text before acting.
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