The Bombay High Court has clarified that the principles of natural justice under the Insolvency and Bankruptcy Code, 2016, are satisfied when the Interim Resolution Professional (IRP) and objecting financial creditors are heard in a withdrawal application under Section 12-A, and not by former directors or unrepresented financial creditors who fail to appear before the NCLT.
Background & Facts
The Dispute
These writ petitions were filed by two petitioners challenging an order dated 09.09.2025 passed by the National Company Law Tribunal (NCLT), Mumbai, which rejected an application for withdrawal of Corporate Insolvency Resolution Process (CIRP) filed by the Interim Resolution Professional (IRP) under Section 12-A of the Insolvency and Bankruptcy Code, 2016 (IBC). The application for withdrawal was initiated by the financial creditor, M/s. Mohandas Chhataram, following a settlement with the suspended director of the corporate debtor, Gokul Sugar Industries Limited. The NCLT, after hearing the IRP and the objecting financial creditors - Union Bank of India, Solapur District Central Co-operative Bank Limited (SDCCBL), and Indian Bank - held that withdrawal could not be permitted due to substantial objections from a majority of financial creditors.
Key Facts
- The CIRP was initiated on 27.06.2024 by M/s. Mohandas Chhataram under Section 7 of the IBC.
- The NCLT appointed an IRP on the same date.
- The suspended director of the corporate debtor, Vishal Ganpat Shinde, filed an appeal before the NCLAT on 27.06.2024.
- On 23.07.2024, the NCLAT recorded that the suspended director intended to settle the dispute with the financial creditor by paying ₹17 crores out of ₹50 crores owed, and granted three weeks to make payment.
- The NCLAT, on 24.01.2025, disposed of the appeal, granting liberty to the suspended director to file an application under Section 12-A of the IBC before the NCLT within three weeks, and directed that the Committee of Creditors (CoC) shall not be constituted until then.
- The suspended director did not file any application under Section 12-A.
- On 10.02.2025, the financial creditor, M/s. Mohandas Chhataram, submitted Form FA under Regulation 30-A of the IBC Regulations, authorizing the IRP to file the withdrawal application.
- On 12.02.2025, the IRP filed the application for withdrawal under Section 12-A.
- Union Bank of India, SDCCBL, and Indian Bank filed intervention applications opposing withdrawal, claiming substantial dues.
- The financial creditor filed its own intervention petition (IBC No.77 of 2025) seeking copies of the opposition applications.
- The financial creditor failed to appear before the NCLT on 22.07.2025, 06.08.2025, and 09.09.2025, despite specific directions to appear.
- On 09.09.2025, the NCLT dismissed the withdrawal application, holding that the objections of the financial creditors outweighed the settlement.
- The CoC was constituted on 26.09.2025.
Procedural History
- 27.06.2024: NCLT admitted CIRP petition under Section 7 and appointed IRP.
- 23.07.2024: NCLAT issued notice in appeal filed by suspended director; recorded settlement intent; directed CoC not to be constituted.
- 24.01.2025: NCLAT disposed of appeal; granted three weeks to suspended director to file Section 12-A application; liberty granted to objecting creditors to approach NCLT.
- 10.02.2025: Financial creditor submitted Form FA authorizing IRP to file withdrawal application.
- 12.02.2025: IRP filed application under Section 12-A for withdrawal.
- 06.08.2025: NCLT adjourned hearing; directed financial creditor to appear on next date.
- 09.09.2025: NCLT passed impugned order rejecting withdrawal application; heard IRP and objecting creditors.
- 22.09.2025: CoC convened.
- 22.09.2025: Writ Petition (Lodging) No. 30071 of 2025 filed by suspended director seeking interim stay.
- 26.09.2025: Bombay HC granted ad-interim stay on NCLT order.
- 26.03.2026: Bombay HC delivered final judgment.
The Parties' Positions
- Petitioner 1 (Vishal Ganpat Shinde): Suspended director of corporate debtor; claimed he had settled with the financial creditor and paid ₹17 crores; argued he was not heard despite being the original party to the settlement.
- Petitioner 2 (M/s. Mohandas Chhataram): Financial creditor who initiated CIRP; argued it had authorized the IRP to file withdrawal; claimed it was not served copies of opposition applications and was not heard.
- Respondents (Union Bank of India, SDCCBL, Indian Bank): Financial creditors opposing withdrawal; claimed they were duly heard and served; asserted their claims were substantial and valid.
- Respondent 3 (IRP): Represented that it had been heard and complied with all procedural requirements.
Relief Sought
The petitioners sought quashing of the NCLT’s order dated 09.09.2025, restoration of the withdrawal application, and directions to permit withdrawal of CIRP. The suspended director also sought inclusion of his settlement payment as a valid basis for withdrawal.
The Legal Issue
Whether the NCLT violated the principles of natural justice by failing to serve notice and hear the suspended director and the financial creditor before rejecting the application for withdrawal of CIRP under Section 12-A of the IBC, when the IRP and objecting financial creditors were duly heard.
Arguments Presented
For the Appellant/Petitioner
The petitioners contended that the NCLT violated natural justice by not serving notice or hearing the suspended director and the financial creditor. They relied on Rule 34(4) and Rule 37 of the NCLT Rules, which mandate notice to all parties. They argued that the suspended director, having paid ₹17 crores, was a vitally interested party whose interests were distinct from the corporate debtor under Glas Trust Company LLC v. Byju Raveendran. They also claimed the financial creditor was deprived of the opportunity to verify the claims of the objecting banks, as copies of their applications were not served. Reliance was placed on Kamal K. Singh v. Union of India to argue that procedural violations justify writ jurisdiction despite alternative remedies.
For the Respondent/State
The respondents argued that the IBC scheme vests exclusive authority to act on behalf of the corporate debtor in the IRP after admission of CIRP under Sections 17 and 25. Only the IRP could file a withdrawal application under Regulation 30-A. The objecting financial creditors were duly heard and served through the IRP. The petitioners’ absence from hearings, particularly the financial creditor’s repeated non-appearance, waived any claim of prejudice. The Supreme Court in Glas Trust held that NCLT must hear all stakeholders, but the IRP is the sole conduit for applications. The petitioners’ reliance on Section 61’s “any person aggrieved” was misplaced, as it pertains to appellate rights, not procedural entitlements at the NCLT stage.
The Court's Analysis
The Court undertook a detailed analysis of Sections 12-A, 17, 25 of the IBC and Regulation 30-A of the IBC Regulations, alongside the Supreme Court’s judgment in Glas Trust Company LLC v. Byju Raveendran. The Court emphasized that upon admission of a CIRP petition, the proceedings become in rem, and the management of the corporate debtor vests exclusively in the IRP. The erstwhile management, including directors, lose all authority to act on behalf of the corporate debtor.
"Once the application is admitted and CIRP is initiated, it is the IRP who takes charge of the affairs of the corporate debtor. The proceedings become collective proceedings and the interests of the former management of the corporate debtor, become disjunct from the interest of the corporate debtor. Therefore, the parties (such as the former management of the corporate debtor) must submit their application for withdrawal through the IRP who is now the person in control of the insolvency proceedings."
The Court held that the IRP, not the financial creditor or the suspended director, was the only authorized entity to file the withdrawal application under Regulation 30-A(1)(a). The financial creditor’s Form FA was merely an authorization to the IRP - it did not confer independent standing. The suspended director’s failure to file an application within the three-week window granted by the NCLAT rendered his grievance non-justiciable.
The Court further noted that the NCLT had heard the IRP and the objecting financial creditors, who were duly served under Rule 34(4) and Rule 37 of the NCLT Rules. The IRP appeared through counsel and was heard. The financial creditor’s own intervention petition (IBC No.77 of 2025) was dismissed not due to lack of notice, but because the petitioner failed to appear on multiple occasions despite explicit directions. The Court held that a party cannot claim violation of natural justice when it deliberately absents itself from proceedings.
The Court distinguished Kamal K. Singh on the grounds that it involved a post-hearing order uploaded without pronouncement and after the judge had demitted office - a gross procedural failure absent here. The NCLT’s conduct was transparent, adversarial, and compliant with statutory mandates.
The Court also noted that the CoC had been constituted before the writ petitions were heard, making any further withdrawal application subject to the 90% approval requirement under Section 12-A, which the petitioners had not sought.
The Verdict
The writ petitions were dismissed. The interim order dated 22.09.2025 staying the NCLT’s order was vacated. The petitioners were held to have failed to establish a violation of natural justice, as the IRP and objecting financial creditors were duly heard. The petitioners are at liberty to approach the NCLAT under Section 61 of the IBC to challenge the NCLT’s order. No monetary relief or direction was granted.
What This Means For Similar Cases
The IRP Is the Sole Conduit for CIRP Withdrawal Applications
- Practitioners must ensure that any application for withdrawal under Section 12-A is filed exclusively through the IRP or RP, not directly by promoters, directors, or financial creditors.
- Authorizations from financial creditors (e.g., Form FA) are procedural aids, not substitutes for statutory compliance.
- Any attempt to bypass the IRP will be deemed invalid, regardless of settlement terms.
Absence from Hearings Waives Natural Justice Claims
- Parties who fail to appear before the NCLT despite specific directions cannot later claim denial of hearing.
- Intervention petitions filed without active participation are vulnerable to dismissal on procedural grounds.
- Legal teams must ensure presence at all listed dates, even if the matter appears ancillary.
Natural Justice Does Not Require Hearing of All Interested Parties - Only Stakeholders
- The term "parties concerned" under Glas Trust refers to the IRP and creditors with verified claims, not former directors or unrepresented entities.
- The NCLT is not obligated to serve notice on every person with a tangential interest in the outcome.
- The statutory framework prioritizes collective creditor interests over individual settlements post-admission.
