Section 12A under IBC (Amendment) Act, 2026: Strict Timeline for CIRP Withdrawal

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 was passed by both Houses of Parliament as part of the legislative process for strengthening the insolvency framework. The Bill was first approved by the Lok Sabha, followed by its passage in the Rajya Sabha, after which it received the assent of the President on 6 April 2026 and came into force. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 aims to speed up insolvency resolution, strengthen creditor control, and improve efficiency in the insolvency framework.

One of the key changes introduced by the amendment relates to the revision of Section 12A governing the withdrawal of applications. The provision now imposes stricter conditions by allowing withdrawal only after the constitution of the Committee of Creditors (CoC) and before the issuance of the invitation for submission of resolution plans. Such withdrawal requires the approval of at least 90% of the voting share of the CoC, thereby ensuring a high level of creditor consensus. Additionally, the National Company Law Tribunal (NCLT) is mandated to dispose of such withdrawal applications within 30 days, promoting timely and efficient decision-making.

 Section 12A of the IBC has been fully substituted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 and now reads as follows-

 “12A. (1) Subject to sub-section (2), the Adjudicating Authority may allow the withdrawal of an application admitted under section 7, 9 or 10, on an application made by the resolution professional, with the approval of ninety per cent. voting share of the committee of creditors in such manner as may be specified.

 (2) Notwithstanding anything contained in any law for the time being in force, an application admitted under section 7, 9 or 10 shall not be withdrawn—

a. before the constitution of the committee of creditors under sub-section (1) of section 21; and

b. after the first invitation for submission of a resolution plan has been issued by the resolution professional.

 (3) The Adjudicating Authority shall pass an order under sub-section (1) within a period of thirty days from the date of receipt of the application:

 Provided that if the Adjudicating Authority has not passed an order within such period, it shall record the reasons for such delay in writing.”.

The amended provision introduces a structured framework for withdrawal of CIRP applications. It provides that:

• Withdrawal of an application is permitted only after the constitution of the Committee of Creditors (CoC) and before issuance of the first invitation for submission of resolution plans.
• Such withdrawal requires approval of at least 90% voting share of the CoC.
• The Adjudicating Authority is required to pass an order within 30 days from the date of the withdrawal application.

The substitution of Section 12A by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 marks a significant shift from the earlier framework governed by Section 12A read with Regulation 30A of the CIRP Regulations. Under the earlier regime, Section 12A simply provided that withdrawal of an admitted application could be allowed with the approval of 90% voting share of the Committee of Creditors, while Regulation 30A filled procedural gaps by permitting withdrawal both before and after constitution of the CoC. In fact, before constitution of the CoC, withdrawal could be made through the Interim Resolution Professional, and even after issuance of invitation for expression of interest, withdrawal was allowed subject to justification. Judicial pronouncements also recognised flexibility, allowing withdrawal even before CoC formation and, in some cases, invoking inherent powers under Rule 11 of the NCLT/NCLAT Rules.

However, the amended Section 12A (2026) introduces a more structured and restrictive framework. It expressly prohibits withdrawal before the constitution of the CoC and after the issuance of the first invitation for resolution plans, thereby eliminating earlier flexibility. The requirement of 90% CoC approval has been retained, but the process must now be routed through the Resolution Professional. Additionally, a mandatory timeline of 30 days has been prescribed for the Adjudicating Authority to decide the application. The amendment also clarifies that reliance on inherent powers for permitting withdrawal is no longer appropriate, addressing earlier misinterpretations.

Thus, while the earlier framework under Section 12A read with Regulation 30A was flexible and procedure-driven, the amended provision ensures certainty, discipline, and time-bound withdrawal, preventing disruption of CIRP at advanced stages and reinforcing the central role of the CoC in an in rem proceeding.

 Observations of the Select Committee

The Select Committee, while examining the substituted Section 12A, inter alia observed:

“…The Committee reckon that the absence of clear timelines for withdrawing the CIRP causes disruption to process when applications for withdrawal are filed at belated stages. Further, since CIRP is an in-rem proceeding, it is essential for the CoC overseeing the process to be consulted before withdrawal of application or approval of any form of settlement. The Committee observe that the proposed amendment has been brought in place to remove misinterpretation of Section 12A which suggested that Adjudicating Authority may permit withdrawal of application before constitution of the Committee of Creditors under inherent powers of the Adjudicating Authority provided under Rule 11 of National Company Law Tribunal (NCLT) Rules. Further the amendment to Section 12A has also been proposed rectifying the issue of lack of outer time limit for filing an application seeking withdrawal. Thus, taking into account the concerns raised by the stakeholders and submissions made by the Ministry, the Committee, after thorough deliberations, accept the proposed amendment without any modification.”

While examining the substituted Section 12A, the Select Committee observed:

• The absence of clear timelines for withdrawal had been causing disruption, particularly when applications were filed at advanced stages of CIRP.
• Since CIRP is an in rem proceeding, consultation with the CoC is essential before permitting withdrawal or settlement.
• The amendment seeks to remove earlier misinterpretations that allowed withdrawal before constitution of the CoC by invoking inherent powers of the Adjudicating Authority under Rule 11 of the NCLT Rules.
• It also addresses the issue of lack of an outer time limit for filing withdrawal applications.

Accordingly, after considering stakeholder concerns and submissions of the Ministry, the Committee approved the amendment without modification.

 Old Section 12A and Regulations 30A

It is to be noted that earlier Section 12A and Regulation 30A provides that

 Section 12A. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be prescribed.

 Regulation 30A. (1) An application for withdrawal under section 12A may be made to the Adjudicating Authority –

• • before the constitution of the committee, by the applicant through the interim resolution professional;
  • after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be:

 Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.

 (2) The application under sub-regulation (1) shall be made in Form FA of the Schedule-I accompanied by a bank guarantee-

a. towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub-regulation (1); or

b. towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1).

 (3) Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt.

 (4) Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt.

 (5) Where the application referred to in sub-regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

 (6) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (3) or (5).

 (7) Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code.

 Judicial Pronouncements

1. NCLAT cannot utilise inherent powers under Rule 11 to allow compromise after admission. (Lokhandwala Kataria Construction Pvt. Ltd. v. Nisus Finance, 2017)

2. Regulation 30A must be read along with Section 12A. (Brilliant Alloys Pvt. Ltd. v. S. Rajagopal, 2018)

3. Exit route under Section 12A is not available to a resolution applicant. (Maharashtra Seamless Ltd., 2020)

4. Withdrawal before CoC constitution was permissible earlier; settlement should not be stifled. (Ashok G. Rajani v. Beacon Trusteeship, 2022)

5. Regulation 30A validly permitted withdrawal before CoC constitution; no inconsistency with Section 12A. (Abhishek Singh v. Huhtamaki PPL Ltd., 2023)

6. Withdrawal must be routed through the Resolution Professional; reliance on inherent powers is no longer permissible. (GLAS Trust Company LLC v. BYJU Raveendran, 2024)

Illustration: Old vs New Section 12A

 Example under the Old Regime (Section 12A + Regulation 30A)

Suppose a financial creditor initiates CIRP against a corporate debtor. After admission, but before

the constitution of the Committee of Creditors (CoC), the parties arrive at a settlement. Under the earlier framework, the applicant could file a withdrawal application through the Interim Resolution Professional under Regulation 30A. Even though the CoC was not yet constituted, the Adjudicating Authority could permit withdrawal, and in certain cases, courts even allowed such withdrawal by invoking inherent powers under Rule 11 of the NCLT Rules.

Further, even if the CoC had been constituted and the process had progressed to the stage where invitation for expression of interest (EOI) had been issued, withdrawal was still possible, provided 90% of the CoC approved it and the applicant justified the late-stage withdrawal. This demonstrates the flexibility of the earlier regime.

 Example under the Amended Section 12A (2026)

Consider the same situation where a CIRP is admitted and the parties reach a settlement. Under the amended law, withdrawal cannot be allowed before the constitution of the CoC. Therefore, even if the parties settle early, they must wait until the CoC is formed. Once the CoC is constituted, withdrawal can be permitted only if 90% of the CoC approves it.

However, if the process has progressed to the stage where the first invitation for submission of resolution plans has already been issued, withdrawal is no longer permitted, even if all parties agree to settle. Additionally, once the withdrawal application is filed, the NCLT is required to decide it within 30 days, ensuring a time-bound process.