Jagmal Vs Mangal Sales Corporation Through Its Proprietor & Anr. (NCLAT Delhi)
The National Company Law Appellate Tribunal, Principal Bench, New Delhi, allowed the appeal of Jagmal, suspended director of Prolific Papers Pvt. Ltd., against the order admitting the corporate debtor into the corporate insolvency resolution process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016. The operational creditor, Mangal Sales Corporation, had claimed an operational debt of Rs. 1,69,48,652.14. The NCLT had reserved its decision on 15 December 2025, but the parties subsequently reached a settlement on 23 March 2026.
Under the settlement deed, the parties agreed on payment in three tranches and withdrawal of the insolvency petition upon payment. The order records that the final instalment was paid on 23 March 2026. The operational creditor applied for withdrawal on 26 March 2026. Registry defects delayed processing, and the application was refiled on 9 April 2026, the same date on which the NCLT pronounced the order admitting the corporate debtor into CIRP. The appellant submitted that the full claim had already been discharged; counsel for the operational creditor confirmed the payment and the withdrawal application.
The NCLAT observed that the NCLT should have deferred pronouncement and expedited scrutiny of the withdrawal application. Because the entire dues had been paid before the admission order, the Tribunal held that the insolvency petition should have been permitted to be withdrawn. It set aside the order dated 9 April 2026, directed withdrawal of the CIRP, allowed the appeal without costs and disposed of all pending interim applications. The decision turned on the completed settlement preceding admission, not a general right to withdraw CIRP following admission.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
Per Justice N. Seshasayee, Member (Judicial)
1. This appeal has been filed by the suspended director of the Corporate Debtor (CD), challenging the order admitting the CD into CIRP under Sec. 9 of the IBC in CP (IB) No. 429 of 2024, filed by the first respondent herein.
2. The facts fall within a very narrow compass and are as follows:
a) The first respondent/Operational Creditor (OC) has laid a petition under Sec. 9 alleging that appellant has defaulted in payment of an operational debt of Rs. 1,69,48,652.14/-.
b) The CD entered appearance and the matter was heard by the Adjudicating Authority. On 15.12.2025, the Adjudicating Authority reserved the petition under Sec. 9 for orders.
c) While matters stood thus, on 23.03.2026 the appellant and the first respondent settled their disputes and entered into a Settlement Deed. Based on the same, the appellant and the first respondent agreed that the former would pay the latter a sum that they had mutually agreed towards full settlement of the latter’s claim. This amount was to be paid in three tranches. This document of settlement also provided for the withdrawal of CP (IB) No. 429 of 2024 which the first respondent had instituted immediately the appellant making payments as stipulated in the said document.
d) On 23.03.2026, the last instalment required to be paid was duly paid. On 26.03.2026, an application was taken out by the respondent No. 1, the Operational Creditor (OC) for withdrawal of the CP (IB) No. 429 of 2024. However, some defects were notified by the Registry and on 09.04.2026, this application was refiled by the first respondent.
3. On 09.04.2026, the Adjudicating Authority pronounced the Order admitting the CD into CIRP. It is in these circumstances the present appeal has been preferred challenging the aforesaid order. Learned counsel for the appellant submitted that it was the sheer misfortune of the CD that it was drawn into CIRP even though the entire claim of the first respondent had been paid in terms of the settlement deed even before the CD was admitted to CIRP. Indeed, even an application was promptly filed on 26.03.2026, but because some defects were notified, the same could not be brought on record before the final order was passed. Indeed, according to both the parties herein, before the pronouncement of order on 09.04.2026, this aspect was brought to the notice of the learned Adjudicating Authority but the same was not considered.
4. Appearing for the first respondent Shri. Raunak Satpathy, the learned counsel for the operational creditor, endorsed every statement of the counsel for the appellant. He submitted that the entire amount had been received even before the order under Sec. 9 was pronounced and, hence, on 26.03.2026, the first respondent had even taken out an application.
5. We have carefully perused the records, including documents of settlement dated 23.03.2026. The e-filing portal of NCLT shows that the application for withdrawal of Sec. 9 petition was filed on 26.03.2026 by the very Operational Creditor who had earlier filed the petition under Sec. 9 of the IBC. Given the circumstances, it would have been appropriate if the learned Adjudicating Authority had deferred pronouncement of the final order and expedited the scrutiny process of the application which the appellant had filed for withdrawal of CP (IB) No. 429 of 2024.
6. Inasmuch as the entire amount has been paid even before the pronouncement of final order, necessarily the CP (IB) No. 429 of 2024 should have been allowed to be withdrawn. Since CIRP came to be admitted overlooking the aspect of complete settlement of the dues of the respondent No. 1, it is appropriate that the order of the Adjudicating Authority be set aside and the CIRP is permitted to be withdrawn.
7. Accordingly, this appeal is allowed and the impugned Order dated 09.04.2026 passed by the Adjudicating Authority is set aside, and the CIRP wrongly initiated against the corporate debtor is directed to be withdrawn. No costs.
8. All Pending IAs also stand disposed of.
