{"file_name": "2024_10_1802_1854_EN.pdf", "text": "[2024] 10 S.C.R. 1802 : 2024 INSC 811\n\nGLAS Trust Company LLC \nv. \nBYJU Raveendran & Ors.\n\n(Civil Appeal No. 9986 of 2024 )\n\n23 October 2024\n\n[Dr Dhananjaya Y Chandrachud,* CJI, \nJ.B. Pardiwala and Manoj Misra, JJ.]\n\nIssue for Consideration\n\nWhether the appellant, who was not a party to the settlement \nbetween the second respondent-BCCI (Operational Creditor) and \nthe Corporate Debtor, has locus in the proceedings before this \nCourt; whether the NCLAT erred in invoking its inherent powers \nunder Rule 11 of the NCLAT Rules 2016 in the presence of a \nprescribed procedure for withdrawal of Corporate Insolvency \nResolution Process (CIRP) and settlement of claims between \nparties; and without prejudice to the above, whether the NCLAT \nadequately addressed the objections raised by the appellant, \nwhile exercising its discretionary power under Rule 11 of the \nNCLAT Rules 2016.\n\nHeadnotes†\n\nInsolvency and Bankruptcy Code, 2016 – s.62 – Appeal to \nSupreme Court – “any person aggrieved” – Appellant claiming \nto be a Financial Creditor, if falls within the ambit of the phrase \n“any person aggrieved” and has the locus standi to institute \nthe present appeal:\n\nHeld: Yes – Under Section 62 governing statutory appeals to \nthe Supreme Court from the orders of the NCLAT, “any person” \naggrieved by the order of the NCLAT may file an appeal before \nthe Supreme Court – Section 61 which provides for appeals to \nNCLAT from orders of the NCLT uses similar language – The \nuse of the phrase “any person aggrieved” indicates that there is \nno rigid locus requirement to institute an appeal challenging an \norder of the NCLT, before the NCLAT or an order of the NCLAT, \nbefore this Court – Any person who is aggrieved by the order may \n\n* Author\n\n\f[2024] 10 S.C.R. \n\n1803\n\ninstitute an appeal, and nothing in the provision restricts the phrase \nto only the applicant creditor and the corporate debtor – Once the \nCIRP is initiated, the proceedings are no longer restricted to the \nindividual applicant creditor and the corporate debtor but rather \nbecome collective proceedings (in rem), where all creditors, such \nas the appellant, are necessary stakeholders – Appellant is not \nan unrelated party to the CIRP, but is an entity whose claims had \nbeen verified by the IRP. [Paras 75, 76]\n\nInsolvency and Bankruptcy Code, 2016 – s.12A – National \nCompany Law Appellate Tribunal Rules, 2016 – r.11 – CIRP \nRegulations 2016 – Regulation 30A – Second respondent-BCCI \n(an Operational Creditor had executed the ‘Team Sponsor \nAgreement’ with the Corporate Debtor-third respondent) filed \napplication under Section 9 of the IBC, w.r.t an operational \ndebt of approx. Rs.158 crore payable by the third respondent \nunder the aforesaid Agreement – Petition admitted by NCLT, \nCIRP initiated against third respondent – Invoking inherent \npowers under Rule 11, NCLAT approved a settlement between \nthe parties and set aside the order of NCLT – When the \nsettlement was sought by the first respondent (former director \nof the Corporate Debtor) before NCLAT, the Section 9 petition \nhad already been admitted and the Section 7 petition had also \nbeen disposed of on that basis – However, admittedly, the \nCoC had not been constituted – NCLAT stayed the formation \nof the CoC:\n\nHeld: In such cases, the legal framework mandates that an \n(i) application for withdrawal be moved; (ii) the application has to \nbe moved through the IRP; and (iii) it be placed before the NCLT \nfor approval – None of these requirements were met – Despite \ngrave deviations, NCLAT still proceeded with approving the \nsettlement and setting aside the CIRP by invoking its inherent \npower under Rule 11 – Recourse to Rule 11 was not warranted – \n‘Inherent powers’ cannot be used to subvert legal provisions, which \nexhaustively provide for a procedure – To permit the NCLAT to \ncircumvent this detailed procedure by invoking its inherent powers \nunder Rule 11 would be contrary to the carefully crafted procedure \nfor withdrawal – NCLAT provided no reasons for deviating from \nthis procedure or the urgency to approve the settlement without \nfollowing the procedure – The correct course of action by the \nNCLAT would have been to stay the constitution of the CoC and \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1804 \n\n[2024] 10 S.C.R.\n\ndirect the parties to follow the course of action in Section 12A read \nwith Regulation 30A of the CIRP Regulations 2016 – Even if the \nprocedural infirmity is kept aside, once the CIRP was admitted, the \nproceedings became collective, and all creditors of the Corporate \nDebtor became stakeholders – NCLT must hear all the concerned \nparties and consider all relevant factors on the facts of each case \neven while invoking Rule 11 to allow withdrawal – Appellant raised \ndetailed objections before the NCLAT to the source of the funds \nfor the settlement and a reasonable apprehension that there was \nround tripping of funds, in violation of the order passed by the \nDelaware Court – These objections were summarily dismissed by \nthe NCLAT, relying solely on the undertaking filed by one of the \nformer directors of the Corporate Debtor – NCLAT did not adequately \naddress the alleged facts such as the fraudulent transfer of USD \n533 million to a hedge fund in the United States; the orders of the \nUS Court restraining the brothers from transferring or dissipating \nthe amount; the contempt proceedings against one of the former \ndirectors of the Corporate Debtor; the ongoing investigation by ED \nagainst the first respondent and the Corporate Debtor; and other \nattempts by the Corporate Debtor to dissipate assets – Impugned \njudgment of the NCLAT approving the settlement between the \nparties and setting aside the order of the NCLT admitting the \nSection 9 petition, set aside – However, appellant’s objections to \nthe settlement agreement on merits not adjudicated as the issues \nraised are subject matter of several litigations in different fora, \nincluding the United States Bankruptcy Court, District of Delaware \nand investigation by various authorities, including the ED, which \nare pending – CoC constituted, parties may invoke their remedies, \nto seek a withdrawal or settlement of claims – CoC to maintain \namount of Rs.158 crores, along with accrued interest, if any, in \nan escrow account until further developments and to abide by the \nfurther directions of NCLT. [Paras 79-81, 86-88]\n\nInsolvency and Bankruptcy Code, 2016 – ss.7, 9, 10, \n12A  – Insolvency and Bankruptcy (Second Amendment) \nAct, 2018  – National Company Law Tribunal Rules, 2016 – \nr.8 – CIRP Regulations 2016 – Regulation 30A – IBBI (CIRP) \n(Third Amendment) Regulations, 2018 – 2019 Amendment to \nRegulation 30A of the CIRP Regulations w.e.f. 25-07-2019  – \nProcedure for the withdrawal of CIRP or settlement of claims – \nFour stages:\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1805\n\nHeld: (i) Before the application under Sections 7, 9 or 10 is admitted \nby the NCLT; (ii) After an application under Sections 7, 9, or 10 \nis admitted, but before the CoC has been constituted; (iii) After \nan application under Section 7, 9 or 10 is admitted, the CoC has \nbeen constituted and the invitation for expression of interest has \nnot been issued; (iv) After an application under Section 7, 9 or \n10 is admitted, the CoC has been formed and the invitation for \nexpression of interest has been issued – Explained – In view of \nthe detailed procedure to deal with withdrawal or settlement at both \nstages post admission- before and after the CoC is constituted, \nthe requirement to invoke discretionary power such as Rule 11 \nof the NCLT Rules, or Rule 11 of the NCLAT Rules or even the \npower of this Court under Article 142 of the Constitution of India \nno longer arises. [Para 63, 64]\n\nNational Company Law Appellate Tribunal Rules, 2016 – \nr.11  – Scope of powers under – Stated – National Company \nLaw Tribunal Rules, 2016 – r.8 – Code of Civil Procedure, \n1908 – s.151.\n\nCIRP Regulations 2016 – Regulation 30A – IBBI (CIRP) \n(Third Amendment) Regulations, 2018 – 2019 Amendment \nto Regulation 30A w.e.f. 25-07-2019 – Requirement under \nRegulation 30A (1) to move an application before the NCLT \nthrough the IRP, in cases where the CoC is not constituted, \nwhether a mere technicality which can be dispensed with:\n\nHeld: No – The fact that the application is to be submitted by the \nIRP rather than the parties themselves is not a distinction without \ndifference – Once the application is admitted and CIRP is initiated, \nit is the IRP who takes charge of the affairs of the corporate \ndebtor – The proceedings become collective proceedings and the \ninterests of the former management of the corporate debtor, become \ndisjunct from the interest of the corporate debtor – Therefore, the \nparties (such as the former management of the corporate debtor) \nmust submit their application for withdrawal through the IRP who \nis now the person in control of the insolvency proceedings – \nNCLT conducts an adjudicatory exercise when the application for \nwithdrawal is placed before it and the procedure is not a mere \ntechnicality. [Para 66]\n\nInsolvency and Bankruptcy Code, 2016 – Chapter II – ss.7, 9, \n10 – Insolvency and Bankruptcy (Second Amendment) Act, \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1806 \n\n[2024] 10 S.C.R.\n\n2018 – s.12A – CIRP Regulations 2016 – Regulation 30A  – \nInsolvency and Bankruptcy (Application to Adjudicating \nAuthority) Rules, 2016 – r.8 – Withdrawal and settlement of \nclaims – Evolution of law – Discussed.\n\nCase Law Cited\n\nKamal K. Singh v. Dinesh Gupta (2022) 8 SCC 33; Ashok G. \nRajani v. Beacon Trusteeship Ltd [2022] 18 SCR 133 : 2022 SCC \nOnLine SC 1275 – held per incuriam.\n\nAbhishek Singh v. Huhtamaki PPL Limited [2023] 4 SCR 596 : \n2023 SCC Online SC 349 – distinguished.\n\nSwiss Ribbons (P) Ltd. v. Union of India [2019] 3 SCR 535 : (2019) \n4 SCC 17 – relied on.\n\nArun Kumar Jagatramka v Jindal Steel & Power Ltd [2021] 3 SCR \n114 : (2021) 7 SCC 474; Indus Biotech (P) Ltd. v. Kotak India \nVenture (Offshore) Fund [2021] 7 SCR 112 : (2021) 6 SCC 436; \nLokhandwala Kataria Construction (P) Ltd. v. Nisus Finance and \nInvestment Managers LLP (2018) 15 SCC 589; Mothers Pride \nDairy India Private Limited v. Portrait Advertising and Marketing \nPrivate Limited 2017 SCC OnLine SC 1789; Uttara Foods & Feeds \n(P) Ltd. v. Mona Pharmachem (2018) 15 SCC 587; Brilliant Alloy \nPrivate Limited v. S Rajagopal and Ors (2022) 2 SCC 544; Ram \nChand and Sons Sugar Mills (P) Ltd. v. Kanhayalal Bhargava \n[1966] 3 SCR 856 : 1966 SCC OnLine SC 215; Ebix Singapore \n(P) Ltd. v. Educomp Solutions Ltd. (CoC) [2021] 14 SCR 321 : \n(2022) 2 SCC 401 – referred to.\n\nList of Acts\n\nInsolvency and Bankruptcy Code, 2016; National Company Law \nTribunal Rules, 2016; National Company Law Appellate Tribunal \nRules, 2016; CIRP Regulations 2016; Insolvency and Bankruptcy \n(Second Amendment) Act, 2018; IBBI (CIRP) (Third Amendment) \nRegulations, 2018.\n\nList of Keywords\n\nByju; Online educational services; Ed-tech services business; \nCorporate Debtor, Financial Creditor; Operational Creditor; ‘Team \nSponsor Agreement’; Board of Control for Cricket in India (BCCI); \nSponsorship of the Indian National Cricket Team; Administrative \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1807\n\nAgent’ of the lenders; Corporate Insolvency Resolution Process \n(CIRP); Interim Resolution Professional (IRP); Operational debt; \nLocus/Locus standi; Inherent powers under Rule 11 of the NCLAT \nRules 2016; Discretionary powers; Not unrelated party to CIRP, \nClaims verified by IRP; Prescribed procedure for withdrawal of CIRP; \nWithdrawal or settlement at both stages post admission- before \nand after the CoC is constituted; Settlement of claims between \nparties; Settlement agreement; Appeal to Supreme Court; “any \nperson aggrieved”; Applicant creditor; Collective proceedings; in \nrem; All creditors stakeholders; Application for withdrawal; NCLAT \napproved the settlement; Section 9 petition; Section 7 petition; \nCIRP set aside; Constitution of the CoC; CIRP admitted, Objections \nbefore the NCLAT; Source of the funds for the settlement; Round \ntripping of funds, Fraudulent transfer; Hedge fund; United States \nBankruptcy Court, District of Delaware; Proceedings before the \nDelaware Court; Interim stay; Interim order staying the constitution \nof the CoC; Debt enforcement; Preferential payment; Oppression; \nMismanagement; Ongoing investigation; Enforcement Directorate \n(ED); Objections summarily dismissed.\n\nCase Arising From\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 9986 of 2024\n\nFrom the Judgment and Order dated 02.08.2024 of the National \nCompany Law appellate Tribunal, Chennai in CAAT (CH) (I) No. \n262 of 2024\n\nWith\n\nSpecial Leave Petition (C) No. 21023 of 2024\n\nAppearances for Parties\n\nKapil Sibal, Shyam Divan, Sr. Adv., Prateek Kumar, Ms. Raveena \nRai, Ms. Smriti Nair, Nishant Sharma, Ms. Anshula Laroiya, \nMs. Manisha Singh, M/S. Khaitan & Co., Advs. for the Appellant.\n\nTushar Mehta, SG/Sr. Adv., Dr. Abhishek Manu Singhvi, Neeraj \nKishan Kaul, Ramji Srinivasan, Gopal Sankaranarayanan, \nS. Niranjan Reddy, Sr. Advs., Zulfiquar Memon, Rishabh Gupta, \nWaseem Pangarkar, Mrinal Bharti, Kunal Vajani, Avishkar Singhvi, \nAmit Bhandari, Vivek Jain, Mrs. Nadiya Sarguroh, Swapnil \nSrivastava, Mrs. Kanika Goenka, Mrs. Swagata Ghosh, Jayesh \nSrivastava, Ms. Kashika Gera, Yashowardhan Dixit, Ms. Gargi Patil, \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1808 \n\n[2024] 10 S.C.R.\n\nMs. Aditi Tiwari, Allan David, Ms. Yashita Bharadwaj, Deepak Joshi, \nM/s. Mzm Legal Delhi Llp, R. Sudhinder, Ms. Adity Chaudhury, Ms. \nBhavya Mohan, Rahul Dev, Ms. Aastha Trivedi, Ms. Ann Pereira, \nKanu Agrawal, Ms. Mili Baxi, Arjun Amin, A. Karthik, I/b Argus \nPartners, Poornachandra B Pattar, Sahil Bhalaik, Tushar Giri, Ms. \nBhavna Arul, Siddharth Anil Khanna, Ritik Arora, Shivam Mishra, \nMs. Namrata Saraogi, Arjun Bhatia, Ms. Gulshan Jahan, Ms. Shivani \nVij, Ms. Trisha Chandran, Syed Jafar Alam, Shankh Sengupta, Ms. \nTine Abraham, Yogesh Singh, Ms.Manasa Sundarraman, Rangam \nSharma, Sujoy Sur, Ms. Prarthna Bathija, Rohan Kohli, Shreyash \nSharma, Shivam Singhania, Ms. Neha Dhavalikar, Shubh Arora, \nSahil Raveen, Advs. for the Respondents.\n\nJudgment / Order of the Supreme Court\n\nJudgment\n\nDr Dhananjaya Y Chandrachud, CJI\n\nTable of Contents*\n\nA. Background ............................................................................... 5\n\ni.\n\nParties before this Court .................................................. 5\n\nii. Proceedings before the US Courts ................................. 6\n\niii.\n\nInsolvency proceedings against the first respondent .... 8\n\niv. Settlement between the parties and proceedings before \nthe NCLAT ............................................................................\n\n9\n\nv.\n\nImpugned Judgement ....................................................... 14\n\nvi. Proceedings before this Court and the Delaware Court ... 16\n\nB.\n\nIssues ........................................................................................ 18\n\nC. Submissions ............................................................................ 18\n\nD. Legal Background .................................................................... 23\n\ni.\n\nLegal context and fundamental principles .................... 23\n\na. General principles underlying the IBC ........................ 23\n\nb. Nature of the proceedings after admission of the \napplication ....................................................................\n\n27\n\n* Ed. Note: Pagination as per the original Judgment.\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1809\n\nii. Legal framework for withdrawal and settlement of \nclaims ..................................................................................\n\n31\n\na. Evolution of the legal framework ............................... 31\n\nb.\n\nInsights from the evolution of the legal framework ...... 44\n\niii. Scope of ‘Inherent Powers’ under Rule 11 ........................ 49\n\nE. Application to the instant case ................................................ 51\n\ni.\n\nLocus of the appellant before this Court ......................... 52\n\nii. Approach of the NCLAT in the Impugned Judgement ..... 54\n\niii. Decisions of this Court cited in the Impugned \nJudgement .........................................................................\n\n57\n\nF. Conclusion ................................................................................ 60\n\n1. This appeal arises from a judgment of the National Company Law \nAppellate Tribunal, Chennai1 dated 2 August 2024.2 The National \nCompany Law Tribunal, Bengaluru,3 admitted the application instituted \nby the second respondent under Section 9 of the Insolvency and \nBankruptcy Code4 and initiated the corporate insolvency resolution \nprocess5 against the third respondent. In the exercise of its powers \nunder Rule 11 of the National Company Law Appellate Tribunal \nRules, 2016,6 the NCLAT approved a settlement in relation to the \ndues payable to the third respondent by the second respondent and \nset aside the order of the NCLT.\n\n2. The appellant, who claims to be a Financial Creditor, had moved \nan application before the NCLAT objecting to the approval of the \nsettlement and questioned the source of the funds for the settlement. \nThe objections of the appellant were rejected by the NCLAT in \nthe Impugned Judgement. The present appeal raises substantial \nquestions about the legal framework governing the withdrawal of a \nCIRP; the settlement of claims after the admission of an application \n\n1 \n\n2 \n\n3 \n\n4 \n\n5 \n\n6 \n\n“NCLAT”\n\n“Impugned Judgement”\n\n“NCLT”\n\n“IBC”\n\n“CIRP”\n\n“NCLAT Rules”\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1810 \n\n[2024] 10 S.C.R.\n\ninstituted by a debtor; and the scope of the inherent powers vested \nin the NCLAT under Rule 11 of the NCLAT Rules. \n\nA. Background\n\ni. \n\nParties before this Court\n\n3. The third respondent, Think and Learn Pvt Ltd, a company engaged in \nthe business of providing online educational services, is the Corporate \nDebtor.7 The first respondent, Byju Raveendran and his brother, Riju \nRaveendran are former directors of the Corporate Debtor.\n\n4. The second respondent, the Board of Control for Cricket in India \n(BCCI) is an Operational Creditor who executed a ‘Team Sponsor \nAgreement’ dated 25 July 2019 with the Corporate Debtor, which \nrelates to the sponsorship of the Indian National Cricket Team. \n\n5. The Corporate Debtor has a 100% owned subsidiary, Byju’s Alpha \nInc. – a company incorporated in the United States of America. Byju’s \nAlpha Inc. availed a loan facility aggregating to approximately USD \n1,200,000,000 under a credit and guarantee agreement dated 24 \nNovember 2021.8 The Appellant, GLAS Trust Company LLC, is the \n‘Administrative Agent’ of all the lenders under this agreement and \nthe ‘Collateral Agent’ for the secured parties. Under the terms of \nthe Credit Agreement, the Corporate Debtor acted as a guarantor \nand issued a guarantee deed dated 24 November 2021 in favour \nof the appellant. \n\nii. Proceedings before the Delaware Court\n\n6. On account of an alleged default under the Credit Agreement, the \nappellant enforced the security in respect of the loan and took a series \nof steps that resulted in the removal of all pre-existing directors of \nByju’s Alpha Inc., including Riju Raveendran and the appointment \nof a new sole director. The appellant contends that despite these \nmeasures, defaults persisted in payment of the principal outstanding \namount and the interest accrued under the Credit Agreement.\n\n7 \n\n8 \n\n“Corporate Debtor”\n\n“Credit Agreement”\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1811\n\n7. Accordingly, the appellant, acting as the Administrative Agent of the \nlenders, issued a notice of demand dated 6 December 2023 to the \nCorporate Debtor, invoking the guarantee deed and demanding that \nthe Corporate Debtor pay the requisite amount. However, it is the \ncase of the appellant, that the Corporate Debtor too defaulted in its \ncapacity as the guarantor under the Credit Agreement. \n\n8. \n\nIt is contended that a series of wire transfers were carried out in \nApril and July 2022 by Byju’s Alpha Inc., allegedly at the behest of \nthe Corporate Debtor, fraudulently transferring approximately USD \n533 million to a hedge fund based in the United States. A motion for \npreliminary injunctive relief to protect this amount was moved before \nthe United States Bankruptcy Court, District of Delaware.9 \n\n9. On 18 March 2024, the Delaware Court issued a preliminary \ninjunction inter alia restraining Riju Raveendran, another wholly \nowned subsidiary of the Corporate Debtor, the concerned hedge fund, \nand other similarly placed persons from taking any steps to spend, \ntransfer, exchange, convert, dissipate, liquidate, or otherwise move \nor modify any rights related to the USD 533 million transferred from \nByju’s Alpha Inc to the hedge fund. The operative directions of the \norder passed by the Delaware Court read as follows: \n\n“Defendants Riju Ravindran, Inspilearn LLC (“Inspilearn”), \nCamshaft Capital Fund LP, Camshaft Capital Advisors, \nLLC, Camshaft Capital Management, LLC; and any \nof such parties’ officers, agents, servants, employees, \nand attorneys, and any other persons who are in active \nconcert or participation with the foregoing, including, \nByju Raveendran and Divya Gokulnath (collectively, the \n“Enjoined Parties”) are immediately enjoined, upon \nentry of this Order, from taking any steps to spend, \ntransfer, exchange, convert, dissipate, liquidate, or \notherwise move or modify any rights related to: (i) \nthe funds that in the approximate amount of $533,000, \nI00.00 transferred from the Debtor to Camshaft Capital \nFund, LP in April and July 2022, (ii) the funds (or other \nassets) transferred to and/or redeemed by a non-U.S. \n\n9 \n\n“Delaware Court”\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1812 \n\n[2024] 10 S.C.R.\n\ntrust on behalf of lnspilearn on or about February 1, \n2024, and (iii) the funds (or other assets) that were \npurportedly subsequently transferred to a “non-US \nbased 100% subsidiary of BYJU’S,” along with any \nassociated accrued interest or proceeds, in each case \n((i), (ii), and (iii) collectively, the “Alpha Funds”).”\n\n(emphasis supplied)\n\n10. On 28 May 2024, the Delaware Court passed an order finding that \nRiju Raveendran was in contempt of the above preliminary injunction \norder dated 18 March 2024. The Delaware Court directed that “full \ndiscovery shall immediately commence concerning Mr Ravindran’s \nfinancial situation, including, but not limited to, the location and \namounts of his assets wherever and however held, including \n(i)  how much money he has, including funds in his personal bank \naccount(s), and (ii) what other assets he holds” and posted the case \nto a later date to determine the financial penalties to be imposed \non Riju Raveendran. Eventually, on 31 July 2024, the Delaware \nCourt imposed financial penalties of USD 10,000 per day on Riju \nRaveendran, which is payable until the contempt is ”purged by him”.\n\niii. \n\nInsolvency proceedings against the first respondent\n\n11. On 23 September 2023, the second respondent moved a petition \nunder Section 9 of the IBC, in respect of an operational debt of \napproximately Rs 158 crore payable by the Corporate Debtor under \nthe Team Sponsor Agreement.10 The NCLT admitted the petition on \n16 July 2024 and initiated CIRP.11 A moratorium under Section 14 \nof IBC was imposed and an Interim Resolution Professional,12 was \nappointed.\n\n12. Separately, the appellant also filed a petition under Section 7 of the \nIBC against the Corporate Debtor on 22 January 2024.13 On 16 July \n2024, the NCLT disposed of the Section 7 petition, in view of the \norder passed on the same day admitting the Section 9 petition filed \n\n10 Company Petition (IB) No. 149/BB/2023 (“Section 9 Petition”)\n\n11 \n\n12 \n\n“Section 9 Order”\n\n“IRP”\n\n13 Company Petition (IB) No. 55/BB/2024 (“Section 7 Petition”)\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1813\n\nby the second respondent.14 The appellant was granted liberty to \nfile their claims before the IRP appointed pursuant to the Section 9 \nOrder. Significantly, the NCLT also granted liberty to the appellant to \nseek a revival of its Section 7 petition, “depending on the subsequent \ndevelopments at the appellate level, if any.” The NCLT directed as \nfollows: \n\n“3. In view of the order passed today i.e., 16.07.2024 by \nthis Adjudicating Authority in another Company petition \nbearing C.P (IB) No.149/BB/2023 which is filed by The \nBoard and Control for Cricket in India under Section 9 \nof the I & B Code 2016 r/w Rule 6 of the Insolvency & \nBankruptcy (Application to Adjudicating Authority) Rules \n2016, against the same Corporate Debtor herein i.e., \nThink & Learn Private Limited and since the Corporate \nInsolvency Resolution Process (CIRP) has been initiated \nin respect of the Corporate Debtor therein by appointing \nthe IRP, the instant C.P is disposed of by granting \nliberty to the Petitioner herein to put-forth their claim \nbefore the IRP appointed in C.P (IB) No. 149/BB/2023 \nin accordance with the provisions of the IBC 2016 and \nthe Regulation made thereunder.\n\n4. However, at the request of the Learned Senior Counsel \nfor the Petitioner, we hereby grant liberty to the Petitioner \nto seek restoration/revival of the said petition bearing \nC.P (IB) No.55/BB/2024 depending on the subsequent \ndevelopments in the matter at the Appellate level; if \nany.”\n\n(emphasis supplied)\n\n13. The IRP made a public pronouncement on 17 July 2024 and the \n\nappellant filed its claim in the prescribed format on 25 July 2024. \n\niv. Settlement between the parties and proceedings before the \n\nNCLAT \n\n14. Both the appellant and the first respondent moved the NCLAT \nin appeal against the respective orders of the NCLT. The first \n\n14 \n\n“Section 7 Order”\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1814 \n\n[2024] 10 S.C.R.\n\nrespondent challenged the admission of the Section 9 petition by \nthe NCLT.15 On the other hand, the appellant challenged the order \ndisposing of the Section 7 petition.16 The appellant also moved an \napplication before the NCLAT for impleadment in the appeal filed \nby the first respondent, seeking to be heard before any relief was \ngranted.17 \n\n15. The appeal instituted by the first respondent was placed before the \nNCLAT for the first time on 30 July 2024 and adjourned on a request \nmade by the senior counsel for the second respondent. On the next \ndate of the hearing, i.e. 31 July 2024, it was recorded, based on the \nsubmissions by the counsel for the first and second respondents, that \na sum of INR 50 crore had been transferred to the second respondent \nas part of a settlement. The counsel for the first respondent further \nsubmitted, before the NCLAT, that another sum of Rs 25 crore would \nbe paid by 2 August 2024, and the balance amount of Rs 83 crore \nwould be paid thereafter, on or before 9 September 2024.18 \n\n16. The payment was purportedly made pursuant to a settlement offer \nextended by Riju Raveendran, in his personal capacity, to the second \nrespondent by an email dated July 30, 2024. He proposed to clear \nthe operational debt of Rs 158 crore in three tranches on 30 July \n2024,19 2 August 2024 and 9 August 2024, respectively. The second \nrespondent agreed to take steps for withdrawal of the petition upon \nreceipt of full payment of the operational debt. Relevant excerpts of \nthe email are as follows: \n\n“1.⁠ ⁠We undertake to pay INR. 50 crores upfront today i.e. \n30 June 2024, by way of RTGS from the account of its \npromoter, Mr. Riju Ravindran. We shall forward the UTR \ndetails of the same shortly.\n\n2.⁠ ⁠We further undertake to pay INR. 25 crores on 02 August \n2024 through RTGS.\n\n3.⁠ ⁠The total dues are approximately INR. 158 crores.\n\n15 CA (AT) (CH) (Ins) No. 262 of 2024.\n\n16 CA (AT) (CH) (Ins) No. 274 of 2024. \n\n17 \n\n18 \n\nI.A. No. 727 of 2024.\n\nImpugned Judgement, paras 9-11. \n\n19 The settlement offer inadvertently stated “30 June 2024”, which was clarified to be a typographical error \n\nfor 30 July 2024. \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1815\n\n4.⁠ ⁠The balance amount of INR. 83 crores to complete the \nfigures of INR. 158 crores shall be paid on or before 09 \nAugust 2024.\n\n5.⁠ ⁠We shall also hand over post-dated cheques to the tune \nof INR. 83 crores drawn in favour of “Board of Control for \nCricket in India” payable on 09 August 2024.\n\n6.⁠ ⁠In view of the aforesaid proposed settlement, the parties \nshall jointly request the Hon’ble NCLAT on 31 July 2024 \nto suspend the order of admission of Think & Learn Pvt. \nLtd passed by the NCLT until 09 August 2024.\n\n7.⁠ ⁠Further, once the payment of complete INR. 158 crores \nto BCCI is made, BCCI shall make statement to withdraw \nthe Company Petition and take necessary steps towards \nthe same.”\n\n17. \n\nIt is common ground that on 31 July 2024, when the parties sought \nto place the settlement on record, although CIRP had been initiated \nand an IRP had been appointed, the CoC had not been constituted. \nBefore the NCLAT, the second respondent stated that in view of \nthe money being generated in India and coming through a banking \nchannel, it shall be accepted and was in favour of the withdrawal of \nCIRP. The appellant, however, raised several objections, including \ninter alia that the alleged payment made by Riju Raveendran \nwould constitute a preferential payment to an operational creditor. \nFurther, the appellant contended that the source of the funds is \nnot clear, and the amount being offered by Riju Raveendran to \nsettle the debt of the second respondent would constitute an act \nof round-tripping. The appellant apprehended that the funds of \nByjus’s Alpha Inc. were being offered to settle dues in India, in \ncontravention of the preliminary injunction issued by the Delaware \nCourt on 18 March 2024.\n\n18. On 1 August 2024, an affidavit was filed along with an undertaking by \nRiju Raveendran. The affidavit of Riju Raveendran could purportedly \nnot be filed in time as he was not in India and thus, the undertaking \nwas filed through an authorized representative. In the undertaking, Riju \nRaveendran affirmed that (i) the money being offered for settlement \nbetween the Corporate Debtor and the second respondent was being \npaid from his personal funds, including the sale of shares held by \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1816 \n\n[2024] 10 S.C.R.\n\nhim in the Corporate Debtor; (ii) the money was generated in India \nand is not linked to the money involved in the proceedings pending in \nthe Delaware Court; (iii) the first respondent (Byju Raveendran) has \nnot transferred any money or extended any security towards raising \nthe sums for payment of the settlement amount. The undertaking \nreads as follows:\n\n“…\n\n3. I state and confirm that no part of the Settlement \nAmount is being paid in violation of any order passed \nby any court or tribunal, including orders passed by the \nDelaware Bankruptcy Court.\n\n4. I have not received any portion of the USD 533 million \nthat are the subject matter of the proceedings before the \nDelaware Bankruptcy Court and, accordingly, no part of \nthose funds have been, or will be, used to pay the BCCI. \nIn fact, the funds forming part of the Settlement Amount \nare being paid out of my personal funds, as explained in \nparagraph 8 below.\n\n5. To clarify, under the terms of the Credit Agreement dated \n24 November 2021 (the “Credit Agreement”), a group of \nlenders represented by GLAS Trust LLC (GLAS) disbursed \nan amount of USD 1.2 billion to Byju’s Alpha, Inc. (a \nstep-down subsidiary of Think & Learn Pvt. Ltd. (TLPL)). \nUnder the Credit Agreement, monies disbursed thereunder \ncould not be brought into India. Therefore, none of the \nmonies disbursed under the Credit Agreement (of which \nthe USD 533 million forms a part) has ever been brought \ninto India. Indeed, the allegation that I have received any \nsum of monies disbursed under the Credit Agreement has \nnever been made by GI.AS in any proceeding whatsoever, \nincluding the proceeding under Section 7 of the IBC filed \nby it before the NCLT.\n\n6. I specifically confirm that there has been no violation of \nthe Order dated 18 March 2024 passed by the Delaware \nBankruptcy Court, and I have not taken any steps in \ncontravention of the same. I also confirm that I have not \ndirectly, indirectly or in any form or manner received any \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1817\n\nsum of money from disbursements made under the Credit \nAgreement. In fact, the foreign remittance received by \nme since execution of the Credit Agreement is from two \nsecondary sales of my shareholding in TLPL in January \nand November 2022 totalling approximately USD 109 \nmillion, as demonstrated by the SH-4 annexed hereto …\n\n7. I further confirm that Byju Raveendran has not transferred \nany money or extended any security of his assets towards \nraising the sums for payment of the Settlement Amount \nto the BCCI.\n\n8. I further state and confirm that the Settlement Amount \ncomprises funds raised by me personally:\n\na. from the sale and the gains/income on such sale of \nshares held personally by me in TLPL between May \n2015 and January 2022. By way of these sales, I had \naccumulated approximately INR 3600 crores. The forms \nSH-4 evidencing these sales are hereto annexed and \nmarked Exhibit A. Out of the aforementioned amount, \napproximately INR 1050 crores was paid as income \ntax. The IT returns filed by me over the relevant \nperiod and which would reflect these amounts are \nhereto annexed and marked Exhibit B. The remaining \namounts of approximately INR 2600 crores was infused \nback into TLPL due to its operational needs and to \nensure that TLPL continues to carry on business \nas a going concern, including paying salaries to its \n27000 employees and sustaining the platform which \nhas over 150 million students worldwide (which is a \nmatter of record). The amounts that remained with me \nwere used to pay the first tranche of the Settlement \nAmount (in the amount of INR 50 crores) to BCCI on \n30 June 2024; and\n\nb. from liquidation of personal assets in India, which will \nbe used to pay the balance amount of the Settlement \nAmount.”\n\n19. \n\nIn view of these developments, on 1 August 2024, the NCLAT passed \nan interim order staying the constitution of the CoC. \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1818 \n\n[2024] 10 S.C.R.\n\nv. \n\nImpugned Judgement\n\n20. Before the NCLAT, the appellant contended that (i) Section 12A of \nthe IBC and Regulation 30A of the CIRP Regulations 2016 deal \nwith the settlement of claims after CIRP is initiated, both before and \nafter the CoC is constituted. The first respondent should have, thus, \napproached the NCLT as mandated by Rule 30A instead of invoking \nthe inherent powers of the NCLAT under Rule 11; (ii) NCLAT should \nnot exercise its discretionary power under Rule 11 of the NCLAT \nRules because the directors of the Corporate Debtor and its allied \nentities are fugitives, living abroad; have defaulted on government \ndues; Enforcement Directorate proceedings are pending, look out \nnotices have been issued; and there has been a significant drop in \nthe valuation of the Corporate Debtor; and (iii) the interests of all \ncreditors must be considered while accepting a settlement, including \nthe appellant who has a substantial interest with regard to the \nCorporate Debtor. \n\n21. On 2 August 2024, the NCLAT delivered the Impugned Judgement. \nAfter recording the factual background and submissions of the parties \nbefore it, the NCLAT outlined its reasoning and analysis in paras 44 \nto 50 of the Impugned Judgement. The NCLAT held the affidavit and \nundertaking filed by Riju Raveendran made it clear that the money \nwas generated by Riju Raveendran from his own sources; income \ntax had been paid on the sales of shares from which the amount \nwas generated; and there was no violation of the Order dated 18 \nMarch 2024 passed by the Delaware Court either directly or indirectly. \nTherefore, NCLAT held that in the absence of any evidence to the \ncontrary, there was no reason to believe that the money that was \nbeing offered by Riju Raveendran was linked to the money disbursed \nto Byju’s Alpha Inc. under the Credit Agreement or from the coffers \nof the Corporate Debtor. \n\n22. Further, it was held that the law regarding the settlement of disputes \nbetween the parties is in the process of evolution, and this Court \nhas approved the invocation of Rule 11 of the NCLAT Rules to \nallow such settlements. Reliance was placed on the decisions of \nthis Court in Abhishek Singh vs Huhtamaki PPL Limited20 and \n\n20 \n\n[2023] 4 SCR 596 : 2023 SCC Online SC 349\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1819\n\nKamal K. Singh v. Dinesh Gupta,21 in addition to decisions of the \nNCLAT on the point. Further, it was held that the NCLT had granted \nthe appellant the liberty to revive its Section 7 petition, in case of any \nadverse developments in the appellate proceedings in the Section \n9 petition and thus, the right of the applicant to enforce its claims \nwas well protected. \n\n23. Accordingly, the settlement between the parties was approved and \nthe order of the NCLT admitting the Section 9 petition was set aside. \nThe NCLAT directed that in case of a breach of the undertaking and \naffidavit, the Section 9 Order would automatically be revived. The \noperative directions are extracted below: \n\n“51. Thus, in view of the aforesaid facts and circumstances, \nin view of the undertaking given and affidavit filed, the \nsettlement between the parties is hereby approved and \nas a result thereof, the present appeal succeeds and the \nimpugned order is set aside, however, with a caveat that \nin case there is a breach in the undertaking given and the \naffidavit filed, the order dated 16.07.2024 passed against \nthe present Appellant, shall automatically revive.”\n\nvi. Proceedings before this Court and the Delaware Court\n\n24. On 1 August 2024, Byju’s Alpha Inc. and the appellant instituted a \nmotion before the Delaware Court seeking a temporary restraining \norder against Riju Raveendran, inter alia restraining him from using his \npersonal assets to satisfy the dues of the second respondent. Before \nthe Delaware Court, the appellant contended that fraudulent payments \nwere being made by Riju Raveendran to pay the operational debt \ndue to the second respondent and dismiss insolvency proceedings \nagainst the Corporate Debtor, which is “his older brother’s crumbling \nbusiness enterprise in India”. On 8 August 2024, the Delaware Court \npassed an order rejecting the motion. \n\n25. The appellant instituted the present Civil Appeal before this Court, \nchallenging the Impugned Judgement of the NCLAT. By an Order \ndated 14 August 2024, this Court issued notice on the appeal and \ndirected that there would be a stay on the operation of the Impugned \n\n21 \n\n(2022) 8 SCC 330.\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1820 \n\n[2024] 10 S.C.R.\n\nJudgment. The second respondent was directed to maintain the \namount of Rs 158 crores, which has been realized in pursuance of \nthe settlement, in a separate escrow account, to abide by further \ndirections of this Court.\n\n26. \n\nIn view of the above directions of this Court granting an interim stay \non the Impugned Judgement, the CIRP proceedings resumed. On 19 \nAugust 2024, the IRP addressed a letter to the appellant noting that \nthe CIRP had revived, verified the claim submitted by the appellant \nand admitted the appellant as a financial creditor. Accordingly, the \nIRP constituted the CoC, which consisted of four financial creditors, \nincluding the appellant. \n\n27. Subsequently, by a letter dated 1 September 2024, the IRP sought \nto reconstitute the CoC and reclassify the claim of the appellant as \n‘contingent’. The IRP stated that the reclassification of the claim as \n‘contingent’ was on account of purported disqualification notices \nissued by the Corporate Debtor to certain lenders of the loan, which \nallegedly disqualified more than sixty percent of the lenders and \ntherefore, the appellant no longer had the requisite authorization. \nFrom the record and submissions before us, it appears that the first \nmeeting of the CoC took place on 3 September 2024.\n\n28. On 26 September 2024, this Court reserved its judgment and directed \nthat the IRP maintain the status quo and not hold any meeting of \nthe CoC until the judgment is pronounced. \n\nB. \n\nIssues\n\n29. \n\nIn view of the above background, the following issues arise for our \nconsideration: \n\na. Whether the appellant, who is not a party to the settlement \nbetween the second respondent and the Corporate Debtor, \nhas locus in the proceedings before this Court; \n\nb. Whether the NCLAT erred in invoking its inherent powers \nunder Rule 11 of the NCLAT Rules 2016 in the presence of a \nprescribed procedure for withdrawal of CIRP and settlement of \nclaims between parties; and \n\nc. Without prejudice to the above, whether the NCLAT adequately \naddressed the objections raised by the appellant, while \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1821\n\nexercising its discretionary power under Rule 11 of the NCLAT \nRules 2016.\n\nC. Submissions\n\n30. Mr Kapil Sibal and Mr Shyam Divan, Senior Counsel appearing for \n\nthe appellant broadly advanced the following submissions:\n\na. NCLAT should have refrained from exercising its discretionary \npower under Rule 11 of the NCLAT Rules to sanction the \nsettlement when there is a prescribed procedure for withdrawal \nand settlement under Section 12A of the IBC read with \nRegulation 30A of the CIRP Regulations 2016; \n\nb. The powers conferred on the NCLAT under Rule 11 of the \nNCLAT Rules are discretionary and should not be exercised \nmechanically in cases where the withdrawal of the application \nwould prejudice other stakeholders and may result in numerous \nother creditors filing insolvency actions against the Corporate \nDebtors on account of their unpaid dues; \n\nc. NCLAT failed to deal with the objections raised by the appellant \nabout the source of the funds and the conduct of the first \nrespondent and his brother, Mr Riju Raveendran. Facts such \nas – the purported fraudulent transfer of USD 533 million to a \nhedge fund in the United States; the orders of the US Court \nrestraining the brothers from transferring or dissipating the \namount; the contempt proceedings against Mr Riju Raveendran; \nthe ongoing investigation by the Enforcement Directorate against \nthe first respondent and the Corporate Debtor; attempts by the \nCorporate Debtor to dissipate assets – were not adequately \ndealt with in the Impugned Judgement;\n\nd. There are clear indications that the Corporate Debtor cannot \nservice its outstanding debts to its financial creditors. There \nhas been a 99% drop in the valuation of the Corporate Debtor, \ndefaults in paying employees’ salaries, the exit of key managerial \npersons, failure to file financial statements, and oppression \nand mismanagement petitions by the shareholders against the \npromoters, all of which indicate that insolvency proceedings \nare inevitable;\n\ne. Setting aside the CIRP merely because one of the creditors \nhas recovered its dues by way of a settlement agreement, runs \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1822 \n\n[2024] 10 S.C.R.\n\ncontrary to the settled position that the IBC cannot be used as \na recovery mechanism. Upon initiation of insolvency, third-party \nrights are created in all creditors of the corporate debtor; and \n\nf. \n\nRiju Raveendran failed to provide the details of the source of \nfunds by way of an affidavit. His undertaking was accompanied \nby an affidavit of a third party who claims to be a power of attorney \nholder of Riju Raveendran. The declaration in the undertaking \nis ambiguous and the figures mentioned do not add up so as to \nenable him to make payments under the settlement agreement.\n\n31. Dr Abhishek Manu Singhvi and Mr Neeraj Kishan Kaul, Senior \nCounsel for the first respondent advanced the following submissions: \n\na. The inherent powers of the NCLAT, under Rule 11 of the \nNCLAT Rules, include the power to pass orders permitting the \nwithdrawal of the CIRP. In several judgements, after Section \n12A was inserted in the IBC, the NCLAT has invoked Rule 11 \nto permit the withdrawal of CIRP; \n\nb. The appellant has no locus to maintain the present proceedings \nbefore this Court. In a case of settlement between a corporate \ndebtor and an individual creditor, there is no scope for hearing \nany third-party creditor, as such a creditor is free to adopt other \nremedies for its claims;\n\nc. Despite liberty being granted to the appellant to revive its Section \n7 petition, the appellant has failed to do so, because a revival \nwould lead to scrutiny of the maintainability of the Section 7 \npetition. As the appellant has a weak case on maintainability, \nit is seeking to piggyback on the Section 9 NCLT Order and is \nopposing the settlement;\n\nd. The appellant is indulging in forum shopping. Despite specific \nliberty to revive its Section 7 petition, the appellant chose to \nmove an appeal against the order of disposal and intervened \nin the proceedings before the NCLAT instituted by the second \nrespondent. In parallel, the appellant also initiated proceedings \nbefore the Delaware Bankruptcy Court to stall the settlement; \n\ne. The Corporate Debtor is an ed-tech services business, \nwhose revenue is generated from its intellectual property and \nsubscriptions from students. Revenues are likely to be hit with \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1823\n\neach day that the Corporate Debtor continues into insolvency, \nwhich could lead to classes shutting down, disruption of services, \nteachers resigning, and students dropping out; and \n\nf. \n\nThe Corporate Debtor is a solvent company with a running \nbusiness of 27,000 employees and 150 million students. A \nviable company capable of repaying its debts must not be \nadmitted into CIRP.\n\n32. Mr Tushar Mehta, the learned Solicitor General appearing for the \nsecond respondent, supported the arguments of the first respondent \nin support of the Impugned Judgement and also advanced the \nfollowing submissions:\n\na. The IBC aims to prevent the economic death of entities, which \ninvolves encouraging settlement between the parties. NCLAT \npassed the Impugned Judgement after hearing all concerned \nparties. Thus, there was no infirmity in invoking inherent powers \nunder Rule 11 of the NCLAT Rules 2016; \n\nb. Regulation 30A was a statutory response to the decision of this \nCourt in Swiss Ribbons (P) Ltd. v. Union of India22 and the \nintent is to encourage settlement. The provision is directory as \nno consequence of non-compliance is stipulated. It does not \ncontemplate adjudication about the factum of settlement, the \nmode/method of settlement or any specific legal ground by \nthe NCLT;\n\nc. Regulation 30A, even if applicable can have no application \nwhen the settlement is made using personal funds and not the \nfunds of the corporate debtor; and\n\nd. The payment to BCCI does not prejudice other creditors or \nstakeholders of the Corporate Debtor as it is not made from \nthe possible insolvency estate that would be created if the \nCorporate Debtor goes through CIRP. \n\n33. We also had an opportunity to hear the learned Senior Counsel who \nappeared for the intervenors. Mr Gopal Sankarnarayan appeared \nfor an entity that claims to be another Operational Creditor. Another \nintervention application was moved by several shareholders of the \n\n22 \n\n[2019] 3 SCR 535 : (2019) 4 SCC 17.\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1824 \n\n[2024] 10 S.C.R.\n\nCorporate Debtor, who purportedly hold 16.75% of its issued and \nthe paid-up share capital. These shareholders have also instituted \nproceedings under Sections 241, 242 and 244 of the Companies \nAct 2013 for oppression and mismanagement against the erstwhile \nmanagement of the Corporate Debtor, including the first respondent \nand Riju Raveendran. The counsel for the intervenors advanced \nsubmissions broadly on the same lines as the appellant. They \nassailed the acceptance of the settlement agreement by the NCLAT \nand contended that insolvency proceedings against the Corporate \nDebtor are inevitable. \n\nD. Legal Background \n\ni. \n\nLegal context and fundamental principles \n\na. General principles underlying the IBC \n\n34. Before delving into the provisions which constitute the legal framework \nfor the withdrawal of CIRP, it is crucial to delineate some of the \nunderlying aims and objectives which guide the IBC. These principles \nwill assume relevance while analyzing the locus of the appellant \nand the course of action adopted by the NCLAT in the Impugned \nJudgement. \n\n35. The Statement of Objects and Reasons for the IBC reads as follows: \n\n“Statement of Objects and Reasons.—There is no single \nlaw in India that deals with insolvency and bankruptcy. \nProvisions relating to insolvency and bankruptcy for \ncompanies can be found in the Sick Industrial Companies \n(Special Provisions) Act, 1985, the Recovery of Debts \nDue to Banks and Financial Institutions Act, 1993, the \nSecuritisation and Reconstruction of Financial Assets \nand Enforcement of Security Interest Act, 2002 and the \nCompanies Act, 2013. These statutes provide for creation \nof multiple fora such as Board of Industrial and Financial \nReconstruction (BIFR), Debts Recovery Tribunal (DRT) \nand National Company Law Tribunal (NCLT) and their \nrespective Appellate Tribunals. Liquidation of companies \nis handled by the High Courts. Individual bankruptcy \nand insolvency is dealt with under the Presidency Towns \nInsolvency Act, 1909, and the Provincial Insolvency \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1825\n\nAct, 1920 and is dealt with by the courts. The existing \nframework for insolvency and bankruptcy is inadequate, \nineffective and results in undue delays in resolution, \ntherefore, the proposed legislation.\n\n2.The objective of the Insolvency and Bankruptcy Code, \n2015 is to consolidate and amend the laws relating to \nreorganisation and insolvency resolution of corporate \npersons, partnership firms and individuals in a time-\nbound manner for maximisation of value of assets of such \npersons, to promote entrepreneurship, availability of credit \nand balance the interests of all the stakeholders including \nalteration in the priority of payment of government dues \nand to establish an Insolvency and Bankruptcy Fund, \nand matters connected therewith or incidental thereto. \nAn effective legal framework for timely resolution of \ninsolvency and bankruptcy would support development \nof credit markets and encourage entrepreneurship. It \nwould also improve Ease of Doing Business, and facilitate \nmore investments leading to higher economic growth and \ndevelopment.\n\n[…]\n\n5. The Code seeks to achieve the above objectives.’”\n\n36. The long title of the IBC provides that it is “an Act to consolidate and \namend the laws relating to reorganisation and insolvency resolution \nof corporate persons, partnership firms and individuals in a time \nbound manner for maximisation of value of assets of such persons, \nto promote entrepreneurship, availability of credit and balance the \ninterests of all the stakeholders including alteration in the order of \npriority of payment of Government dues and to establish an Insolvency \nand Bankruptcy Board of India, and for matters connected therewith \nor incidental thereto.” \n\n37. The objectives discernible from the long title and the Statement \nof Objects and Reasons of the IBC were discussed in a decision \nof a two-judge bench of this Court in Swiss Ribbons (P) Ltd. v. \nUnion of India.23 This Court observed that the IBC is a beneficial \n\n23 \n\n[2019] 3 SCR 535 : (2019) 4 SCC 17\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1826 \n\n[2024] 10 S.C.R.\n\nlegislation which attempts to put the Corporate Debtor back on its \nfeet. According to this Court, this would involve considering the \ninterests of all concerned stakeholders rather than viewing the IBC \nas a mere recovery legislation for individual creditors. This Court, \nspeaking through Justice RF Nariman, observed as follows: \n\n“28. It can thus be seen that the primary focus of the \nlegislation is to ensure revival and continuation of the \ncorporate debtor by protecting the corporate debtor from \nits own management and from a corporate death by \nliquidation. The Code is thus a beneficial legislation \nwhich puts the corporate debtor back on its feet, not \nbeing a mere recovery legislation for creditors. The \ninterests of the corporate debtor have, therefore, been \nbifurcated and separated from that of its promoters/\nthose who are in management. Thus, the resolution \nprocess is not adversarial to the corporate debtor but, in \nfact, protective of its interests. The moratorium imposed \nby Section 14 is in the interest of the corporate debtor \nitself, thereby preserving the assets of the corporate debtor \nduring the resolution process. The timelines within which \nthe resolution process is to take place again protects the \ncorporate debtor’s assets from further dilution, and also \nprotects all its creditors and workers by seeing that the \nresolution process goes through as fast as possible so that \nanother management can, through its entrepreneurial skills, \nresuscitate the corporate debtor to achieve all these ends.”\n\n(emphasis supplied)\n\n38. A two-judge Bench of this Court, speaking through one of us (DY \nChandrachud, J), in Arun Kumar Jagatramka v Jindal Steel & \nPower Ltd24 also had occasion to observe the quantum change in \ncorporate governance and the rule of law brought in by the enactment \nof the IBC. This Court observed as follows: \n\n“41. … First and foremost, the IBC perceives good \ncorporate governance, respect for and adherence to \nthe rule of law as central to the resolution of corporate \n\n24 \n\n[2021] 3 SCR 114 : (2021) 7 SCC 474\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1827\n\ninsolvencies. Second, the IBC perceives corporate \ninsolvency not as an isolated problem faced by \nindividual business entities but places it in the context \nof a framework which is founded on public interest \nin facilitating economic growth by balancing diverse \nstakeholder interests. Third, the IBC attributes a \nprimacy to the business decisions taken by creditors \nacting as a collective body, on the premise that the \ntimely resolution of corporate insolvency is necessary \nto ensure the growth of credit markets and encourage \ninvestment. Fourth, in its diverse provisions, the IBC \nensures that the interests of corporate enterprises are \nnot conflated with the interests of their promoters; \nthe economic value of corporate structures is \nbroader in content than the partisan interests of their \nmanagements. These salutary objectives of the IBC can \nbe achieved if the integrity of the resolution process is \nplaced at the forefront. Primarily, the IBC is a legislation \naimed at reorganisation and resolution of insolvencies. \nLiquidation is a matter of last resort. These objectives can \nbe achieved only through a purposive interpretation which \nrequires courts, while infusing meaning and content to its \nprovisions, to ensure that the problems which beset the \nearlier regime do not enter through the backdoor through \ndisingenuous stratagems.”\n\n(emphasis supplied)\n\n39. From the above, the following guiding principles emerge, which \nwe must keep in mind while determining the issues raised in the \npresent appeal:\n\na. A significant change brought about by the IBC was the \nconsolidation of the pre-existing fragmented insolvency \nframework, The aim was to eliminate parallel proceedings by \nvarious creditors before different fora, given that all creditors \nwould be a part of a single insolvency process under the IBC; \n\nb. The above consolidation also sought to implement the \nprinciple of ‘collective distribution’, where the interests of all \nstakeholders were considered. The CIRP envisaged by the \nIBC is premised on the principle that each creditor of the \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1828 \n\n[2024] 10 S.C.R.\n\nsame class should receive a share that is proportionate to \nthe debt owed to him; \n\nc. \n\nIBC must not be used as a tool for coercion and debt recovery \nby individual creditors. Improper use of the IBC mechanism by \na creditor includes using insolvency as a substitute for debt \nenforcement or attempting to obtain preferential payments \nby coercing the debtor using insolvency proceedings. That \nthe mechanism under the IBC must not be used as a money \nrecovery mechanism has been reiterated in a consistent line \nof precedent by this Court;25 and\n\nd. The interests of the corporate debtor must be detached from \nthose of its promoters/those who are in management. A \n“recalcitrant management”26 must be prevented from taking \nadvantage of undue delays and preventing an inevitable \ninsolvency. In other words, as noted by this Court in Arun \nKumar Jagatramka (supra), the economic value of corporate \nstructures is broader than the partisan interests of their \nmanagement.\n\nb. Nature of the proceedings after admission of the application \n\n40. Chapter II of the IBC provides that CIRP can be invoked in three \nways: (i) by a financial creditor under Section 7; (ii) by an operational \ncreditor under Section 9; and (iii) by a corporate debtor itself under \nSection 10.27 Section 5(11) of the IBC defines the “initiation date” \nas the date on which the financial creditor, operational creditor or \ncorporate applicant makes an application to the NCLT for initiating \ninsolvency proceedings, including CIRP. This is distinct from the \n“insolvency commencement date” which is defined in Section 5(12) \nof the IBC as the date of admission of an application for initiating \nCIRP by the NCLT under Sections 7, 9 or 10, as the case may be. \n\n41. Once the application is admitted, the CIRP commences and the NCLT \ninter alia declares a moratorium; issues a public pronouncement \n\n25 Swiss Ribbons, para 28; \n\n26 Mobilox, para 36. \n\n27 Section 6, IBC reads: “6. Persons who may initiate corporate insolvency resolution process.  – \nWhere any corporate debtor commits a default, a financial creditor, an operational creditor or the \ncorporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate \ndebtor in the manner as provided under this Chapter.”\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1829\n\nof the initiation of CIRP and a call for submission of claims; and \nappoints an IRP.28 Once an IRP is appointed, the affairs of the \ncorporate debtor are managed by the IRP,29 who inter alia receives \nand collates all the claims submitted by the creditors pursuant to \nthe public announcement of the CIRP.30 After the collation of claims \nreceived and the determination of the financial position of the \ncorporate debtor, the IRP shall constitute a CoC, which consists of \nall the financial creditors of the corporate debtor.31 The CoC appoints \na Resolution Professional32 and the CIRP process continues, as \nprescribed. \n\n42. From this scheme of Chapter II of the IBC, it appears that the \nadmission of an application is a significant event that alters the \nnature of the proceedings, and the stakeholders involved. Initially, \nwhen the petition is filed by the financial creditor, operational creditor \nor corporate applicant, as the case may be, the proceedings are in \npersonam and the only relevant stakeholders are the applicant creditor \nand the corporate debtor. However, once the petition is admitted and \nCIRP is initiated, several significant changes take place, including \nthe transfer of the management of the affairs of the corporate debtor \n\n28 Sections 13, 14, 15, 16, IBC. \n\n29 Section 17, IBC reads “17. Management of affairs of corporate debtor by interim resolution \n\nprofessional. - (1) From the date of appointment of the interim resolution professional, - \n(a) the management of the affairs of the corporate debtor shall vest in the interim resolution professional; \n(b) the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall \nstand suspended and be exercised by the interim resolution professional; \n(c) the officers and managers of the corporate debtor shall report to the interim resolution professional \nand provide access to such documents and records of the corporate debtor as may be required by the \ninterim resolution professional; \n(d) the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of \nthe interim resolution professional in relation to such accounts and furnish all information relating to the \ncorporate debtor available with them to the interim resolution professional. \n(2) The interim resolution professional vested with the management of the corporate debtor, shall- \n(a) act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other \ndocuments, if any; \n(b)take such actions, in the manner and subject to such restrictions, as may be specified by the Board; \n(c)have the authority to access the electronic records of corporate debtor from information utility having \nfinancial information of the corporate debtor; \n(d)have the authority to access the books of account, records and other relevant documents of corporate \ndebtor available with government authorities, statutory auditors, accountants and such other persons as \nmay be specified; and\n(e) be responsible for complying with the requirements under any law for the time being in force on behalf \nof the corporate debtor.”\n\n30 Section 18(b), IBC. \n\n31 Section 21, IBC. \n\n32 \n\n“RP”\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1830 \n\n[2024] 10 S.C.R.\n\nto the IRP, the declaration of the moratorium, and the collation of \nthe claims against the corporate debtor. Therefore, the proceedings \nnow change character – they become in rem and are no longer the \npreserve of only the applicant creditor and the corporate debtor \nand even creditors who were not the original applicants, become \nnecessary stakeholders. \n\n43. A three-judge Bench of this Court in Indus Biotech (P) Ltd. v. Kotak \nIndia Venture (Offshore) Fund33 adjudicated on the question of the \nstage at which the proceedings under the IBC attain the status of in \nrem and create third-party rights for all creditors. This Court held that \nthe trigger point is not the filing of the application, but the admission \nof the application, and observed as follows:\n\n“17. The procedure contemplated will indicate that before \nthe adjudicating authority is satisfied as to whether the \ndefault has occurred or not, in addition to the material placed \nby the financial creditor, the corporate debtor is entitled to \npoint out that the default has not occurred and that the debt \nis not due, consequently to satisfy the adjudicating authority \nthat there is no default. In such exercise undertaken by the \nadjudicating authority if it is found that there is default, the \nprocess as contemplated under sub-section (5) of Section 7 \nof IB Code is to be followed as provided under sub-section \n(5)(a); or if there is no default the adjudicating authority \nshall reject the application as provided under sub-section \n(5)(b) to Section 7 of IB Code. In that circumstance if the \nfinding of default is recorded and the adjudicating authority \nproceeds to admit the application, the corporate insolvency \nresolution process commences as provided under sub-\nsection (6) and is required to be processed further. In \nsuch event, it becomes a proceeding in rem on the \ndate of admission and from that point onwards the \nmatter would not be arbitrable. The only course to be \nfollowed thereafter is the resolution process under IB \nCode. Therefore, the trigger point is not the filing of the \napplication under Section 7 of IB Code but admission \nof the same on determining default.\n\n33 \n\n[2021] 7 SCR 112 : (2021) 6 SCC 436\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1831\n\n26. […] On admission, third-party right is created in \nall the creditors of the corporate debtors and will have \nerga omnes effect. The mere filing of the petition and \nits pendency before admission, therefore, cannot be \nconstrued as the triggering of a proceeding in rem. \nHence, the admission of the petition for consideration \nof the corporate insolvency resolution process is the \nrelevant stage which would decide the status and the \nnature of the pendency of the proceedings and the mere \nfiling cannot be taken as the triggering of the insolvency \nprocess.”\n\n44. \n\nIn summary, the scheme of the IBC under Chapter II gives rise to \ntwo significant principles:\n\na. Once the petition is admitted, the proceedings are no longer \nthe preserve of the applicant creditor and the debtor. They now \nbecome in rem and all creditors of the corporate debtor become \nstakeholders in the process; and\n\nb. Once the petition is admitted, the management of the affairs \nof the corporate debtor is vested in the IRP and eventually, in \nthe RP. Thus, the corporate debtor no longer exists in the form \nthat it did, before the admission of the petition. Once CIRP \nis initiated, the interests of the erstwhile management of the \ncorporate debtor must be distinguished from the interests of \nthe corporate debtor.\n\nii. \n\nLegal framework for withdrawal and settlement of claims\n\na. Evolution of the legal framework\n\n45. \n\nIntroduced less than a decade ago, the IBC and the various rules \nand regulations promulgated under the Act constitute a relatively \nnascent legal framework. On several occasions, the legislature \nand the executive have responded to the lacunae in the framework \nidentified by this Court and sought to fill the gaps by legislating, \nin the form of amendments to the IBC or promulgating rules or \nregulations, if necessary. The evolution of the legal framework \nin relation to the withdrawal of CIRP after the admission of an \napplication moved by a creditor is a classic example of this delicate \ncoordination.\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1832 \n\n[2024] 10 S.C.R.\n\n46. Under Rule 8 of the Insolvency and Bankruptcy (Application to \nAdjudicating Authority) Rules, 2016,34 the NCLT may permit the \nwithdrawal of applications made by a creditor (under Sections 7, \n9 or 10) on a request by the applicant before the admission of the \napplication.35 When the IBC was originally enacted in 2016, it did not \ncontain any provisions, in the text of the Act or its allied rules and \nregulations, for the withdrawal of CIRP after the application had been \nadmitted. Although there was no express provision in this regard, in \nseveral instances, this Court invoked its powers under Article 142 of \nthe Constitution and permitted withdrawal of the CIRP on account \nof a settlement between the creditor and the corporate debtor after \nthe application had been admitted by the NCLT.36 \n\n47. \n\nIn one such decision of this Court, namely, Lokhandwala Kataria \nConstruction (P) Ltd. v. Nisus Finance and Investment Managers \nLLP,37 a two-judge bench of this Court invoked its power under Article \n142 to record the settlement of the parties and allow the compromise \nbetween the creditor and the corporate debtor after the admission \nof the concerned application. While doing so, this Court also prima \nfacie agreed with the proposition that in view of Rule 8 of the CIRP \nRules, the NCLAT cannot use its inherent powers under Rule 11 of \nthe NCALT Rules 2016 to allow a settlement or withdrawal after the \nadmission of the application. \n\n48. The above position was followed by the same Bench of this Court \nin Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem,38 while \nallowing another settlement between the parties under Article 142. \nHowever, on this occasion, the bench also observed that instead of \nall such orders coming to this Court to utilize its powers under Article \n142, the relevant rules may be amended to account for cases where \nan agreement has been reached after admission of the application. \nThis Court observed as follows: \n\n“2. … this Bench had observed that in view of Rule 8 of \nthe Insolvency and Bankruptcy (Application to Adjudicating \n\n34 \n\n35 \n\n“CIRP Rules”\n\n“8. Withdrawal of application. —The Adjudicating Authority may permit withdrawal of the application \nmade under rules 4, 6 or 7, as the case may be, on a request made by the applicant before its admission.”\n\n36 Mothers Pride Dairy India Private Limited v. Portrait Advertising and Marketing Private Limited, 2017 \nSCC OnLine SC 1789; Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem (2018) 15 SCC 587. \n\n37 \n\n38 \n\n(2018) 15 SCC 589\n\n(2018) 15 SCC 587\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1833\n\nAuthority) Rules, 2016, the National Company Law \nAppellate Tribunal prima facie could not avail of the inherent \npowers recognised by Rule 11 of the National Company \nLaw Appellate Tribunal Rules, 2016 to allow a compromise \nto take effect after admission of the insolvency petition. \nWe are of the view that instead of all such orders \ncoming to the Supreme Court as only the Supreme \nCourt may utilise its powers under Article 142 of the \nConstitution of India, the relevant Rules be amended by \nthe competent authority so as to include such inherent \npowers. This will obviate unnecessary appeals being \nfiled before this Court in matters where such agreement \nhas been reached. On the facts of the present case, we \ntake on record the settlement between the parties and set \naside the NCLT order …”\n\n49. Against this backdrop, the Ministry of Corporate Affairs of the \nGovernment of India set up the Insolvency Law Committee,39 to \naddress the early teething challenges arising from the implementation \nof the IBC.40 The ILC Report, submitted on 26 March 2018, also dealt \nwith the issue of withdrawal of CIRP proceedings and discussed \nthe existing practice of this Court of granting “judicial permission” \nfor withdrawal of CIRP after the admission of the application of the \ncreditor. In this context, the report discussed the objectives of the IBC, \ndrawing from the report of the Bankruptcy Law Reforms Committee \nwhich preceded the enactment of the IBC, and concluded that: \n\n“29.1 …it was agreed that once the CIRP is initiated, it \nis no longer a proceeding only between the applicant \ncreditor and the corporate debtor but is envisaged to be \na proceeding involving all creditors of the debtor. The \nintent of the Code is to discourage individual actions \nfor enforcement and settlement to the exclusion of the \ngeneral benefit of all creditors.”\n\n(emphasis supplied)\n\n50. The ILC Report found that in several cases, a settlement may be \nreached amongst “all creditors and the debtor” for withdrawal, and \n\n39 \n\n40 \n\n“ILC”\n\n“ILC Report”\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1834 \n\n[2024] 10 S.C.R.\n\nnot only between the individual applicant creditor and the debtor. In \nlight of this, the ILC unanimously agreed that the relevant rules may \nbe amended to provide for withdrawal post-admission if the CoC \napproved of such an action by a voting share of ninety per cent. \nSignificantly, the report states that the ILC specifically discussed \nand concluded that Rule 11 of the NCLAT Rules, 2016 may not be \nadopted for withdrawal of CIRP, and instead Rule 8 of the CIRP \nRules may be appropriately amended. The observations in the ILC \nReport on this aspect are as follows: \n\n“29.2. On a review of the multiple NCLT and NCLAT \njudgments in this regard, the consistent pattern that \nemerged was that a settlement may be reached amongst \nall creditors and the debtor, for the purpose of a withdrawal \nto be granted, and not only the applicant creditor and the \ndebtor. On this basis read with the intent of the Code, \nthe Committee unanimously agreed that the relevant \nrules may be amended to provide for withdrawal post \nadmission if the CoC approves of such action by a voting \nshare of ninety per cent. It was specifically discussed \nthat rule 11 of the National Company Law Tribunal Rules, \n2016 may not be adopted for this aspect of CIRP at \nthis stage (as observed by the Hon’ble Supreme Court \nin the case of Uttara Foods and Feeds Private Limited \nv. Mona Pharmacem) and even otherwise, as the issue \ncan be specifically addressed by amending rule 8 of the \nCIRP Rules.”\n\n51. Accepting the recommendation of the ILC, the legislature introduced \nSection 12A in the IBC by the Insolvency and Bankruptcy (Second \nAmendment) Act, 2018 with effect from 6 June 2018.41 It reads as \nfollows: \n\n“12A. Withdrawal of application admitted under \nsection 7, 9 or 10. – \n\nThe Adjudicating Authority may allow the withdrawal \nof application admitted under section 7 or section 9 or \nsection 10, on an application made by the applicant with the \n\n41 Act No. 26 of 2018.\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1835\n\napproval of ninety per cent. voting share of the committee \nof creditors, in such manner as may be specified.”\n\n(emphasis supplied)\n\n52. The provision provides for the withdrawal of an application under \nSections 7, 9 and 10 after it has been admitted, with the approval \nof ninety-percent voting share of the CoC. Evidently, Section 12A \nwas made more stringent in comparison to Section 30(4) of the \nIBC, which pertains to approval of the Resolution Plan by the CoC. \nWhereas under Section 30(4) of the IBC, the voting share of the \nCoC for approving the Resolution Plan is sixty-six percent, the \nrequirement under Section 12A of the IBC for withdrawal of CIRP \nis ninety percent. The reason for this divergence and high threshold \nappears to be rooted in the reasoning provided in the ILC report \nthat once an application is admitted it is no longer a proceeding \nonly between the applicant creditor and the corporate debtor but is \na proceeding involving all creditors of the debtor. Significantly, the \ntext of Section 12A only details the procedure for the withdrawal of \nthe application after the formation of the CoC (with ninety percent of \nthe voting share), but is silent about the withdrawal of an application \nafter the application is admitted, but before the CoC is formed. \n\n53. With the introduction of Section 12A in the IBC, the CIRP Regulations \nwere also amended to include Regulation 30A which delineated the \ndetailed procedure to withdraw an application under Section 12A.42 \nAt the time of its introduction, the regulation read as follows: \n\n“30-A. Withdrawal of application.— (1) An application \nfor withdrawal under Section 12-A shall be submitted \nto the interim resolution professional or the resolution \nprofessional, as the case may be, in Form FA of the \nSchedule before issue of invitation for expression of interest \nunder Regulation 36-A.\n\n(2) The application in sub-regulation (1) shall be \naccompanied by a bank guarantee towards estimated cost \nincurred for purposes of clauses (c) and (d) of Regulation \n31 till the date of application.\n\n42 \n\nIBBI (CIRP) (Third Amendment) Regulations, 2018 vide Notification No. IBBI/2018-19/GN/REG031, \ndated 3rd July, 2018, w.e.f. 04.07.2018.\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1836 \n\n[2024] 10 S.C.R.\n\n(3) The committee shall consider the application made \nunder sub-regulation (1) within seven days of its constitution \nor seven days of receipt of the application, whichever is \nlater.\n\n(4) Where the application is approved by the committee \nwith ninety per cent voting share, the resolution professional \nshall submit the application under sub-regulation (1) to the \nadjudicating authority on behalf of the applicant, within \nthree days of such approval.\n\n(5) The adjudicating authority may, by order, approve the \napplication submitted under sub-regulation (4).”\n\n54. Regulation 30A(1), as it stood originally, required that an application for \nwithdrawal shall be submitted to the IRP or the RP in the prescribed \nform, before the invitation for expression of interest under Regulation \n30A. It did not provide the procedure for withdrawal after the invitation \nof expression of interest had been issued. Regulation 30A(2) provided \nthat the application for withdrawal shall be accompanied by a bank \nguarantee towards the specified estimated costs. Regulation 30A(3) \nmandated that the CoC must consider the application within seven \ndays of its constitution or the receipt of the application, whichever is \nlater. Finally, Regulation 30A(4) provided that once the CoC approved \nthe application with ninety percent voting share, the RP shall submit \nthe application to the NCLT on behalf of the applicant, within three \ndays of the approval. Finally, under Regulation 30A(5), the NCLT \ncould approve the application submitted by an order. \n\n55. Notably, akin to Section 12A, Regulation 30A in its original form, \nwas silent about withdrawal in cases where the application had been \nadmitted, but the CoC had not been formed. Similarly, Regulation \n30A(1) only spoke of withdrawal before the invitation of expression \nof interest had been issued and there was no provision which \nprovided for withdrawal after it had been issued. Both these gaps \nwere identified in subsequent judgements of this Court. \n\n56. \n\nIn Brilliant Alloy Private Limited vs S Rajagopal and Ors,43 a \ntwo-judge bench of this Court observed that the requirement in \nRegulation 30A, as it stood then, that the application must be made \n\n43 \n\n(2022) 2 SCC 544\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1837\n\nbefore the issuance of an invitation for expression of interest was \nonly directory. The regulation, it was held, has to be read along with \nSection 12A, which does not contain any bar on withdrawal after the \nissuance of an invitation for expression of interest. \n\n57. The constitutional validity of various provisions of the IBC, including \nSection 12A was challenged before this Court. In Swiss Ribbons \n(supra), a two-judge bench of this Court, speaking through Justice \nRohinton Fali Nariman, inter alia upheld the constitutionality of \nSection 12A. One of the questions that arose before this Court, in this \ncontext, was what happens if withdrawal is sought after admission of \nthe application, but before the CoC is constituted. This Court observed: \n\n“82. It is clear that once the Code gets triggered by \nadmission of a creditor’s petition under Sections 7 to 9, the \nproceeding that is before the adjudicating authority, \nbeing a collective proceeding, is a proceeding in rem. \nBeing a proceeding in rem, it is necessary that the \nbody which is to oversee the resolution process must \nbe consulted before any individual corporate debtor \nis allowed to settle its claim. A question arises as to \nwhat is to happen before a Committee of Creditors is \nconstituted (as per the timelines that are specified, a \nCommittee of Creditors can be appointed at any time \nwithin 30 days from the date of appointment of the \ninterim resolution professional). We make it clear that \nat any stage where the Committee of Creditors is not \nyet constituted, a party can approach NCLT directly, \nwhich Tribunal may, in exercise of its inherent powers \nunder Rule 11 of NCLT Rules, 2016, allow or disallow \nan application for withdrawal or settlement. This will \nbe decided after hearing all the parties concerned and \nconsidering all relevant factors on the facts of each case.\n\n83. The main thrust against the provision of Section \n12-A is the fact that ninety per cent of the Committee of \nCreditors has to allow withdrawal. This high threshold \nhas been explained in the ILC Report as all financial \ncreditors have to put their heads together to allow \nsuch withdrawal as, ordinarily, an omnibus settlement \ninvolving all creditors ought, ideally, to be entered into. \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1838 \n\n[2024] 10 S.C.R.\n\nThis explains why ninety per cent, which is substantially \nall the financial creditors, have to grant their approval to \nan individual withdrawal or settlement. In any case, the \nfigure of ninety per cent, in the absence of anything further \nto show that it is arbitrary, must pertain to the domain of \nlegislative policy, which has been explained by the Report \n(supra). Also, it is clear, that under Section 60 of the \nCode, the Committee of Creditors do not have the last \nword on the subject. If the Committee of Creditors \narbitrarily rejects a just settlement and/or withdrawal \nclaim, NCLT, and thereafter, NCLAT can always set \naside such decision under Section 60 of the Code. For \nall these reasons, we are of the view that Section 12-A \nalso passes constitutional muster.”\n\n(emphasis supplied)\n\n58. From the above observations of this Court in Swiss Ribbons (supra), \n\nthe following positions of law may be deduced: \n\na. Once the petition instituted by a creditor is admitted, the \nproceedings before the NCLT become a ‘collective proceeding’ \nor a proceeding in rem. Thus, the body which oversees the \nresolution process, i.e. CoC must be consulted before allowing \nthe claim to be settled;\n\nb. This Court recognized that there was a lacuna in relation to cases \nwhere the CoC had not been formed. Accordingly, it was held \nthat, in such cases, the party can approach the NCLT directly, \nand the NCLT may exercise its inherent powers under Rule 11 \nto allow or disallow the application for settlement/withdrawal. \nHowever, given the in rem nature of the proceedings, such an \napplication must be decided only after hearing all the parties \nconcerned and considering the relevant factors in the case; \n\nc. \n\nThis high threshold of a ninety-percent voting share of the CoC \nis not arbitrary. The idea is that the financial creditors have to \nput their heads together to allow such withdrawal; and \n\nd. Under Section 60 of the IBC, the decision of the CoC to reject \nor accept the settlement claim can be challenged before the \nNCLT and then, the NCLAT. \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1839\n\n59. \n\nIn response to the lacunae identified by this Court in Swiss Ribbons \n(supra) and Brilliant Alloy Private Limited (supra), an amendment \nwas made to Regulation 30A of the CIRP Regulations.44 This \namendment came into effect on 25 July 2019 and Regulation 30A \nin its present form reads as follows:\n\n“30A. Withdrawal of application. \n\n(1) An application for withdrawal under section 12A may \nbe made to the Adjudicating Authority – \n\n(a) before the constitution of the committee, by the applicant \nthrough the interim resolution professional; \n\n(b) after the constitution of the committee, by the applicant \nthrough the interim resolution professional or the resolution \nprofessional, as the case may be: \n\nProvided that where the application is made under clause \n(b) after the issue of invitation for expression of interest \nunder regulation 36A, the applicant shall state the reasons \njustifying withdrawal after issue of such invitation. \n\n(2) The application under sub-regulation (1) shall be made \nin Form FA of the Schedule-I accompanied by a bank \nguarantee- \n\n(a) towards estimated expenses incurred on or by the \ninterim resolution professional for purposes of regulation \n33, till the date of filing of the application under clause (a) \nof sub- regulation (1); or \n\n(b) towards estimated expenses incurred for purposes \nof clauses (aa), (ab), (c) and (d) of regulation 31, till the \ndate of filing of the application under clause (b) of sub-\nregulation (1).\n\n(3) Where an application for withdrawal is under clause (a) \nof sub-regulation (1), the interim resolution professional \nshall submit the application to the Adjudicating Authority \non behalf of the applicant, within three days of its receipt. \n\n44 Notification No. IBBI/2019-20/GN/REG048, dated 25th July, 2019 (w.e.f. 25-07-2019) \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1840 \n\n[2024] 10 S.C.R.\n\n(4) Where an application for withdrawal is under clause \n(b) of sub-regulation (1), the committee shall consider the \napplication, within seven days of its receipt. \n\n(5) Where the application referred to in sub-regulation (4) \nis approved by the committee with ninety percent voting \nshare, the resolution professional shall submit such \napplication along with the approval of the committee, to \nthe Adjudicating Authority on behalf of the applicant, within \nthree days of such approval. \n\n(6) The Adjudicating Authority may, by order, approve the \napplication submitted under sub-regulation (3) or (5). \n\n(7) Where the application is approved under sub-regulation (6), \nthe applicant shall deposit an amount, towards the actual \nexpenses incurred for the purposes referred to in clause (a) \nor clause (b) of sub-regulation (2) till the date of approval \nby the Adjudicating Authority, as determined by the interim \nresolution professional or resolution professional, as the \ncase may be, within three days of such approval, in the \nbank account of the corporate debtor, failing which the \nbank guarantee received under sub-regulation (2) shall be \ninvoked, without prejudice to any other action permissible \nagainst the applicant under the Code.”\n\n60. Regulation 30A (1) now provides for the procedure to make an \napplication for withdrawal before the NCLT under Section 12A, \nboth before and after the constitution of the CoC. Sub-clause (a) \nof Regulation 30A (1) states that in cases where the CoC has \nnot been constituted, the applicant may place an application for \nwithdrawal before the NCLT, through the IRP. Similarly, sub-clause \n(b) of Regulation 30A (1) states that in cases where the CoC is \nconstituted, the applicant may place an application for withdrawal \nbefore the NCLT, through the IRP or the RP, as the case may be. \nIn essence, at both stages – before and after the constitution of the \nCoC – the application for withdrawal may only be made through \nthe person appointed to oversee the insolvency proceedings, i.e. \nthe IRP or the RP. \n\n61. The proviso to Regulation 30A (1) provides that when the application \nis made after the CoC has been constituted and after the invitation for \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1841\n\nexpression of interest has been issued, the applicant shall state the \nreasons for withdrawal at this stage. In essence, the regulation in its \namended form, deviates from its earlier form by also responding to \nthe decision of this Court in Brilliant Alloy Private Limited (supra). \nUnlike the unamended regulation, the regulation acknowledges the \npossibility of withdrawal even after the invitation for expression has \nbeen issued. However, it mandates that an application for withdrawal \nin such cases must be accompanied by reasons. \n\n62. Regulation 30A (2) provides that the application must be made in \nthe manner prescribed in Form FA of Schedule-I,45 and must be \naccompanied by a bank guarantee towards the specified expenses. \nRegulation 30A(3) provides that in cases where the application for \nwithdrawal is moved before the constitution of the CoC, the IRP \nshall submit the application to the NCLT on behalf of the applicant \nwithin three days of receipt. Regulations 30A (4) and (5) deal with \nthe situation where the CoC has already been constituted. They \nprovide that the CoC shall consider the application within seven \ndays of receipt, and subsequently, if the application is approved by \n\n45 \n\nAPPLICATION FOR WITHDRAWAL OF CORPORATE INSOLVENCY RESOLUTION PROCESS\n[Under Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution \nProcess for Corporate Persons) Regulations, 2016]\n\n171 [FORM FA\n\n[Date]\n\nTo\nThe Adjudicating Authority\n\n[Through the Interim Resolution Professional / Resolution Professional]\n[name of corporate debtor]\n\nSubject: Withdrawal of Application admitted for corporate insolvency resolution process of \n[name of corporate debtor]\n\nI, [Name of applicant], had filed an application bearing [particulars of application, i.e, diary number/ case \nnumber] on [Date of filing] before the Adjudicating Authority under [Section 7 / Section 9/ Section 10] \nof the Insolvency and Bankruptcy Code, 2016. The said application was admitted by the Adjudicating \nAuthority on [date] bearing [case number].\n\n2. I hereby withdraw the application bearing [particulars of application, i.e, diary number/ case number] \nfiled by me before the Adjudicating Authority under [Section 7 / Section 9/Section 10] of the Insolvency \nand Bankruptcy Code, 2016.’\n\n3. I attach the required bank guarantee as per sub-regulation (2) of regulation 30A.\n\nDate:\nPlace:\n[Note: In the case of company or limited liability partnership, the declaration and verification shall be \nmade by the director/manager/secretary/designated partner and in the case of other entities, an officer \nauthorised for the purpose by the entity]”.]\n\n(Signature of the applicant)\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1842 \n\n[2024] 10 S.C.R.\n\nthe CoC with a ninety-percent voting share, the RP must submit the \napplication with the approval to the NCLT within three days of the \napproval. Finally, regulation 30A(6) provides that on the receipt of \nthe application under both mechanisms (before the CoC and after), \nthe NCLT may pass an order approving the application submitted \nby the RP or IRP, as the case may be. \n\nb. \n\nInsights from the evolution of the legal framework\n\n63. \n\nIn essence, after a series of deliberations by the legislature, the \nexecutive and nudges by this Court, the framework created by Rule 8 \nof the NCLT Rules and Section 12A of the IBC read with Rule 30A \nof the CIRP Regulations lays down an exhaustive procedure for the \nwithdrawal of an application filed by creditors under Sections 7, 9, \nor 10 of the IBC. Withdrawal may be sought at four stages, all of \nwhich have a procedure prescribed under the existing framework. \nThese may be summarized as follows: \n\ni. \n\nBefore the application under Sections 7, 9 or 10 is admitted \nby the NCLT: Such cases are squarely covered by Rule 8 of \nthe NCLT Rules, which requires that the applicant approach the \nNCLT directly. The NCLT may then pass an order permitting \nthe withdrawal of the application. At this stage, as the CIRP \nprocess has not been initiated, the proceedings are still in \npersonam, as between the applicant creditor and the corporate \ndebtor. Therefore, while approving the withdrawal at this stage, \nthe NCLT may restrict its enquiry to only hear the applicant \ncreditor and corporate debtor, and other potential creditors are \nnot stakeholders at this stage. \n\nii. After an application under Sections 7, 9, or 10 is admitted, \nbut before the CoC has been constituted: Although Section \n12A continues to be silent on this aspect, after the decision in \nSwiss Ribbons (supra), Regulation 30A was amended to provide \nfor this eventuality. An application for withdrawal in such cases \nmay be made by the applicant through the IRP.46 The IRP will \nthen place the application before the NCLT, which may pass \nan order either approving or rejecting the application. As noted \nabove, once the application has been admitted, the proceedings \n\n46 Regulation 30A (1), CIRP Regulations, 2016.\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1843\n\nare no longer the sole preserve of the applicant creditor and \nthe corporate debtor. They are now in rem and at this stage, \nthe NCLT must hear the concerned parties and consider all \nrelevant factors before approving or rejecting the application \nfor withdrawal. The NCLT being a quasi-judicial body, must not \nact as a mere post office, which stamps and approves every \nsettlement agreement, without application of judicial mind. \n\niii. After an application under Section 7, 9 or 10 is admitted, the \nCoC has been constituted and the invitation for expression \nof interest has not been issued: Section 12A read with \nRegulation 30A provides exhaustively for this scenario. In such \ncases, the application for withdrawal is to be placed before the \nNCLT, through the IRP or the RP. The application is first placed \nbefore the CoC and after ascertaining approval with a ninety \npercent voting share, the RP shall submit the application to \nthe NCLT. \n\niv. After an application under Section 7, 9 or 10 is admitted, the \nCoC has been formed and the invitation for expression of \ninterest has been issued: The procedure is the same as that \ndetailed in (iii) above, with the added requirement stemming from \nthe proviso to Regulation 30A (1). in such cases, the applicant \nmust state the reasons for withdrawal at this belated stage.\n\n64. Not only is there an exhaustive framework to deal with withdrawal \nand settlement, but the evolution of the law and the creation of an \ncomprehensive framework indicates an attempt to reduce reliance on \ndiscretionary powers. As detailed above, the IBC and the allied rules \nand regulations, in their original form did not provide any procedure for \nthe settlement/withdrawal of claims after admission of the application \nby the creditor. This Court was compelled to invoke Article 142 in \ndecisions such as Lokhandwala Kataria Construction (supra) \nand Uttara Foods & Feeds (P) Ltd. (supra). To reduce reliance \non Article 142, Section 12A and Regulation 30A were introduced to \nprovide a detailed procedure for such cases. In fact, the ILC report \nwhich led to the inclusion of Section 12A specifically discussed and \nrejected the proposition that Rule 11 can instead be used for this \npurpose. Next, this Court in Swiss Ribbons (supra) held that since \nthere was no prescribed framework to allow settlement/withdrawal \nof claims after admission of the application but before the CoC was \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1844 \n\n[2024] 10 S.C.R.\n\nconstituted, Rule 11 of the NCLT Rules may be invoked. In response \nto this, to reduce reliance on the inherent powers under Rule 11 and \nprovide certainty, necessary amendments were made to Regulation \n30A. There is now a detailed procedure to deal with withdrawal or \nsettlement at both stages post admission – before and after the CoC \nis constituted. In view of this detailed framework, the requirement to \ninvoke discretionary power such as Rule 11 of the NCLT Rules, or \nRule 11 of the NCLAT Rules or even the power of this Court under \nArticle 142 no longer arises.\n\n65. Mr Tushar Mehta, Senior Counsel for the second respondent, has \nsought to contend that the requirement under Regulation 30A (1) \nto move an application before the NCLT through the IRP, in cases \nwhere the CoC is not constituted, is a mere technicality which can \nbe dispensed with. The logic he advances is that the regulation \ndoes not require adjudication by the NCLT about the factum of the \nsettlement, the mode of settlement or adjudication on any other \nground. His submission is that Regulation 30A (1) only requires that \nthe withdrawal application be submitted to the IRP in the prescribed \nForm FA, which is then forwarded to the NCLT to mechanically \napprove the settlement. At this stage, according to him, the NCLT \nis not required to hear any other parties, but only approve the \napplication and thus, whether the application is submitted through \nthe IRP or whether it is before the NCLT or the NCLAT, is a mere \ntechnicality. \n\n66. We do not concur with the above understanding for two broad reasons. \n\na. Firstly, that the application is to be submitted by the IRP \nrather than the parties themselves is not a distinction without \ndifference. As noted above, once the application is admitted and \nCIRP is initiated, it is the IRP who takes charge of the affairs \nof the corporate debtor. The proceedings become collective \nproceedings and the interests of the former management of \nthe corporate debtor, become disjunct from the interest of the \ncorporate debtor. Therefore, the parties (such as the former \nmanagement of the corporate debtor) must submit their \napplication for withdrawal through the IRP who is now the \nperson in control of the insolvency proceedings. To subvert \nthis requirement would run contrary to the scheme of the IBC \nand the underlying principles discussed in this judgment; and \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1845\n\nb. Secondly, the NCLT cannot be considered a post office that \nmerely puts a stamp on the withdrawal application submitted \nby the parties through the IRP. The ILC Report, in response to \nwhich, the parent provision, i.e. Section 12A was introduced in \nthe IBC specifically discussed the possibility of the creditors, \napart from the applicant creditor agreeing to a settlement as \nthe underlying reason to permit withdrawal even after initiation \nof the CIRP. It was never fathomed by the ILC that withdrawal \nof claims would remain a unilateral process, even though the \napplication is admitted and CIRP has been initiated. Similarly, \nthis Court in Swiss Ribbons (supra), in response to which \nRegulation 30A was amended, specifically observed that in \ncases where withdrawal is sought after initiation of CIRP, \nbut before the CoC is constituted, the NCLT must decide on \nthe application after “hearing all the parties concerned and \nconsidering all relevant factors on the facts of each case.” \nTherefore, the NCLT does conduct an adjudicatory exercise \nwhen the application for withdrawal is placed before it, and the \nprocedure is not a mere technicality. \n\niii. Scope of ‘Inherent Powers’ under Rule 11\n\n67. Section 151 of the Code of Civil Procedure47 reads as follows: \n\n“151. Saving of inherent powers of Court.—Nothing in \nthis Code shall be deemed to limit or otherwise affect the \ninherent power of the Court to make such orders as may \nbe necessary for the ends of justice or to prevent abuse \nof the process of the Court.”\n\n68. Rule 11 of the NCLT Rules 2016 and Rule 11 of the NCLAT Rules \n2016, which preserve the inherent powers of the NCLT and the \nNCLAT respectively, mirror Section 151 of the CPC and read as \nfollows: \n\n“11. Inherent powers.- Nothing in these rules shall be \ndeemed to limit or otherwise affect the inherent powers of \nthe Appellate Tribunal to make such orders or give such \ndirections as may be necessary for meeting the ends of \n\n47 \n\n“CPC”\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1846 \n\n[2024] 10 S.C.R.\n\njustice or to prevent abuse of the process of the Appellate \nTribunal.”\n\n69. \n\nIn a consistent line of precedent, this Court has held that ‘inherent \npowers’ may be exercised in cases where there is no express \nprovision under the legal framework. However, such powers cannot be \nexercised in contravention of, conflict with or in ignorance of express \nprovisions of law. We may helpfully refer to the observations of a \ntwo-judge bench of this Court in one such case. In Ram Chand and \nSons Sugar Mills (P) Ltd. v. Kanhayalal Bhargava,48 a two-judge \nbench of this Court, speaking through Justice K Subba Rao (as the \nlearned chief Justice then was), opined: \n\n“5. … Having regard to the said decisions, the scope \nof the inherent power of a court under Section 151 of \nthe Code may be defined thus: The inherent power of a \ncourt is in addition to and complementary to the powers \nexpressly conferred under the Code. But that power will \nnot be exercised if its exercise is inconsistent with, or \ncomes into conflict with, any of the powers expressly or by \nnecessary implication conferred by the other provisions of \nthe Code. If there are express provisions exhaustively \ncovering a particular topic, they give rise to a necessary \nimplication that no power shall be exercised in \nrespect of the said topic otherwise than in the manner \nprescribed by the said provisions. Whatever limitations \nare imposed by construction on the provisions of Section \n151 of the Code, they do not control the undoubted \npower of the Court conferred under Section 151 of the \nCode to make a suitable order to prevent the abuse \nof the process of the Court.”\n\n(emphasis supplied)\n\n70. When a procedure has been prescribed for a particular purpose \nexhaustively, no power shall be exercised otherwise than in the \nmanner prescribed by the said provisions. In such cases, the court \nmust be circumspect in invoking its ‘inherent powers’ to deviate from \n\n48 \n\n[1966] 3 SCR 856 : 1966 SCC OnLine SC 215. \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1847\n\nthe prescribed procedure. If such deviation is made, the court must \njustify why this was necessary to “prevent the abuse of the process \nof the Court”. \n\n71. The need to be circumspect while invoking “inherent powers”, when \nthere is an exhaustive legal framework is amplified in the context of \na legislation like the IBC. In Ebix Singapore (P) Ltd. vs. Educomp \nSolutions Ltd. (CoC),49 a two-judge bench of this Court, speaking \nthrough one of us (DY Chandrachud, J), affirmed this position and \nobserved as follows:\n\n“Any claim seeking an exercise of the adjudicating \nauthority’s residuary powers under Section 60(5)(c) IBC, \nNCLT’s inherent powers under Rule 11 of the NCLT Rules \nor even the powers of this Court under \n\nArticle 142 of the Constitution must be closely scrutinized \nfor broader compliance with the insolvency framework and \nits underlying objective. The adjudicating mechanisms \nwhich have been specifically created by the statute, \nhave a narrowly defined role in the process and must be \ncircumspect in granting reliefs that may run counter to \nthe timeliness and predictability that is central to the IBC. \nAny judicial creation of a procedural or substantive \nremedy that is not envisaged by the statute would not \nonly violate the principle of separation of powers, but \nalso run the risk of altering the delicate coordination \nthat is designed by the IBC framework and have grave \nimplications on the outcome of the CIRP, the economy \nof the country and the lives of the workers and other \nallied parties who are statutorily bound by the impact \nof a resolution or liquidation of a Corporate Debtor.”\n\n(emphasis supplied)\n\nE. Application to the instant case\n\n72. \n\nIn the preceding section, we have analyzed the law with regard \nto (i) the principles governing IBC relevant to contextualize the \nconsequences of withdrawing CIRP; (ii) the nature of the proceedings \nafter admission of an application by a creditor; (iii) the evolution of the \n\n49 \n\n[2021] 14 SCR 321 : (2022) 2 SCC 401\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1848 \n\n[2024] 10 S.C.R.\n\nlegal framework for the withdrawal of CIRP or settlement of claims; \nand (iv) the scope of Rule 11 of the NCLAT Rules 2016. We will now \napply the above discussion to the specific issues before this Court \nin the present factual context, namely, the locus of the appellant to \ninstitute the present proceedings and the approach of the NCLAT \nin the Impugned Judgment. \n\ni. \n\nLocus of the appellant before this Court\n\n73. The counsel for the respondents sought to argue that the appellant \ndoes not have the locus to maintain the present proceedings before \nthis Court. They contend that in a case for settlement between the \nCorporate Debtor and the second respondent, there is no scope for \nhearing any other creditors, such as the appellant. We do not find \nmerit in this submission. \n\n74. Section 62 of the IBC governs statutory appeals to the Supreme \nCourt from the orders of the NCLAT. The provision reads as follows: \n\n“62. Appeal to Supreme Court – (1) Any person aggrieved \nby an order of the National Company Law Appellate \nTribunal may file an appeal to the Supreme Court on a \nquestion of law arising out of such order under this Code \nwithin forty-five days from the date of receipt of such order. \n\n(2) The Supreme Court may, if it is satisfied that a person \nwas prevented by sufficient cause from filing an appeal \nwithin forty-five days, allow the appeal to be filed within a \nfurther period not exceeding fifteen days.” \n\n(emphasis supplied)\n\n75. The provision stipulates that “any person” who is aggrieved by the \norder of the NCLAT may file an appeal before the Supreme Court \nwithin the prescribed limitation period. Similar language is used in \nSection 61 of the IBC, which provides for appeals to NCLAT from \norders of the NCLT.50 The use of the phrase “any person aggrieved” \n\n50 \n\n “61. Appeals and Appellate Authority.- \n(1) Notwithstanding anything to the contrary contained under the Companies Act 2013 (18 of 2013), any \nperson aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the \nNational Company Law Appellate Tribunal. \n[…]”\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1849\n\nindicates that there is no rigid locus requirement to institute an \nappeal challenging an order of the NCLT, before the NCLAT or an \norder of the NCLAT, before this Court. Any person who is aggrieved \nby the order may institute an appeal, and nothing in the provision \nrestricts the phrase to only the applicant creditor and the corporate \ndebtor. As noted above, once the CIRP is initiated, the proceedings \nare no longer restricted to the individual applicant creditor and \nthe corporate debtor but rather become collective proceedings (in \nrem), where all creditors, such as the appellant, are necessary \nstakeholders. The appellant is not an unrelated party to the CIRP, \nbut is in fact, an entity whose claims had been verified by the \nIRP vide letter 19 August 2024. The appellant who claims to be a \nFinancial Creditor, has expressed reasonable apprehensions about \nthe prejudice it would face if there were roundtripping of the funds, \nand the prioritization of the debts of the second respondent, an \noperational creditor. \n\n76. \n\nIn any event, the appellant had moved an application before the \nNCLAT seeking impleadment as a respondent and the objections \nof the appellant were specifically recorded and addressed in the \nImpugned Judgement. Therefore, there is no doubt that the appellant \nfalls within the ambit of the phrase “any person aggrieved” and has \nthe locus standi to institute the present Civil Appeal before this Court. \n\nii. Approach of the NCLAT in the Impugned Judgement\n\n77. The appellant contends that the NCLAT erred in invoking its inherent \npowers under Rule 11 of the NCLAT Rules in the presence of a \nprescribed procedure dealing with the withdrawal of CIRP. The \nrespondent, on the other hand, contends that at the time of executing \nthe settlement agreement, the CoC was not formed and in such \nsituations, Rule 11 of the NCLAT Rules may be invoked to allow \nthe settlement. In view of the detailed discussion in Part D of this \njudgement, we find considerable force in the submissions of the \nappellant on this point. \n\n78. \n\nIn paragraph 63 of this judgement, we identified the four stages \nat which a procedure for the withdrawal of CIRP or settlement \nof claims is contemplated in the existing legal framework. The \nsituation before the NCLAT in the present case fell within serial \nnumber (ii), that is, when the application of a creditor has been \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1850 \n\n[2024] 10 S.C.R.\n\n79. \n\nadmitted and CIRP has been initiated, however, the CoC has not \nbeen formed. When settlement was sought by the first respondent \nbefore the NCLAT, the Section 9 petition had been admitted and \nthe Section 7 petition had also been disposed of on that basis. \nHowever, admittedly, on this date, i.e. 31 July 2024, the CoC had \nnot been constituted and the NCLAT subsequently stayed the \nformation of the CoC. \n\nIn such cases, the legal framework mandates that an (i) application \nfor withdrawal be moved; (ii) the application has to be moved through \nthe IRP; and (iii) it be placed before the NCLT for approval. None of \nthese requirements were met in the present case. First and foremost, \nthere was no formal application instituted to seek the withdrawal \nof the CIRP. The settlement agreement was taken on record and \napproved by the NCLAT based on the submissions and assurances \nof the counsel before it and the affidavits/undertakings filed by the \nparties. Further, the first respondent, who is a former director of \nthe Corporate Debtor, did not move the application through the IRP \nand instead approached the NCLAT directly. Finally, the request \nto approve the settlement was moved before the NCLAT during \nappellate proceedings, instead of being placed before the NCLT. \nDespite these grave deviations, the NCLAT still proceeded with \napproving the settlement and setting aside the CIRP by invoking its \ninherent power under Rule 11 of the NCLAT Rules. \n\n80. We are of the view that recourse to Rule 11 of the NCLAT Rules was \nnot warranted in the present circumstances. As noted above, ‘inherent \npowers’ cannot be used to subvert legal provisions, which exhaustively \nprovide for a procedure. To permit the NCLAT to circumvent this \ndetailed procedure by invoking its inherent powers under Rule 11 \nwould run contrary to the carefully crafted procedure for withdrawal. \nIn the Impugned Judgement, the NCLAT does not provide any \nreasons for deviating from this procedure or the urgency to approve \nthe settlement without following the procedure. The correct course \nof action by the NCLAT would have been to stay the constitution \nof the CoC and direct the parties to follow the course of action in \nSection 12A read with Regulation 30A of the CIRP Regulations 2016. \nThis legal framework for such withdrawal was formulated after giving \ndue consideration to the appropriate procedure for withdrawal and \nbalancing it with the objectives of the IBC. \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1851\n\n81. Even if the procedural infirmity is kept aside, once the CIRP was \nadmitted, the proceedings became collective, and all creditors of the \nCorporate Debtor became stakeholders. As noted in Swiss Ribbons \n(supra), even while invoking Rule 11 to allow withdrawal, the NCLT \nmust hear all the concerned parties and consider all relevant factors \non the facts of each case. The appellant raised detailed objections \nbefore the NCLAT to the source of the funds for the settlement and \na reasonable apprehension that there was round tripping of funds, \nin violation of the order passed by the Delaware Court on 18 March \n2024. These objections were summarily dismissed by the NCLAT, \nrelying solely on the undertaking filed by Riju Raveendran. The only \nfinding in this regard is found in paragraph 44. The NCLAT relies \nentirely on the undertaking filed by Riju Raveendran and states \nthat “although, the Applicant is not satisfied about the undertaking \nbut the Applicant has also not brought on record any evidence to \nthe contrary that the money which is being offered has actually \nbeen brought by Riju Raveendran from the money disbursed to the \nborrower in terms of credit agreement or has been taken out of the \ncoffers of the CD.” Alleged facts such as the fraudulent transfer of \nUSD 533 million to a hedge fund in the United States; the orders of \nthe US Court restraining the brothers from transferring or dissipating \nthe amount; the contempt proceedings against Mr Riju Raveendran; \nthe ongoing investigation by the Enforcement Directorate against \nthe first respondent and the Corporate Debtor; and other attempts \nby the Corporate Debtor to dissipate assets, were not adequately \naddressed by the NCLAT.\n\niii. Decisions of this Court cited in the Impugned Judgement \n\n82. The respondents relied on the decisions of this Court in Ashok G. \nRajani v. Beacon Trusteeship Ltd.,51 and Abhishek Kumar (supra) \nto argue that before the CoC is formed, the proceedings are between \nthe applicant creditor and the debtor and thus, Rule 11 can be invoked \nto allow the settlement. In the Impugned Judgement too, the NCLAT \nrelies on the decisions of this Court in Abhishek Kumar (supra) and \nKamal K Singh (supra), to justify the invocation of Rule 11 of the \nNCLAT Rules and observe that there has been “a change in the law \non settlement”. The respondents are correct to contend that each of \n\n51 \n\n2022 SCC OnLine SC 1275\n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1852 \n\n[2024] 10 S.C.R.\n\n83. \n\nthese decisions was rendered after Section 12A was inserted and \nRegulation 30A was amended. However, it is important to understand \nthe context in which this Court upheld the invocation of Rule 11 of the \nNCLAT Rules and whether these decisions considered the prescribed \nprocedure under Section 12A and the amended Regulation 30A. We \nare of the considered view that these judgements do not advance \nthe case of the respondents. \n\nIn Kamal Singh (supra), a two-judge bench of this Court passed a \nbrief order setting aside an order of the NCLT, which dismissed an \napplication filed under Rule 11 of the NCLT Rules 2016 for withdrawal \nof CIRP based on a settlement arrived at before the constitution of \nthe CoC. This Court relied on the observations in para 82 of Swiss \nRibbons (supra) referred to above, wherein this Court stated that \nat the stage when the CoC has not been constituted, the NCLT may \nexercise its inherent powers under Rule 11 to allow or disallow an \napplication for withdrawal or settlement. It may be noted that there \nis no reference in this order to the prescribed procedure under \nSection 12A read with Regulation 30A, although the proceedings \ntook place well after their insertion. As noted above, in response to \nthe decision of this Court in Swiss Ribbons (supra), there was a \nchange in the legal framework and Regulation 30A was amended to \nspecifically provide for a procedure for withdrawal before the CoC is \nconstituted. The intention was to account for the lacuna identified in \nSwiss Ribbons (supra) and at the same time, reduce the reliance \non ‘inherent powers’ by prescribing a procedure for withdrawal at \nthis stage. In our view, as the order overlooks the relevant legal \nprovisions and fails to even refer to the existing legal framework \nunder Regulation 30A, it would be per incuriam and is not binding \non this Court.\n\n84. The same infirmity is found in Ashok G. Rajani (supra), a judgement \nrendered by a two-judge bench of this Court. In this case, too, the \npetition filed by a creditor against a corporate debtor had been \nadmitted, but the CoC had not been constituted. The decision \nrefers to Section 12A of the IBC but fails to even acknowledge the \namendment to Regulation 30A, which specifically provided for such an \neventuality. Instead, this Court proceeded to hold while Section 12A \nof the IBC permits withdrawal after admission of the application by \nthe creditor, it only provides for the procedure for withdrawal after the \nCoC has been constituted, without laying down a bar on withdrawal \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R. \n\n1853\n\nbefore the constitution of the CoC. According to the two-judge bench, \nthe question of approval of the CoC by the requisite percentage of \nvotes can only arise after the CoC is constituted and thus, Rule 11 \nmust be invoked to allow withdrawal. This observation was made \nwithout as much as a passing reference to Regulation 30A, which \nspecifically governs such a situation. \n\n85. The decision of this Court in Abhishek Kumar (supra) rendered by a \ntwo-judge bench of this Court speaking through Justice Vikram Nath, \ncorrectly identifies the legal framework. However, it is distinguishable \nfrom the present factual situation and the findings of this Court do \nnot support the case of the respondents. The facts are comparable \nvis-à-vis the stage of the proceedings – the petition had been \nadmitted, but the CoC had not been constituted. However, in that \ncase, the IRP had moved an application under Regulation 30A of \nthe CIRP Regulations. Instead of adjudicating upon the application \nunder Regulation 30A, the NCLT took the view that Regulation 30A \nis a mere directory provision and dismissed the application. The \nNCLT vacated the stay on the constitution of the CoC and directed \nthat the application under 12A be decided directly (i.e. including for \ncompliance with the requirement of a ninety-percent voting share \nof the CoC). This Court set aside the order of the NCLT on the \nground that Regulation 30A provides a complete mechanism for \ndealing with the applications filed under such a provision, and it is \nnot necessary to get the approval of a ninety percent voting share \nof the CoC if the application for withdrawal is moved before the \nconstitution of the CoC. On the other hand, in the present case, \nthere was no application filed through the IRP before the NCLT under \nRegulation 30A at all. Therefore, this decision is not applicable to \nthe present case. \n\nF. Conclusion\n\n86. For the above reasons, we allow the present appeal and set aside \nthe impugned judgment of the NCLAT dated 2 August 2024 in the \nabove terms. At this stage, it would not be appropriate for this Court \nto adjudicate on the objections of the appellant to the settlement \nagreement on merits. The issues raised are the subject matter of \nseveral litigations in different fora, including the Delaware Court \nand investigation by various authorities, including the Enforcement \nDirectorate, which are pending. \n\nGLAS Trust Company LLC v. BYJU Raveendran & Ors.\f1854 \n\n[2024] 10 S.C.R.\n\n87. During the course of the proceedings before this Court, the CoC has \nbeen constituted. The parties are at liberty to invoke their remedies, \nto seek a withdrawal or settlement of claims, in compliance with \nthe legal framework governing the withdrawal of CIRP. Nothing in \nthis judgment should be construed as a finding on the conduct of \nany of the parties or other stakeholders involved in the insolvency \nproceedings. \n\n88. The amount of Rs 158 crore, along with accrued interest, if any, \nwhich has been maintained in a separate escrow account pursuant \nto the Order of this Court dated 14 August 2024, is to be deposited \nwith the CoC. The CoC is directed to maintain this amount in an \nescrow account until further developments and to abide by the further \ndirections of the NCLT.\n\n89. The civil appeal and special leave petition shall stand disposed of \n\naccordingly. \n\n90. Pending applications, if any, stand disposed of.\n\nResult of the case: Civil appeal and special leave petition \n\ndisposed of.\n\n†Headnotes prepared by: Divya Pandey\n\nDigital Supreme Court Reports\f"}