The Supreme Court of India, on October 1, 2024, set aside an order of the National Company Law Appellate Tribunal that had permitted Think & Learn Private Limited (Byju's) to withdraw from insolvency proceedings following a settlement with the Board of Control for Cricket in India. A Bench comprising Chief Justice D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra held that once an insolvency application is admitted under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), withdrawal can only occur through compliance with Section 12A, which requires approval of ninety per cent of the Committee of Creditors.
Background
The corporate insolvency resolution process against Think & Learn Private Limited — the entity operating the Byju's education technology platform — was initiated following an application by the BCCI for recovery of outstanding sponsorship dues. The NCLT admitted the insolvency application under Section 7 of the IBC, triggering the appointment of an interim resolution professional and constitution of the Committee of Creditors.
Subsequently, Byju Raveendran, the promoter, deposited approximately Rs 158.9 crore to settle the BCCI's claims. The NCLAT, accepting this settlement, allowed the company to withdraw from the insolvency proceedings, reasoning that the triggering debt had been satisfied. Multiple creditors, including Glas Trust Company LLC — representing holders of a USD 1.2 billion term loan — challenged this order before the Supreme Court, contending that the NCLAT had bypassed the statutory withdrawal mechanism under Section 12A.
Key Holdings
The Supreme Court delivered the following rulings on the scope of CIRP withdrawal:
Section 12A is mandatory: Once an insolvency application is admitted and the CIRP commences, the withdrawal mechanism under Section 12A of the IBC is the exclusive statutory route. This requires an application by the applicant supported by approval of ninety per cent of the voting share of the Committee of Creditors.
Settlement with one creditor insufficient: A settlement between the corporate debtor and the applicant creditor alone cannot terminate the CIRP when other creditors have filed claims that remain pending. The insolvency process, once initiated, operates in the collective interest of all creditors, not merely the triggering creditor.
NCLAT exceeded jurisdiction: The NCLAT erred in permitting withdrawal without verifying compliance with Regulation 30A of the CIRP Regulations, which prescribes the procedural requirements for applications under Section 12A. The appellate tribunal cannot substitute its discretion for the statutory safeguards designed to protect the collective creditor interest.
CIRP restored: The Supreme Court directed that the CIRP against Think & Learn Private Limited be restored and continue from the stage at which it stood prior to the NCLAT's order, with the Committee of Creditors retaining authority over the resolution process.
Implications for Practitioners
This judgment reinforces the collective nature of the insolvency process under the IBC and closes what had appeared to be an emerging loophole — the possibility of exiting CIRP by settling with the triggering creditor alone. Insolvency practitioners and creditors' counsel should note that the Court has categorically rejected any pathway to CIRP withdrawal that circumvents the ninety per cent CoC approval threshold.
For promoters seeking to regain control of companies in CIRP, the judgment clarifies that the only viable strategy is a comprehensive settlement acceptable to the supermajority of the CoC, or submission of a resolution plan under Section 30. Selective settlements with individual creditors, regardless of the quantum, cannot achieve the objective of withdrawing from the process.
The practical consequence for the edtech sector and other industries with complex multi-creditor capital structures is that once insolvency is triggered, the process acquires a momentum that individual creditor settlements cannot arrest. Practitioners advising corporate debtors should prioritise pre-admission settlements to avoid the constraints of Section 12A.