Section 12A of the Insolvency and Bankruptcy Code, 2016 is the provision that permits the withdrawal of an insolvency application after it has been admitted by the NCLT, provided the withdrawal is approved by ninety percent of the voting share of the Committee of Creditors. Under Indian law, Section 12A was introduced by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, to provide a statutory exit route for parties who reach a settlement during the CIRP.
Legal definition
Section 12A of the Insolvency and Bankruptcy Code, 2016 provides:
The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be prescribed.
The procedural framework is prescribed in Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which provides:
(1) An application for withdrawal under section 12A shall be made to the Adjudicating Authority —
(a) before the constitution of the committee, by the applicant through the interim resolution professional;
(b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be.
Prior to the insertion of Section 12A, there was no statutory mechanism for withdrawal of admitted insolvency applications, and the Supreme Court had laid down guidelines in exercise of its powers under Article 142 of the Constitution.
How courts have interpreted this term
Brilliant Alloys Pvt. Ltd. v. S. Rajagopal & Ors. 2018 SCC OnLine SC 2932
The Supreme Court held that Section 12A contains no time restriction on when an application for withdrawal can be made. The NCLT had rejected the withdrawal citing Regulation 30A, which imposes conditions regarding the stage of the process. The Supreme Court ruled that Regulation 30A must be read harmoniously with Section 12A, and since the statute itself contains no such time stipulation, the regulation cannot override the provision. Where the CoC has approved the withdrawal with more than 90% voting share, the Adjudicating Authority cannot reject the application on procedural grounds under the regulations.
Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17
Before Section 12A was enacted, the Supreme Court in this case laid down interim guidelines for withdrawal of admitted CIRP applications. The Court held that settlements between the corporate debtor and the applicant creditor should be encouraged, and the NCLT should permit withdrawal where a genuine settlement has been reached. These guidelines were subsequently formalised by the legislative insertion of Section 12A.
Jindal Steel and Power Ltd. v. Arun Kumar Jagatramka (2021, NCLAT)
The NCLAT clarified that withdrawal under Section 12A is not an absolute right of the applicant even with 90% CoC approval. The Adjudicating Authority retains a supervisory jurisdiction to examine whether the settlement is bona fide and does not prejudice the interests of other stakeholders, including dissenting creditors and operational creditors who may not have been party to the settlement negotiations.
Why this matters
Section 12A addresses a critical gap in the original IBC framework. When the Code was enacted in 2016, there was no mechanism for withdrawal once an application was admitted, creating situations where parties who had settled their disputes were nonetheless trapped in the insolvency process. The insertion of Section 12A recognises that the primary objective of the IBC is resolution — and a consensual settlement between the debtor and creditors achieves this objective outside the formal resolution plan framework.
For practitioners, Section 12A settlements have become a significant strategy in insolvency practice. Promoters of corporate debtors frequently use this route to negotiate a one-time settlement with creditors, secure 90% CoC approval, and withdraw the CIRP before a third-party resolution plan is approved. This allows promoters to retain control of their companies while satisfying creditor claims.
The 90% threshold, however, makes withdrawal challenging. Even a small minority of financial creditors with aggregate voting share exceeding 10% can block the withdrawal. In practice, this means that large institutional creditors often hold effective veto power over settlements, particularly in cases where a single bank holds more than 10% of the financial debt.
Related terms
Broader process:
Approval authority:
Trigger provisions:
Frequently asked questions
Can a Section 12A withdrawal happen at any stage of CIRP?
Yes. The Supreme Court in Brilliant Alloys (2018) held that Section 12A contains no time restriction. Withdrawal can be sought even after the issue of an invitation for expression of interest or receipt of resolution plans, provided the CoC approves it with 90% of the voting share.
What happens to the costs incurred during CIRP if the application is withdrawn?
Regulation 30A(4) provides that the CoC may, while approving withdrawal, impose conditions including payment of the costs incurred by the resolution professional and other process costs during the CIRP. The settlement amount typically includes provision for these costs.
Can the NCLT reject a withdrawal even if the CoC approves it?
The NCLT retains a supervisory jurisdiction and can, in theory, refuse withdrawal if the settlement is found to be not bona fide or prejudicial to the interests of stakeholders. However, in practice, where 90% of the CoC has approved the withdrawal, courts have generally permitted it, deferring to the commercial wisdom of the creditors.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.