Prasad Pandurang Mokashi vs M/S. Yashwant Dugdh Prakriya Limited & ...

IN THE MATTER OF Prasad Pandurang Mokashi, Suspended Director of Yashwant Dugdh Prakriya Ltd. ...Appellant

Versus

Yashwant Dugdh Prakriya Ltd. & Anr. ...Respondents

Present: For Appellant : Ms. Aakashi Lodha and Mr. Nishant Kumar, Advocates.

For Respondents : Mr. Tejas Aggarwal, Mr. Himanshu Satija, Ms. Ripul Swati and Mr. Suyash Shrivastava, Advs. for R-1.

ORDER

(Hybrid Mode)

20.08.2026 This application (I.A. No. 2740 of 2026) is filed by the

Appellant praying for withdrawal of the CIRP proceedings against the

Corporate Debtor of which he was a director. The appeal is preferred

challenging an Order admitting the Corporate Debtor to CIRP at the instance

of Respondent No. 2 herein under Sec.7 of the IBC.

2. The brief facts are that:

a) The Respondent No. 2 instituted a CIRP petition against the

Corporate Debtor (CD) under Section 7 of the IBC, alleging that the

Corporate Debtor had defaulted in repaying a loan of about ₹ 11.22

crores. Pursuant to the same, the Corporate Debtor (CD) came to be drawn into an insolvency resolution process vide the order of the

Adjudicating Authority in C.P. (IB)/707(MB)2022 dated 26.11.2025.

b) When this appeal was moved on 03.12.2025, learned counsel for

the appellant inter alia contended that the default had occasioned

during the Sec. 10A period. This court passed the following interim

order:

"...In the meantime, in pursuance of the impugned order Resolution Professional may collate the claim however no further steps shall be taken."

c) Pursuant to the said interim order, the IRP had begun collating

the claims, and had received only two claims, one from Financial

Creditor (FC)/Respondent No. 2 and another from the EPFO. So far as

the claim of EPFO is concerned, it is informed by the IRP that it has

filed a claim of ₹ 84,730.

d) During the pendency of this appeal, on 06.04.2026, the Appellant

and the FC have entered into a settlement regarding restructuring of

the loan amount due to the former. The report of the IRP shows that

the IRP had addressed the email to the EPFO, to which EPFO has

responded vide its email dated 10.04.2026, informing the IRP that the

EPFO's claims have been paid and that there are no outstanding dues.

e) In these circumstances, the Appellant has taken out the present

application seeking withdrawal of CIRP.

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 2 of 9

3. The Learned counsel for the Appellant submits that there are only two

claimants. With regard to the principal creditor, a fresh repayment plan has

been arrived at, as could be seen from the communication of the Respondent

No. 2 dated 06.04.2026. So far as, the dues to the EPFO are concerned, the

same have been fully paid. Thus, the claims of both the creditors have been

satisfied, and it is prayed that the CIRP initiated against the CD may be

withdrawn. Reliance is placed on the dictum of a three-member bench of this

Tribunal in in Sachin Malde v. Hemant Nanji Chheda & another [Comp.

App. (AT) (Ins.) No. 123 of 2024] dated 02.04.2025.

4. The relief sought by the Appellant/Applicant is noted as follows:

a. Allow the withdrawal of the corporate insolvency resolution process against the Corporate Debtor;

b. Allow the present Appeal and set aside the Impugned Order dated 26.11.2025 passed by the Hon'ble National Company Law Tribunal, Mumbai Bench, Court-VI, in C.P. (IB)/707/MB/2022; and/or

c. Pass such other or further order(s) as this Hon'ble Appellate Tribunal deems fit and proper in the facts and circumstances of the present case and in the interest of justice.

5. Both the counsel who appeared for both the Respondents concurred

with the statement of the counsel for the Appellant. The Learned Counsel for

the RP submitted that the claim made by EPFO now stands closed since it

has been fully paid. Learned counsel for the Respondent No. 2 submitted that

Respondent No. 2 and the Appellant have arrived at a settlement, whereby the

loan, the default of which led the CD into CIRP, has been restructured.

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 3 of 9

6. We have carefully perused the papers. Admittedly, the CoC has not been

constituted and as on date, there are only two claimants, and both the claims

have now been satisfied. Where the CD is admitted to CIRP and CoC is not

constituted, the dictum of the Hon'ble Supreme Court in Glas Trust Co., LLC

Vs. Byju Raveendran & others [(2025) 3 SCC 625] directs that other creditors

must be heard and other relevant facts must be considered before ordering

withdrawal of the CIRP. In Sachin Malde Vs. Hemant Nanji Chheda &

another, [Comp. App. (AT) (Ins.) No. 123 of 2024], in a similar situation when

a three Member Bench of this Tribunal encountered a case of one creditor-

one claimant whose claim was satisfied by the suspended directors of the CD,

the Tribunal, after taking note of the judgement in Glas Trust Company LLC

Vs. Byju Raveendran & others, has held that there may not be any necessity

to require the financial creditors to take recourse to Section 12A.

7. It is contended that despite the Glas Trust (supra), the judgment in

Sachin Malde (supra) provides guidance as to how to deal with the issues of

withdrawal of CIRP, where settlement takes place before the constitution of

the CoC and if all the Creditors/Claimants are satisfied then it might be

unnecessary to take the tedious route of Sec.12A as there will be hardly any

need to hear any other claimants or creditors of the CD for considering the

withdrawal of the CIRP. The procedure contemplated under Sec.12A of the

Code read with the Glas Trust dictum only emphasizes the need for fairness

in securing the interests of all the stakeholders in a proceeding in rem.

Therefore, when the claims of all the claimants who might have to be heard

in terms of the Glas Trust dictum are already been proved to have been settled

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 4 of 9 through the report of the IRP, then to direct the IRP to petition the

Adjudicating Authority under Sec.12A is likely to be more cumbersome.

8. It is worth mentioning here that in Civil Appeal No. 9986 of 2024 and

Special Leave Petition (C) No. 21023 of 2024 decided on 23.10.2024

GLAS Trust Company LLC Vs. BYJU Raveendran, the Hon'ble Supreme

Court of India has clearly brought out the mechanism to be followed in such

a situation, which is reproduced as below for easy reference:

"After an application Under Sections 7, 9, or 10 is admitted, but before the CoC has been constituted: Although Section 12A continues to be silent on this aspect, after the decision in Swiss Ribbons (supra), Regulation 30A was amended to provide for this eventuality. An application for withdrawal in such cases may be made by the applicant through the IRP.

The IRP will then place the application before the NCLT, which may pass an order either approving or rejecting the application. As noted above, once the application has been admitted, the proceedings are no longer the sole preserve of the applicant creditor and the corporate debtor. They are now in rem and at this stage, the NCLT must hear the concerned parties and consider all relevant factors before approving or rejecting the application for withdrawal. The NCLT being a quasi- judicial body, must not act as a mere post office, which stamps and approves every settlement agreement, without application of judicial mind."

9. Byju Judgement (supra) further notes as follows:

XXX

69. In a consistent line of precedent, this Court has held that 'inherent powers' may be exercised in cases where there is no express provision under the legal framework. However, such powers cannot be exercised in contravention of, conflict with or in ignorance of express provisions of law.

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 5 of 9 We may helpfully refer to the observations of a two-judge bench of this Court in one such case. In Ram Chand and Sons Sugar Mills (P) Ltd. v. Kanhayalal Bhargava, MANU/SC/0263/1966: 1966:INSC:70 a two-judge bench of this Court, speaking through Justice K. Subba Rao (as the learned chief Justice then was), opined:

5. ... Having regard to the said decisions, the scope of the inherent power of a court Under Section 151 of the Code may be defined thus: The inherent power of a court is in addition to and complementary to the powers expressly conferred under the Code.

But that power will not be exercised if its exercise is inconsistent with, or comes into conflict with, any of the powers expressly or by necessary implication conferred by the other provisions of the Code. If there are express provisions exhaustively covering a particular topic, they give rise to a necessary implication that no power shall be exercised in respect of the said topic otherwise than in the manner prescribed by the said provisions. Whatever limitations are imposed by construction on the provisions of Section 151 of the Code, they do not control the undoubted power of the Court conferred Under Section 151 of the Code to make a suitable order to prevent the abuse of the process of the Court.

(emphasis supplied)

70. When a procedure has been prescribed for a particular purpose exhaustively, no power shall be exercised otherwise than in the manner prescribed by the said provisions. In such cases, the court must be circumspect in invoking its 'inherent powers' to deviate from the prescribed procedure. If such deviation is made, the court must justify why this was necessary to "prevent the abuse of the process of the Court". XXX

10. Furthermore, it is worth noting that the Insolvency and Bankruptcy

Code 2016 has been further amended on 26 May 2026, and it provides clarity

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 6 of 9 with respect to the procedure for withdrawal or otherwise of the insolvency

proceedings. The relevant provision is noted as below:

"Section 12A. Withdrawal of Application admitted under Section 7, 9 or 10

(1) Subject to Subsection (2), the Adjudicating Authority may allow the withdrawal of an application admitted under Section 7, 9 or 10 on an application made by the resolution professional with the approval of 90% voting share of the Committee of Creditors in such manner as may be specified.

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

(a) before the constitution of the Committee of Creditors under Subsection (1) of Section 21

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

11. Bare perusal of the above amended Section 12A and the judgement in

Glass Trust (Supra) indicates that this appellate authority could not use its

"inherent powers" under Rule 111 to bypass the specific procedure laid down

in Section 12A of the Code for the withdrawal of an application without moving

through the NCLT. We further note that the proceedings under Section 7 shall

not be withdrawn before the Constitution of the Committee of Creditors under

1 The National Company Law Appellate Tribunal Rules 2016

Rule 11 Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Appellate Tribunal to make such orders or give such directions as may be necessary for meeting the ends of justice or to prevent abuse of the process of the appellate tribunal.

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 7 of 9 Subsection (1) of Section 21 as per the above extracted provisions. Thus,

above noted amendment clearly provides that withdrawal is not permitted

without the constitution of the CoC. We also further note that after the

admission of CIRP the proceedings are in rem and at this stage the NCLT must

hear all the concerned parties and consider all relevant factors before

approving or rejecting the application for withdrawal. Therefore, we have very

limited options available before us, except to direct the constitution of the CoC

and also placing the matter for the settlement under Section 12A through the

IRP before the Adjudicating Authority.

12. We further note that in the changed scenario, when the Section 12A of

the Code has been amended and the Glass Trust (Supra) provides us

guidance, the judgement cited in Sachin Malde (Supra) may not be of any

assistance to the Appellants.

13. Furthermore, we note that the Appellant - being a suspended director

of the corporate debtor- in this IA No. 2740 of 2026 has sought the relief to

allow the withdrawal of the CIRP proceedings against the corporate debtor

and also allow the present appeal and set aside the impugned order dated

26.11.2025. Such a relief cannot be granted by us as per the existing

provisions of the Code and also the legal precedents. As noted here in earlier,

we are obligated to follow the procedure as laid down in section 12A. In the

facts and the circumstances of the case we are inclined to conclude that it

would be appropriate that after constitution of the COC, the settlement

proposal is placed before the Adjudicating Authority by following the

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 8 of 9 procedure as laid down in Section 12A of the Code through the IRP/RP before

the Adjudicating Authority. We could have used the inherent powers for

meeting the ends of justice or to prevent the abuse of the process of the

appellate tribunal, but there is no occasion to do so. By adopting the

procedure as we are not dismissing the appeal but providing liberty to place

the settlement proposal before the COC, which has to be constituted as per

Section 12A, and taking it to the Adjudicating Authority in a time-bound

manner, the ends of justice would be met and compliance of the Code will also

be ensured.

14. Accordingly, we provide the liberty to the Appellants to place the

settlement before the Adjudicating Authority by following the procedure laid

down in Section 12A of the Insolvency and Bankruptcy Code. No costs.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical) pks/rr

I.A. No. 2740 of 2026 in Comp. App. (AT) (Ins.) No. 1901 of 2025 9 of 9