Allegations of Coercion Must Be Proved with Evidence to Set Aside CIRP Withdrawal: NCLAT

The NCLAT Chennai Bench has held that the withdrawal of a Corporate Insolvency Resolution Process (CIRP) under Section 12A of the Insolvency and Bankruptcy Code, 2016 cannot be set aside merely on the basis of an unsubstantiated allegation of coercion or threat, unless such claims are supported by sufficient evidence.

The CIRP proceedings were initiated against M/s. K Computers upon an application filed by an operational creditor under Section 9 of the Code, which was admitted by the Adjudicating Authority (NCLT Amravati), and an Interim Resolution Professional (IRP) was appointed. An appeal challenging the initiation of CIRP was dismissed by the Appellate Tribunal, following which the matter was carried to the Hon’ble Supreme Court in Civil Appeal No. 857–858/2025, Kalyan Muppaneni vs. M/s. K Computers & Another.

The Apex Court, vide order dated 22.01.2025, recorded the factum of settlement between the parties and disposed of the appeal accordingly.

The appellant subsequently challenged the withdrawal of CIRP before the NCLAT, alleging that the settlement agreement and Form FA were executed under threat and coercion.

It was argued that the settlement was not voluntary and that the application for withdrawal did not satisfy the requirements under Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, particularly on the point that the withdrawal application was not made by the original applicant.

The Appellant also sought to place on record additional documents purportedly evidencing the alleged coercion, which was opposed by the Respondent on the ground that such material had not been placed before the Adjudicating Authority. It was further pointed out that no FIR had been lodged nor any steps taken under the Bharatiya Nyaya Sanhita to substantiate the alleged criminal conduct.

Rejecting the appeal, the Appellate Tribunal held that bald allegations of coercion and threat, unaccompanied by a formal complaint, FIR, or criminal investigation, cannot constitute sufficient grounds to invalidate a settlement recorded and accepted by the Hon’ble Supreme Court. It further noted that the allegations of coercion were raised for the first time before the Appellate Tribunal and had not been urged before the Adjudicating Authority. Consequently, the Tribunal declined to admit any additional documents at the appellate stage and affirmed the validity of the CIRP withdrawal.

Accordingly, the appeal was dismissed.

M/s. K Computers vs. Mr. Pesaladinne Madhusudhan Reddy (IRP) & Mr. Kalyan Muppaneni Company Appeal (AT) (CH) (Ins) No. 227 of 2025