New Delhi, Appellate insolvency tribunal NCLAT has directed the Mumbai bench of NCLT to decide within 15 days on an application seeking withdrawal of insolvency proceedings against Epic Yarns Pvt Ltd, following a settlement between the company and its operational creditor.
A three-member NCLAT bench noted that the entire claim by Epic Yarns’ operational creditor was paid and a settlement deed was drawn even before the company was admitted to CIRP (Corporate Insolvency Resolution Process).
” In fact, even an application was filed before the NCLT before pronouncement of the order. In the present case, the settlement was made on 06.08.2026 whereas the order for admission under CIRP was pronounced on 23.07.2026,” said the National Company Law Appellate Tribunal (NCLAT).
The NCLT had admitted the company into insolvency on July 23, 2026 on a plea by Kolkata-based Uma Exports Ltd and appointed Klass Insolvency Resolution Professionals Pvt Ltd as the Interim Resolution Professional (IRP).
This NCLT order was challenged by Aayush Prashant Agarwal, suspended Director of Epic Yarns, before NCLAT.
The appellant told NCLAT that the company and Uma Exports had entered into a tripartite settlement agreement on August 6, under which Rs 50 lakh was paid on July 23 and a further Rs 2.57 crore via RTGS on August 6.
However, the tribunal noted that the settlement in this case was reached after the CIRP had commenced, and after amendments to Section 12A of the Insolvency and Bankruptcy Code (IBC) that came into force on May 26, 2026.
The amended Section 12A bars withdrawal of an admitted insolvency application before constitution of the Committee of Creditors (CoC) or after a resolution professional has issued the first invitation for a resolution plan, and requires 90 per cent voting share approval of the CoC for withdrawal.
Meanwhile, the IRP, in its status report, submitted that only one claim — from the Employees’ Provident Fund Organisation (EPFO) for about Rs 1.29 crore — had been received so far, and control of the company had not yet been handed over by the suspended board.
The bench noted that the settlement agreement itself acknowledged that closure of the CIRP would be subject to compliance with IBC provisions and approval of the adjudicating authority.
“Considering the conspectus of facts and legal position as applicable to this case, IRP is at liberty to make an appropriate application before the NCLT, in terms of the provisions of Section 12A of the IBC, 2016.
“The NCLT is requested to dispose of the application under Section 12A so received, within 15 days of the receipt of the said application as per law,” said a bench comprising Officiating Chairperson Justice Yogesh Khanna and Technical Members Barun Mitra and Ajai Das Mehrotra.
