Section 12A of IBC: A welcome move for the corporate debtor


The Insolvency and Bankruptcy code, 2016 (IBC) was enacted w.e.f. 28th May, 2016 with the objective of promoting the investments as well as resolution of insolvency of corporate persons in a time bound manner.

The intent behind the enactment of such a code was to keep the corporate debtor as a going concern. To keep the corporate debtor as a going concern the insolvency resolution process has been adopted which works for the maximization of value of assets of the corporate debtor.

Section 12A of IBC

“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 percent voting share of the committee of creditors, in such manner as may be prescribed”.

Earlier, once an application was admitted under section 7, 9 or 10 of IBC, there was provision for the withdrawal of the said application. Even if the corporate debtor wanted to settle the dispute by offering a one time settlement offer, the corporate debtor had to lose the gain over its company.

Due to non-availability of the said clause, the creditors had to sacrifice a high portion of their amount of debt to be recovered under the insolvency resolution process.

What has changed now?

The addition of section 12A has proved to be welcoming step for both the creditors as well as the corporate debtor.

For Creditor

Once an application is filed before National Company Law Tribunal (shortly NCLT) then the corporate debtor has a threat to lose the control over the whole company. The corporate debtor do not wish to lose the control over its company for a very less amount involved or the amount of dispute involved can be settled by the corporate debtor. Therefore, the corporate debtor puts its best efforts to settle the matter at the very initial stage by offering the settlement amount.

The settlement offer serves the purpose of the code at a more efficient manner. Also, the creditor is able to recover the whole amount of the claim and do not require to wait for the whole IBC process to be completed.

For Corporate Debtor

Once an application under section 7, 9 or 10 of IBC is admitted, the corporate debtor is under fear to lose the control over the corporate debtor. Through section 12A of IBC, the corporate debtor has got an opportunity to settle the dispute by entering into a settlement arrangement. If the 90% of committee of creditors approve the settlement offer offered by the corporate debtor, then NCLT shall allow the withdrawal of application.

Post addition of section 12A

After the amendment and addition of section 12A, a significant increase has been seen in the withdrawal of applications at the initial stage. Due to which the creditors are more than satisfied and have been able to recover more than expected.

The corporate debtor has been provided with the opportunity to settle the dispute and satisfy the creditors by providing the amount they have been claiming before NCLT. Thus, if both of the parties arrive at a consensus, then the creditors shall withdraw the application before proceedings further.


While referring the above provisions and alterations made within the IBC, all the aggrieved creditors are advised to approach the NCLT under IBC for a time bound recovery of the amount involved.

By approaching NCLT under IBC either the corporate debtor will offer a onetime settlement offer to the applicant or creditors as the case may be or the resolution process shall be disposed of within 180 days or 270 days from the date of filing of the application.


Disclaimer –  Please note that the above view is based on personal interpretation and for general awareness. The readers are required to take opinion from the Top IBC professionals or Insolvency Professionals before relying on the article. For any clarifications, please write to us at


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