**Title:** Challenges in Withdrawing Companies from Insolvency in India
**Meta Description:** Leading law firms express concerns over the 90% voting threshold for withdrawing companies from insolvency proceedings, complicating resolutions.
**URL Slug:** challenges-withdrawing-companies-insolvency-india
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**Headline:** Law Firms Raise Concerns Over Insolvency Withdrawal Challenges in India
India’s prominent law firms, including Shardul Amarchand Mangaldas & Co, Khaitan & Co, and JSA Advocates & Solicitors, have expressed significant concerns regarding the increasing challenges associated with withdrawing companies from insolvency proceedings. A major obstacle is the stringent requirement for a 90% voting threshold from the committee of creditors (CoC) to approve such withdrawals, even when a feasible insolvency resolution plan is on the table.
Shardul Shroff, executive chairman at Shardul Amarchand Mangaldas & Co, highlighted that achieving the 90% voting threshold is often a formidable challenge. This requirement is stipulated in Section 12A of the Insolvency and Bankruptcy Code, which mandates that the withdrawal of an insolvency application against a corporate debtor can only occur with the approval of 90% of the CoC’s voting share.
Shroff further pointed out another significant hurdle: once insolvency proceedings are initiated, they are classified as proceedings in rem. This classification means that the proceedings affect all stakeholders of the corporate debtor, not just the parties involved in the settlement. Consequently, even if the CoC agrees to a withdrawal, dissenting stakeholders—such as operational creditors or minority financial creditors—may object if their claims remain unresolved or unpaid.
Several insolvency cases, including those involving Byju’s and Syska LED, have illustrated these challenges, where creditors have struggled to reach settlements outside the formal insolvency process. In the Byju’s case, operational creditor BCCI (Board of Control for Cricket in India) approached the insolvency court in 2024 seeking dues of ₹158 crore. Although Byju’s settled its obligations with BCCI, other creditors, including Glas Trust and Aditya Birla Finance, opposed the settlement, arguing that financial creditors had not received their dues before the operational creditor.
On October 23, 2024, the Supreme Court clarified the procedure for withdrawal under Section 12A, emphasizing that the National Company Law Tribunal (NCLT) Mumbai bench should not merely act as a “post office.” However, the Court did not provide a clear test or criteria for the NCLT to apply when the statutory requirements for withdrawal are met. This lack of guidance can lead to legal uncertainty and procedural delays, ultimately diminishing the value available for stakeholders.
As of now, Byju’s remains under the corporate insolvency resolution process (CIRP). Following the Supreme Court’s admission of the appeal filed by BCCI in May 2025, the ongoing CIRP was not stayed, and notices were issued to key creditors, including Glas Trust and Aditya Birla Finance. The next hearing is set for July 21, when the Supreme Court will determine the future course of action.
**FAQ Section:**
**Q: What is the main challenge in withdrawing companies from insolvency in India?**
A: The primary challenge is the requirement for a 90% voting threshold from the committee of creditors, which is often difficult to achieve, complicating the withdrawal process even when a viable resolution plan exists.
