NCLAT Allows CIRP Withdrawal After Lenders Accept Govt-Backed Revival Plan

In a significant move reinforcing the strength of collaborative revival efforts, the National Company Law Appellate Tribunal (NCLAT) has allowed the withdrawal of Corporate Insolvency Resolution Process (CIRP) proceedings against SE TransStadia Pvt. Ltd., following a consensus among financial creditors and the adoption of a Government of Gujarat-backed revival plan. This decision signals an increasing willingness of financial institutions and tribunals to consider viable alternatives to insolvency when backed by credible state-supported restructuring proposals.

Background of the Case

The insolvency case against SE TransStadia Pvt. Ltd., a company involved in sports infrastructure and management, was initially admitted by the National Company Law Tribunal (NCLT) following a petition by financial creditors. However, after the commencement of CIRP, the lead lender Bank of Baroda—along with other financial creditors—submitted an application to withdraw the insolvency proceedings under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016.

The application was supported by a revival and restructuring plan designed in coordination with the Government of Gujarat, which proposed a strategic resolution outside the insolvency framework to restore the company’s financial health and preserve its operations.

What is Section 12A of the IBC?

Section 12A allows the withdrawal of insolvency proceedings after admission, provided that 90% of the Committee of Creditors (CoC) agree to such withdrawal. This provision is intended to encourage resolution through mutual agreement when a better alternative to CIRP exists—especially when it ensures better recovery for creditors and business continuity for the corporate debtor.

In this case, Udit Harish Seth, promoter of SE TransStadia, filed the appeal before NCLAT after NCLT did not accept the initial withdrawal request. The appeal emphasized that all the lenders were on board and that the revival was aligned with public interest due to government involvement.

NCLAT’s Verdict

The Principal Bench of NCLAT, after reviewing all the facts and observing the consensus among the financial creditors, allowed the withdrawal of CIRP against SE TransStadia. The appellate tribunal highlighted the following points in its verdict:

• Consent of Creditors: All major lenders, including Bank of Baroda, consented to the withdrawal based on the revival plan.
• Government Involvement: The support from the Government of Gujarat added credibility and long-term assurance to the revival plan.
• Public Interest: The NCLAT acknowledged that the revival of a company involved in infrastructure and sports development aligned with larger public interest.
• IBC Objectives: The tribunal reiterated that the primary goal of the IBC is revival of businesses and maximization of value, not liquidation or closure.

This ruling underscores the flexibility built into the IBC for achieving resolution outside the courtroom, especially when all stakeholders—including the state—act in coordination.

Why This Case Matters

1. Encourages State-Backed Resolutions: This case sets a strong precedent for government-supported restructuring plans to be accepted as valid alternatives to insolvency.
2. Preserves Valuable Assets: SE TransStadia, being an important player in the sports infrastructure sector, holds strategic value. Reviving such companies can help in nation-building and employment generation.
3. Saves Time and Resources: Full-blown insolvency proceedings can be time-consuming and expensive. A quick withdrawal when creditors agree helps in faster resolution and saves judicial resources.
4. Promotes IBC’s Original Intent: The IBC aims for resolution and not punishment. When a viable path to recovery exists with creditor approval, tribunals are increasingly supportive of withdrawal.

Steps Taken Under the Revival Plan

While the full details of the restructuring plan were not disclosed publicly, reports suggest that the revival plan includes:

• Debt restructuring and refinancing by participating financial institutions.
• Equity infusion or support from state agencies under Gujarat’s development and industry initiatives.
• Operational continuity measures to ensure that the business remains active during transition.
• Potential repurposing of facilities for broader public or PPP (Public-Private Partnership) use.

This aligns with the larger trend of encouraging PPP-driven infrastructure development, especially in sectors like sports and tourism.

Conclusion

The decision of the NCLAT to allow the withdrawal of CIRP against SE TransStadia Pvt. Ltd. represents a progressive interpretation of insolvency laws in India. It demonstrates that tribunals are open to structured out-of-court resolutions when they ensure business continuity, creditor satisfaction, and broader economic benefits.

This case could become a benchmark for future CIRP withdrawals, especially in situations where state governments collaborate with creditors to revive companies with high public value. The synergy between public institutions and private stakeholders can serve as a powerful tool to strengthen India’s insolvency ecosystem while supporting distressed but potentially viable businesses.

FAQs

Q1. What is CIRP?
The Corporate Insolvency Resolution Process is a legal procedure under the IBC to resolve insolvency issues in a time-bound manner.

Q2. What is Section 12A of IBC?
It allows withdrawal of insolvency proceedings after their admission, with 90% CoC approval.

Q3. Why was CIRP withdrawn in this case?
All creditors agreed to a government-supported revival plan, making formal insolvency unnecessary.

Q4. Can government support impact CIRP decisions?
Yes, state involvement can provide credibility, financial support, and broader public interest, influencing tribunal decisions.

Published on: 24 July 2025
Author: CS Chhavi Goyal