The Insolvency and Bankruptcy Code (IBC), introduced in 2016, has transformed India’s approach to corporate distress. Among its many provisions, Section 12A allowed insolvency proceedings to be withdrawn even after admission. While this acted as a safety valve, it also became one of the most frequently used exit routes, particularly in cases filed by operational creditors.

Data from the Insolvency and Bankruptcy Board of India (IBBI) shows that by June 30, 2025, 1,191 cases around 14% of all admitted CIRPs had been withdrawn under Section 12A, with 825 of these initiated by operational creditors. This pattern revealed how promoters often waited until admission before offering settlements to regain control. The weaknesses in this practice became evident in the Byju’s insolvency matter, seen as promoters attempting to short-circuit the collective process through direct settlements after admission.

The Supreme Court clarified that the promoters could not bypass Section 12A by relying on inherent powers under........

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