NCLAT Stays CoC Constitution in Sargam Metals CIRP Withdrawal Case
Authority: National Company Law Appellate Tribunal, Chennai Bench
Order Date: 04 August 2026
Case Overview
The NCLAT Chennai is hearing two interconnected appeals (Company Appeal (AT) (CH) (Ins) No. 376/2026 and 377/2026) concerning the Corporate Insolvency Resolution Process (CIRP) of Sargam Metals Pvt Ltd.
The appellant in the first appeal is Neeraj Agarwal, Proprietor of Ambal Agencies, an operational creditor who initially filed the Section 9 IBC petition against Sargam Metals in November 2024. The petition was admitted in December 2024. The suspended director of Sargam Metals, S. Arun, appealed this admission order and obtained a stay from NCLAT. Eventually, on 21 April 2026, NCLAT dismissed the appeal, though the order was uploaded only on 19 May 2026.
Crucially, on 15 May 2026 (before the order upload), the operational creditor (Appellant) and corporate debtor (through suspended director) reached a settlement agreement. However, on 22 May 2026, Section 12A of IBC was amended and came into force on 26 May 2026. The amended Section 12A mandates that no withdrawal or settlement can occur without constitution of Committee of Creditors (CoC) and CoC recommendation with 90% voting in favor of withdrawal.
The relevant regulation, Regulation 30A, was also amended and came into force on 02 June 2026. The parties moved the Resolution Professional (KJ Vinod) to legalize their 15 May 2026 settlement, but he expressed apprehension about operating under the amended provisions. The appellant then moved the Adjudicating Authority with IA No. 954/2026 for withdrawal of CIRP, which was dismissed as the Authority agreed with the Resolution Professional's view that the amended Section 12A and Regulation 30A would apply.
The legal question before NCLAT is whether the settlement agreement executed on 15 May 2026 (before amendment notification) should be governed by the unamended Section 12A and Regulation 30A, or whether the amended provisions apply retrospectively.
The Resolution Professional reported that besides the operational creditor (Appellant), there is one more operational creditor (Income Tax Department) and one financial creditor who has preferred a claim that was partly accepted. The CIRP has been effectively stalled due to successive orders and developments, and the Resolution Professional is yet to take full charge of the corporate debtor's affairs or gather complete information on assets and liabilities.
Final Outcome
NCLAT has passed a limited interim order staying the constitution of CoC pending further examination. The Tribunal has directed the Resolution Professional to file a status report and has directed the suspended director (S. Arun) to share all details of assets and liabilities with the Resolution Professional. The Tribunal has also indicated that the suspended director may approach the Resolution Professional for limited relaxation of banking restrictions to enable payment of employee salaries. The matter has been listed for next hearing on 19 August 2026.
Topics: Insolvency Law, Legislative Amendments, Settlement Agreements