NCLAT Delhi Ends CIRP of Shalfeyo Industries Private Limited After Settlement With Creditors

Background and Procedural History

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, in Deepak Modi Vs Shalfeyo Industries Private Limited (Company Appeal (AT) (Ins.) No. 222 of 2025), delivered on 07/09/2026, dealt with a corporate insolvency resolution process (CIRP) that had effectively reached a deadlock despite the underlying debts having been settled or offered to be settled in full.

The CIRP of Shalfeyo Industries Private Limited (“Corporate Debtor”) was triggered on 16.08.2022 based on a Section 9 application filed by Prime Impex (Operational Creditor) involving an operational debt of about Rs. 11.90 lakhs in CP (IB) No. 79/9/JPR/2020. Axis Bank Limited came forward as the sole Financial Creditor with a claim of approximately Rs. 1.04 crore. Mr. Umang Jain was appointed as Interim Resolution Professional and later confirmed as Resolution Professional (RP).

From an early stage of the process, it became apparent that the Corporate Debtor lacked meaningful assets and prospects of resolution. Axis Bank, holding 100% of the voting share in the Committee of Creditors (CoC), initially expressed that continuation of CIRP would not be effective and indicated a preference for closure. Over time, however, the process became mired in procedural issues, disputes over CIRP costs, and technical non-compliance with Section 12A and Regulation 30A of the CIRP Regulations.

Genesis of the CIRP and Early CoC Developments

Initiation by Operational Creditor

  • Prime Impex filed a Section 9 application alleging an operational debt of around Rs. 11.90 lakhs.
  • The Adjudicating Authority (NCLT, Jaipur Bench) admitted the petition on 16.08.2022, commencing CIRP against Shalfeyo Industries Private Limited and appointing Mr. Umang Jain as IRP, later confirmed as RP.

Constitution and Fluctuation of CoC

  • Following the public announcement, Axis Bank Limited submitted its financial claim of nearly Rs. 1.04 crore.
  • CoC was accordingly constituted with Axis Bank as the only Financial Creditor, holding 100% voting share.
  • In the first CoC meeting held on 15.09.2022, Axis Bank observed that the Corporate Debtor did not have significant assets and that continued CIRP would not serve a meaningful purpose. Axis Bank urged consideration of closure of CIRP.

Satisfaction of Financial Creditor’s Exposure

  • The suspended director, Deepak Modi (Appellant), had furnished personal collateral to Axis Bank.
  • That collateral was sold and the balance outstanding was deposited, resulting in full satisfaction of Axis Bank’s claim.
  • Once Axis Bank’s entire exposure stood cleared, the Bank withdrew its claim from the CIRP.
  • The RP then reconstituted the CoC by placing Prime Impex as the CoC member in place of Axis Bank.
  • This reconstitution was challenged by the Appellant, and the Adjudicating Authority later restored the CoC to its original structure, reinstating Axis Bank as the sole Financial Creditor.

Move Towards Liquidation

  • While the CoC was momentarily composed of Prime Impex as the sole member, a resolution for liquidation of the Corporate Debtor was passed on 05.11.2022, even though two Expressions of Interest had already been received.
  • The RP filed IA No. 243/JPR/2023 under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (“Code”) seeking liquidation, and separately filed IA No. 160/2023 for determination of CIRP costs, which remains pending before the Adjudicating Authority.

Settlement Efforts During CIRP

Negotiations Initiated by Axis Bank

In CoC meetings, particularly the 6th meeting held on 18.09.2023, Axis Bank noted that:

  • CIRP commenced for an operational claim of around Rs. 12 lakhs.
  • The process had already run for about one and a half years.
  • Axis Bank took initiative to explore settlement between Deepak Modi and Prime Impex.

The Appellant offered various settlements over time:

  • First proposal: Rs. 8 lakhs in cash plus return of material valued at Rs. 4 lakhs lying at the site.
  • Later proposal: settlement of the entire claim of approximately Rs. 12 lakhs of Prime Impex.

Prime Impex, however, insisted on additional amounts such as compensation and litigation costs, and the above proposals did not fructify into a final settlement at that stage.

Full Offer to Operational Creditor

Subsequently, the Appellant:

  • Agreed to pay the entire claimed principal of Rs. 11.90 lakhs to Prime Impex.
  • Tendered a demand draft bearing No. 722222 dated 03.12.2024 for Rs. 11.90 lakhs.
  • Prepared a draft of Form FA and shared it with Prime Impex.
  • Expressly undertook to bear the RP’s fees and CIRP expenses as ultimately decided by the Adjudicating Authority.

Given that:

  • Axis Bank’s claim as Financial Creditor had been completely satisfied, and
  • Prime Impex had been offered full payment of its claim,

the Appellant sought to bring the CIRP to an end under Section 12A of the Code read with Regulation 30A of the CIRP Regulations by filing an application (IA (IBC) No. 549/JPR/2024) on 20.11.2024, in his capacity as suspended director.

NCLT’s Rejection of Section 12A Application

The Adjudicating Authority (NCLT, Jaipur Bench) examined the withdrawal application and noted the following:

  • The application under Section 12A was filed by the suspended director, not through the Resolution Professional as required.
  • The claim of Axis Bank (Financial Creditor) had been stated as fully settled.
  • A demand draft for **Rs.