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CS Professional · Insolvency and Bankruptcy - Law and Practice · Bankruptcy Order for Individuals and Partnership Firms

Meera Credit filed a bankruptcy application against Mr. Dinesh Rao and later settled informally with him. Meera Credit's manager informs the Adjudicating Authority by letter that the application is withdrawn, and treats it as closed. What is the legal position?

The application is not withdrawn merely by the creditor's letter. Section 123(7) says a creditor's bankruptcy application cannot be withdrawn without the permission of the Adjudicating Authority, so the creditor must obtain that permission even after settling with the debtor.

  1. AThe application stands withdrawn on the creditor's letter
  2. BThe application stands withdrawn after 30 days of the letter
  3. CThe application cannot be withdrawn without the permission of the Adjudicating AuthorityCorrect
  4. DThe application can be withdrawn only by the bankruptcy trustee

Explanation

Section 123(7) states that an application for bankruptcy by a creditor shall not be withdrawn without the permission of the Adjudicating Authority. A unilateral letter, even after a settlement, does not suffice. No trustee withdrawal route or 30-day deemed withdrawal exists in the text.

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