In the case of Lokhandwala Kataria Construction Pvt. Ltd (Corporate Debtor) v. Nisus Finance & Investment Managers LLP (civil appeal NO. 9279 OF 2017), the main issue before the Hon’ble Supreme Court was that whether the Adjudicating Authority could utilize its inherent powers under Rule 11 of the NCLAT Rules, 2016 to allow an application to be withdrawn after admission of the matter.

In this case, Nisus finance & investment Managers(Respondent) who  were the financial creditor filed an application against the Corporate Debtor i.e. Lokhandwala Kataria Construction Pvt. Ltd, under section 7 of the Insolvency and Bankruptcy Code, 2016. The issue was however settled by the parties themselves, after admission of the matter. Subsequently, the Appellant approached the NCLAT for withdrawal of the application. The Appellant relied on Rule 11 of the NCLAT Rules, 2016 , which provides inherent powers to the tribunals to make such orders or give such directions as may be necessary for meeting the ends of justice or to prevent abuse of the process of the tribunal to allow the withdrawal of application. The NCLAT refused to do so and stated that only Rule 20 and 26 have been adopted for the purpose of the code. It relied on Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,(mention year) which states that an application can be withdrawn upon request made by applicant before its admission and rejected the application.

The parties, against the order of the NCLAT, approached the Hon’ble Supreme Court. It was held that the adjudicating authorities don’t have the inherent powers under Rule 11 and thus cannot allow a compromise before it after admission of the matter. The reason for the same was that after admission of the matter, the matter becomes a collective action and is no longer between only two parties. If it is allowed it would indirectly mean refusing the claim of all the creditors, as after admission all creditors can join the proceedings, and it then represents the interests of all the creditors collectively.

The Supreme Court exercised its power under Article 142 of the Constitution of India, 1950 against Rule 8 which restricts withdrawal of application after admission, recorded the consent terms as all the parties were before it and disposed of the appeal but since the court used its powers under Article 142 the order will not get the status of a precedent as per Article 141.