NCLAT (2026.07.17) in Kavish Gupta & Vs. Yes Bank Ltd. and Ors. [(2026) ibclaw.in 889 NCLAT, Company Appeal (AT) (Ins.) No. 1015 of 2025 Ors.] held that;
In these circumstances, the Adjudicating Authority proceeded to consider the Section 7 Application on the basis of the financial debt and default placed before it and did not find it appropriate to await the outcome of the pending DRT proceedings. We find no error in the approach adopted by the Adjudicating Authority.
The Appellant has relied upon Vidarbha Industries Power Limited v. Axis Bank Limited, [(2022) ibclaw.in 91 SC] : (2022) 8 SCC 352. However, the said judgment was rendered in exceptional facts where the Corporate Debtor had a crystallised and enforceable claim in its favour. In the present case, the proposed Scheme under Section 230, the settlement discussions and the pending Counter Claim before the DRT had not attained finality and did not displace the established financial debt and default.
This Appellate Tribunal held that the mere filing of a counterclaim or money suit does not negate the existence of financial debt and default. In the present case also, the pendency of OA No. 571/2023 and the Counter Claim before the DRT did not affect the Financial Creditor’s right to maintain the application under Section 7.
This Appellate Tribunal held that equitable considerations cannot override the statutory mandate of the Code. The Appellant’s reliance on the Corporate Debtor’s ongoing projects, payments to suppliers and commercial viability cannot, therefore, constitute valid grounds to postpone the insolvency proceedings once the requirements of Section 7 stand satisfied.
Excerpts of the Order;
This appeal CA (AT) (Ins.) No. 1015 of 2025 has been preferred under Section 61 of the Code by Mr. Kavish Gupta, Suspended Director of KKSPUN India Limited, and it arises from the judgment and order dated 11.07.2025 passed by the National Company Law Tribunal, New Delhi Bench-IV (Adjudicating Authority), in CP (IB) No. 36/ND/2024. The Adjudicating Authority vide the impugned order admitted the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘Code’) by Yes Bank Limited/ Respondent No.1 and Financial Creditor, against KKSPUN India Limited/Corporate Debtor and initiated the Corporate Insolvency Resolution Process (CIRP). Mr. Harvinder Singh, was appointed as the Interim Resolution Professional (IRP) of KKSPUN India Limited/Corporate Debtor, by the Adjudicating Authority and he is the Respondent No.2 here. The State Bank of India (SBI), which is the lead bank of consortium of lenders, who have extended credit facilities to CD has been arrayed as Respondent No.3 and IndusInd Bank another member of the same consortium is the Respondent No.4. This appeal would henceforth be referred to as First Appeal/Main Appeal.
# 2. The Appellant contends that the impugned order was passed without affording an effective opportunity of hearing; without considering the pending applications seeking deferment of the proceedings; and despite the fact that a comprehensive settlement and compromise scheme under Sections 230-232 of the Companies Act, 2013 had reached an advanced stage of approval before the consortium of lenders. According to the Appellant, the admission of the Section 7 application rendered the ongoing settlement process infructuous and caused irreparable prejudice to an otherwise commercially viable MSME company.
Company Appeal (AT) (Ins.) No. 812 of 2025
# 3. The CA (AT) (Ins.) No. 812 of 2025 (hereinafter referred to as ‘Second Appeal’) has been preferred by KKSPUN India Limited (Corporate Debtor/Appellant) against State Bank of India (Respondent/Financial Creditor) challenging the order dated 14.05.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 326/ND/2024. The appeal arises from the dismissal of the New Restoration Application bearing RA No. 36/ND/2025, which was filed by the Corporate Debtor seeking restoration of its earlier Recall Application bearing IA No. 1916/ND/2025. The said Recall Application was preferred for recalling the orders dated 19.03.2025 and 02.04.2025, whereby the Corporate Debtor contended that vide order dated 19.03.2025 the Ld. Adjudicating Authority closed its right to advance arguments in the Section 7 proceedings filed by State Bank of India and further vide the order dated 02.04.2025 the Ld. AA reserved the orders in Sec 7 petition, without granting it an effective opportunity of hearing. The Corporate Debtor has challenged the said order on the ground that the Adjudicating Authority ought to have restored the Recall Application and considered its submissions on merits.
Company Appeal (AT) (Ins.) No. 813 of 2025
# 4. The CA (AT) (Ins.) No. 813 of 2025 (hereinafter referred to as ‘Third Appeal’) has been preferred by KKSPUN India Limited (Corporate Debtor/Appellant) against State Bank of India (Respondent/Financial Creditor) challenging the order dated 28.04.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 326/ND/2024. The appeal arises from the dismissal of the Corporate Debtor’s Recall Application bearing IA No. 1916/ND/2025, which was filed seeking recall of the orders dated 19.03.2025 and 02.04.2025 passed in the Section 7 proceedings initiated by State Bank of India. The IA No. 1916/ND/2025 was dismissed by the Ld. Adjudicating Authority for ‘want of prosecution’ by the Appellant. The grievance raised by the Corporate Debtor is that while the settlement process between the Corporate Debtor and consortium lenders was progressing and the application seeking abeyance of the Section 7 proceedings was pending, the Adjudicating Authority closed the Corporate Debtor’s right to argue on 19.03.2025 and thereafter reserved the Company Petition for final orders on 02.04.2025. The present appeal, therefore, primarily concerns the issue of denial of opportunity of hearing and the refusal to recall the procedural orders passed during the pendency of the insolvency proceedings.
Company Appeal (AT) (Ins.) No. 815 of 2025
# 5. The CA (AT) (Ins.) No. 815 of 2025 (hereinafter referred to as ‘Fourth Appeal’) has been preferred by KKSPUN India Limited (Corporate Debtor/Appellant) against Yes Bank Limited (Respondent/Financial Creditor) challenging the order dated 28.04.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 36/ND/2024. The present appeal arises from the dismissal of the Corporate Debtor’s Recall Application bearing IA No. 1913/ND/2025, which sought recall of the orders dated 19.03.2025 and 02.04.2025 passed during the pendency of the Section 7 application filed by Yes Bank Limited, for ‘want of prosecution’. The Corporate Debtor submitted that the order dated 19.03.2025 resulted in closure of its right to advance oral arguments and the subsequent order dated 02.04.2025 resulted in the Section 7 Petition being reserved for final orders, despite the pendency of its application seeking deferment of proceedings due to the ongoing settlement discussions and the Scheme of Compromise and Arrangement under Sections 230-232 of the Companies Act, 2013. The appeal has accordingly been preferred seeking restoration of the opportunity to address arguments and contest the Section 7 proceedings on merits before any final adjudication.
Company Appeal (AT) (Ins.) No. 816 of 2025
# 6. The CA (AT) (Ins.) No. 816 of 2025 (hereinafter referred to as ‘Fifth Appeal’) has been preferred by KKSPUN India Limited/Corporate Debtor against Yes Bank Limited (Respondent/Financial Creditor) challenging the order dated 14.05.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 36/ND/2024. The appeal arises from the dismissal of the New Restoration Application bearing RA No. 37/ND/2025, filed by the Corporate Debtor for restoration of its earlier Recall Application bearing IA No. 1913/ND/2025. The Recall Application sought recall of the orders dated 19.03.2025 and 02.04.2025, whereby the Corporate Debtor’s right to argue the Section 7 Petition filed by Yes Bank Limited was closed and the matter was reserved for final orders. According to the Corporate Debtor, dismissal of the Restoration Application prevented consideration of its grievance regarding lack of effective hearing. The present appeal therefore seeks restoration of the Recall Application and an opportunity to place its submissions before adjudication of the insolvency proceedings.
# 7. The First appeal is the Main Appeal among the five connected appeals arising out of the same insolvency proceeding i.e. CP (IB) No. 36/ND/2024, vide which the CD was admitted in CIRP. The other 4 appeals are challenges to procedural orders passed by Ld. Adjudicating Authority during the CIRP proceedings of the same Corporate Debtor. Since all the appeals arise from the same set of facts and interconnected proceedings, before the Ld. Adjudicating Authority, they are being considered together. The First appeal challenges the final order dated 11.07.2025 passed in CP (IB) No. 36/ND/2024, whereby the Adjudicating Authority admitted the application under Section 7 of the Code and initiated the Corporate Insolvency Resolution Process against the Corporate Debtor.
Facts of the Case
# 8. The brief facts of the case relevant to the disposal of these appeals are as follows: –
i. The Corporate Debtor, KKSPUN India Limited, is engaged in the business of manufacturing precast concrete products and supplying the same to large Engineering, Procurement and Construction (EPC) companies, particularly Larsen & Toubro. The company is registered as a Micro, Small and Medium Enterprise (MSME) and claims to be a commercially solvent, profit-making concern employing more than 235 persons. Being an EPC contractor, its principal commercial assets consist of ongoing work orders, skilled manpower and engineering expertise rather than tangible immovable assets.
ii. The Yes Bank Limited/ Respondent No.1 Bank sanctioned various credit facilities to the Corporate Debtor over a period of time since 2016. The Corporate Debtor failed to maintained financial discipline and defaulted in payment to the Financial Creditor. Subsequently, the loan account of the Appellant/ Corporate Debtor was classified as NPA w.e.f. 05.08.2022. Yes Bank also recorded the default of the Appellant with the NeSL portal on 05.08.2022. The Respondent No.1, thereafter on 07.03.2023 issued loan recall notice to Corporate Debtor for the entire outstanding amount of all facilities, amounting to Rs.32.13 crores, which was due as on 01.03.2023, together with interest and other charges etc. and requested the payment within seven days of receipt of the loan recall notice.
iii. As the Corporate Debtor did not make outstanding payment, the Respondent No.1/Yes Bank filed application under Section 7 of the Code for total outstanding dues of Rs.32.57 cr. on 14.12.2023. The same was registered on 24.01.2024 as CP (IB) No.36/ND/2024. The Corporate Debtor filed its detailed reply on 09.05.2024.
iv. Parallelly, The CD had also availed credit facilities from Respondent No.3/SBI, which were granted way back in 2011 amounting to Rs.69.50 cr. These facilities were subsequently enhanced/ renewed/ modified over a period of time. The last such renewal took place on 18.02.2022 for Rs.169.88 cr. The CD also committed default in repayment of SBI Loan Account also and it was declared as NPA w.e.f. 10.08.2022. SBI also filed its own Section 7 petition, which was listed as CP (IB) No. 326/2024 for a default of Rs.190.49 cr. Later on, several banks, which had provided credit facilities to the CD, formed a consortium of which SBI was the lead member. The CD filed its Reply dated 28.08.2024 to the Section 7 IBC Petition of the SBI.
v. The Ld. NCLT on 18.12.2024 heard the Ld. Counsel for the SBI and asked the Respondent to come forth for arguments, as the present application had been pending for long. However, as the Debt and default was crystal clear, the CD sought an opportunity to get the matter settled. Therefore, the Ld. NCLT, on 06.01.2025, 20.02.2025 and on 30.01.2025 granted several opportunities to the CD to settle the matter with the Applicant and also to argue the matter on merits, but in vain.
vi. A Joint Lenders Meeting (JLM) was conducted on 10.02.2025 to discuss the revised Settlement Proposal dated 30.01.2025 of Rs. 83.00 Crores of the CD, however, the CD did not make payment of any upfront amount, thus, the said Settlement Proposal could not proceed at all even for consideration of the lenders, hence, was deemed as failed.
vii. The above fact of non-consideration of the Settlement Proposal of the CD was informed to the Ld. NCLT during hearing on 19.03.2025, whereafter, the Ld. NCLT re-heard the arguments on behalf of the Applicant-Bank, and on failure to argue the matter, the respondent’s right to argue was closed, while the Ld. NCLT granted liberty to both the parties to file a brief note and listed the matter for compliance to 02.04.2025. The brief notes were duly filed by all concerned, and on 02.04.2025 the Ld. NCLT reserved the matter for orders.
viii. The CD filed an LA. No. 1916/2025 seeking recall of Orders dated 19.03.2025 and 02.04.2025, however, the CD did not appear before the Ld. NCLT to prosecute the said LA. No. 1916/2025 on 28.04.2025, thus, on the 2nd call, the said I.A. was dismissed for ‘want of prosecution’. The Restoration Application No. 36/2025 of the CD seeking to restore LA. No. 1916/2025 was also dismissed by the Ld. NCLT by its Order dated 14.05.2025 holding that the appellant failed to point out any valid reasons for restoration.
ix. The CD filed CA (AT) (INS.) Nos. 812/2025 and 813/2025 challenging the Orders dated 14.05.2025 and 28.04.2025 which was listed for hearing on 27.05.2025, however, no interim relief was granted in favour of the CD. Having failed to obtain any interim Order from the NCLAT on 27.05.2025, the CD again moved the Ld. NCLT by filing LA. No. 3136/2025 seeking abeyance of pronouncement of Order in the Section 7 IBC Petition, This IA. No. 3136/2025 was dismissed by the Ld. NCLT by its Order dated 04.07.2025.
x. During the pendency of the Section 7 proceedings, the Corporate Debtor, on 07.12.2024, initiated an independent process under Sections 230-232 of the Companies Act, 2013 by filing CA (CAA) No.114/ND/2024, proposing a comprehensive Scheme of Compromise and Arrangement before the consortium of lenders with the objective of settling the outstanding debts outside insolvency proceedings. The proposed scheme envisaged a negotiated restructuring with all consortium banks, including Yes Bank.
xi. The Corporate Debtor thereafter filed IA No.5985/ND/2024 on 16.12.2024 under Rule 11 of the NCLT Rules, requesting the Adjudicating Authority to keep the Section 7 proceedings in abeyance, until consideration of the compromise scheme under Sections 230-232. The said application was ultimately dismissed as infructuous simultaneously with the admission of the Section 7 petition on 11.07.2025.
xii. While these negotiations continued, the first motion application filed under Sections 230-232 came to be reserved for orders on 11.02.2025, and thereafter, on 20.02.2025, the Corporate Debtor placed before the Adjudicating Authority the minutes of the Joint Lenders Meeting reflecting that the settlement proposal was proposed to be put to voting on 10.03.2025. In view thereof, the Section 7 proceedings were adjourned to 19.03.2025 for reporting the status of settlement or for hearing arguments.
xiii. Shortly thereafter, on 20.03.2025, the Adjudicating Authority allowed the first motion application in CA (CAA) No.114/ND/2024, thereby approving the initial stage of the proposed Scheme of Compromise and Arrangement under Sections 230-232 of the Companies Act.
xiv. When the matter again came up on 02.04.2025, the Corporate Debtor had engaged a Senior Counsel to argue the Section 7 petition. However, the Adjudicating Authority reserved orders without hearing arguments either on the pending Rule 11 application, on the merits of the Section 7 petition, or on the progress of the compromise scheme and the Joint Lenders Meetings. Aggrieved thereby, the Corporate Debtor filed IA No.1913/ND/2025 on 16.04.2025 seeking recall of the orders dated 19.03.2025 and 02.04.2025, alleging that those orders had been obtained due to serious misrepresentations made by Yes Bank before the Adjudicating Authority. The recall application, however, came to be dismissed on 28.04.2025 for non-appearance of counsel.
xv. Finally, while the clarification applications came up before this Appellate Tribunal on 11.07.2025, the Adjudicating Authority pronounced the impugned order on the very same day admitting the Section 7 petition and initiating CIRP against the Corporate Debtor. Ld. Adjudicating Authority took a view that the loan account(s) of the CD having turned NPA on 10.08.2022 and the debts and default being clear in view of the NESL Certificates as also the CD having admitted the debts and defaults in the Letter dated 24.11.2021; Balance Sheet as at 2022 & 2023; and the Settlement Proposals dated 08.01.2024, 06.07.2024, 24.09.2024 and 30.01.2025; it was a fit case for admission in CIRP.
xvi. Both the CP (IB) No. 36/2024 of the Yes Bank Ltd. and the CP (IB) No. 326/2024 of the SBI were listed for pronouncement of Orders on 11.07.2025. However, since the Section 7 IBC Petition of the Yes Bank Ltd. was filed prior in time, the Ld. NCLT passed the Admission Order in CP (IB) No. 36/2024 of Yes Bank Ltd., while the CP (IB) No. 326/2024 of the Respondent No.3/SBI was disposed of in view of Admission Order and Appointment of the RP in Yes Bank’s CP (IB) No. 36/2024. This appeal arises from the aforesaid impugned order dated 11.07.2025.
Analysis and Findings
# 53. We have gone through the documents on record and have heard the parties at length.
# 54. The Appellant’s challenge in the present appeal is mainly on two grounds. Firstly, it has been argued that the Corporate Debtor was denied an effective opportunity of hearing and that the Adjudicating Authority ought to have deferred the proceedings in the interest of revival of the Corporate Debtor. The applications filed by Appellant at various stages were not decided or summarily rejected by the Adjudicating Authority and the Section 7 petition was admitted. Further the Appellant’s lawyer was not allowed to argue his case before the Adjudicating Authority. These events are clear violation of Principles of Natural Justice and based on this ground alone the impugned order needs to be set aside. Secondly, he challenges the admission of the Section 7 Application by contending that the Adjudicating Authority ought not to have initiated the Corporate Insolvency Resolution Process, when the Corporate Debtor was pursuing a Scheme of Compromise under Section 230 of the Companies Act, 2013 and negotiations for a One-Time Settlement (“OTS”) were actively underway with the Consortium of Lenders.
# 55. On the other hand, the Respondents contend that the financial debt and default stand admitted and duly established; that the requirements of Section 7 of the Code stood fully satisfied; and that neither the pendency of a proposed settlement nor the existence of a Scheme under Section 230 could prevent the Adjudicating Authority from exercising its jurisdiction under the Code. The Respondents further submit that the Corporate Debtor had been afforded sufficient opportunity during the proceedings and that the Impugned Order does not suffer from any legal or factual infirmity.
# 56. We have carefully considered the record in this regard in light of the proceedings before the Adjudicating Authority. The record indicates that the Corporate Debtor was granted several opportunities to place its case and advance submissions. The Section 7 Application was first listed before the Adjudicating Authority on 05.04.2024, when notice was issued to the Corporate Debtor. Thereafter, vide order dated 19.04.2024, the Corporate Debtor was granted time to file its reply. On 10.05.2024, when further time was sought on account of delay in filing, the Adjudicating Authority directed the Corporate Debtor to upload its reply on the DMS portal, thereby providing an opportunity to bring its defence on record.
# 57. The proceedings further demonstrate that the matter remained pending for a considerable period thereafter. The arguments on behalf of the Financial Creditor were heard on 14.10.2024. Subsequently, on 13.11.2024, the Corporate Debtor again sought an adjournment on the ground that its counsel was engaged before the Hon’ble Delhi High Court. The Adjudicating Authority, while granting the said opportunity, specifically recorded that the Corporate Debtor should address arguments on the next date, failing which the matter would proceed on the basis of the material already available on record.
# 58. Despite the aforesaid opportunity, on 13.12.2024, the Corporate Debtor again sought deferment of the proceedings on the ground that IA/5985/ND/2024 had been filed on 11.12.2024 and was listed on the same day. The Adjudicating Authority noticed that sufficient opportunities had already been granted and that the Financial Creditor had already concluded its arguments. Accordingly, the Adjudicating Authority declined further adjournment and closed the opportunity of the Corporate Debtor to advance arguments.
# 59. It is also significant that even thereafter, the Corporate Debtor was afforded another opportunity. On 19.03.2025, considering the change in the composition of the Bench, the Adjudicating Authority again called upon the Corporate Debtor to advance its submissions. However, the counsel appearing for the Corporate Debtor expressed inability to argue the matter. It was only thereafter that the right to advance oral arguments was closed. The Adjudicating Authority took the written submissions filed by the appellant on record.
# 60. The above sequence of proceedings shows that the Corporate Debtor was not denied an opportunity to present its case. The record reflects that the Corporate Debtor participated in the proceedings, filed its pleadings, placed its defence before the Adjudicating Authority and was repeatedly granted opportunities to advance submissions. The closure of the right to argue was not an immediate consequence but followed only after several opportunities had already been provided.
# 61. Further, even after reserving the matter, the Adjudicating Authority continued to seek necessary clarifications. On 23.05.2025, directions were issued to both parties to file status reports indicating the stage of proceedings in OA No.571/2023 and the Counter Claim. Further directions were also issued regarding submission of a valid Authorisation for Assignment (AFA), declaration regarding non-initiation of disciplinary proceedings and details of assignments undertaken by the proposed Resolution Professional. This further indicates that the Adjudicating Authority proceeded after examining the relevant material and ensuring procedural compliance.
# 62. The principles of natural justice require a fair and reasonable opportunity of hearing. They cannot be interpreted to mean that proceedings must continue indefinitely despite repeated opportunities being granted. A party which has participated in the proceedings and has been provided sufficient opportunity to place its case cannot subsequently contend that there has been denial of natural justice merely because further adjournment was not granted.
# 63. It is also pertinent to note that the Corporate Debtor had sufficient opportunity to place its case before the Adjudicating Authority. The pleadings, documents, replies, applications and written submissions filed by the parties were already available on record. The Corporate Debtor had also placed its objections regarding the Section 7 Application, proposed Scheme under Section 230 of the Companies Act, settlement discussions and pending DRT proceedings before the Adjudicating Authority. Therefore, it cannot be said that the Corporate Debtor was deprived of an opportunity to present its case.
# 64. In view of the above factual position, we find that the proceedings before the Adjudicating Authority do not suffer from violation of principles of natural justice. The Corporate Debtor had adequate opportunity to present its defence, and the Adjudicating Authority committed no error in proceeding to decide the Section 7 Application on the basis of the pleadings, documents and material available on record. We are also cognizant of the fact that the proceedings under the Code are summary proceedings and need to be finalized in a time bound manner. The appellant was given several opportunities for making its submissions before the Adjudicating authority which it failed to utilize. In spite of that, Adjudicating Authority did not decide the matter ex-parte but passed the order after considering the reply filed by the appellant as well as its written submissions.
# 65. The Appellant has also sought to contend that the orders dated 19.03.2025 and 02.04.2025 were illegal and therefore the admission order based upon those proceedings must automatically fail. This contention is equally without merit. As noted earlier, we did not find any irregularity in the procedure adopted by the Adjudicating Authority. The matter was decided on merit based on the documents submitted by the appellant and respondents including their written submissions. Once the main petition has been decided on merits by the Adjudicating Authority, those procedural orders become part of the decision in the main appeal. Mere pendency of such proceedings cannot automatically invalidate the admission order passed by the Adjudicating Authority.
# 66. We are also unable to accept the submission that the Adjudicating Authority ought to have exercised its inherent powers to postpone the decision on the Section 7 Application. Inherent powers are intended to advance the cause of justice and cannot be exercised in a manner that defeats the statutory scheme of the Code. Once debt and default stood established, the Adjudicating Authority was justified in proceeding to decide the application in accordance with law. Accepting the Appellant’s submission would virtually permit insolvency proceedings to remain pending for an indefinite period on the basis of negotiations which may or may not ultimately succeed.
# 67. In addition to that, it is necessary to examine the scope of jurisdiction of the Adjudicating Authority while dealing with an application under Section 7 of the Code. The jurisdiction under Section 7 is limited. The Adjudicating Authority is required to examine whether a financial debt exists, whether a default has occurred and whether the application is otherwise complete in terms of the Code. Once these requirements are satisfied, the Adjudicating Authority is ordinarily required to admit the application. The insolvency process under the Code is triggered by the occurrence of default and not by the commercial strength or future prospects of the Corporate Debtor.
# 68. In the present case, the existence of financial facilities extended by the lenders to the Corporate Debtor is not in dispute. The material placed on record shows that substantial credit facilities had been sanctioned by the consortium of banks from time to time. The loan accounts were classified as Non-Performing Assets and recall notices were issued. The Banks have specifically pointed out that the Corporate Debtor committed default in repayment of the financial facilities and that the outstanding dues exceeded Rs.190 Crores. These facts form part of the record and have not been effectively disputed by the Appellant. Instead, the challenge is primarily directed against the timing of the admission of the Section 7 petition rather than the existence of debt or default itself.
# 69. It is an admitted position that several OTS proposals were submitted by the appellant on 08.01.2024, 06.07.2024 and 24.09.2024, which were all rejected by the lenders. This itself is an admission and acknowledgment of ‘debt’ and ‘default’ on its part.
# 70. The principal argument advanced by the Appellant is that the Adjudicating Authority ought to have deferred the Section 7 proceedings because the Corporate Debtor had initiated a Scheme of Compromise under Section 230 of the Companies Act, 2013 and the Consortium of Lenders was considering the same. According to the Appellant, the proposed Scheme had reached an advanced stage and the Consortium had resolved to vote upon the proposal during the period from 14.07.2025 to 14.08.2025. It has also been argued that the Corporate Debtor had agreed to deposit a portion of the settlement amount to demonstrate its bona fides.
# 71. The Respondent banks, on the contrary, have submitted that in the Joint Lenders Meeting conducted on 10.02.2025, a revised settlement proposal of the CD for Rs.83 crores was considered. However, the CD did not make payment of any upfront amount due to which settlement proposal could not reach the consideration stage by the lending banks. Consequent to the non-consideration of the settlement proposal of the CD, the lending banks informed the Adjudicating Authority during the hearing on 19.03.2025 that the settlement proposal could not be considered by the banks. Thereafter, the Adjudicating Authority re-heard the arguments on behalf of Applicant banks. The respondent failed to argue the matter on the said date and its right to argue was closed. At the same time, Ld. Adjudicating Authority granted liberty to both the parties to file written submissions. Matter was listed for compliance on 02.04.2025 and as the notes of submission were filed by the parties, the Ld. Adjudicating Authority reserved the matter for orders.
# 72. The submission of appellant that the orders under section 7 should not have been passed during the pendency of a Scheme under Section 230 of the Companies Act, in our view, does not prevent the Adjudicating Authority from exercising its jurisdiction under Section 7 of the IBC. Until such Scheme under section 230 is approved in accordance with law and becomes binding upon all stakeholders, it remains only a proposal. The Court cannot refuse to admit a Section 7 application merely because settlement negotiations are taking place or because there exists a possibility that the parties may arrive at a future settlement. Judicial decisions must be based on existing legal rights and obligations and not on uncertain future events. We have already noted that the settlement proposal had failed and banks had duly informed the Ld. Adjudicating Authority about such failure. It’s only after the failure of settlement that the Ld. Adjudicating Authority decided the matter on merits.
# 73. The Appellant has repeatedly emphasised that the Corporate Debtor is a commercially viable company executing public infrastructure projects, that it possesses substantial receivables, and that admission into CIRP would adversely affect its business operations and future contracts. The facts on the contrary show that CD failed repeatedly to make payments to its Financial Creditors. In case of OTS proposals, it failed to deposit even earnest money. Which commercially viable and solvent company would not be able to pay even working capital loan? We find no merit in this submission of CD. While these submissions may indicate that the Corporate Debtor intended to revive its business, they do not alter the legal position under the Code. The object of the IBC is itself the resolution of financially distressed companies. Admission into CIRP does not amount to liquidation, on the contrary, the Code provides a structured mechanism for resolution, while preserving the Corporate Debtor as a going concern. Therefore, the possibility of commercial hardship cannot by itself constitute a legal ground to refuse admission under Section 7.
# 74. The Appellant has also relied upon the observations made by this Appellate Tribunal in the earlier proceedings that settlement negotiations may continue in parallel with the pending insolvency proceedings. In our view, the said observation has been correctly understood by the Adjudicating Authority. The observation merely recognised that parties were free to continue negotiations, even while the statutory proceedings remained pending. It did not direct the Adjudicating Authority to indefinitely postpone the adjudication of the Section 7 petition until the settlement discussions concluded. It,s only after all efforts at settlement failed and the Banks reported the same to the Ld. Adjudicating Authority the AA moved ahead with Sec 7 proceedings. Had such an interpretation been accepted, every Corporate Debtor could indefinitely delay insolvency proceedings merely by initiating negotiations with its lenders. Such an interpretation would be contrary to the scheme and timelines prescribed under the Code.
# 75. The Appellant has further argued that the Section 7 petition was filed only as a recovery mechanism and therefore ought not to have been entertained. This contention also deserves to be rejected. It is well settled that a Financial Creditor is entitled to invoke the provisions of Section 7 once the statutory requirements are fulfilled. Merely because the Financial Creditor seeks recovery of its legitimate dues cannot lead to the conclusion that the insolvency process has been misused. In the absence of any material demonstrating abuse of process or lack of jurisdiction, such a contention cannot invalidate the proceedings initiated under the Code.
# 76. It is further relevant to notice that the Corporate Debtor had relied upon the pendency of proceedings before the Debt Recovery Tribunal, including OA No.571/2023 and the Counter Claim filed by it, to seek deferment of the Section 7 proceedings. The Adjudicating Authority, before passing the Impugned Order, had also sought clarification from the parties regarding the status of the said proceedings. From the status placed on record, it was noticed that the matter before the DRT was still pending and the Corporate Debtor had not filed its written submissions therein. Therefore, the Counter Claim was yet to be adjudicated and no determination had been made in favour of the Corporate Debtor which could have any bearing on the proceedings under Section 7 of the Code.
# 77. It is also pertinent to note that the Counter Claim relied upon by the Corporate Debtor arose at a later stage during the pendency of proceedings. The same remained pending adjudication before the DRT and no final determination had been made in favour of the Corporate Debtor. Therefore, the mere filing of the Counter Claim could not be treated as a ground to defer adjudication of the Section 7 Application.
# 78. In these circumstances, the Adjudicating Authority proceeded to consider the Section 7 Application on the basis of the financial debt and default placed before it and did not find it appropriate to await the outcome of the pending DRT proceedings. We find no error in the approach adopted by the Adjudicating Authority.
# 79. The Appellant has relied upon Vidarbha Industries Power Limited v. Axis Bank Limited, [(2022) ibclaw.in 91 SC] : (2022) 8 SCC 352. However, the said judgment was rendered in exceptional facts where the Corporate Debtor had a crystallised and enforceable claim in its favour. In the present case, the proposed Scheme under Section 230, the settlement discussions and the pending Counter Claim before the DRT had not attained finality and did not displace the established financial debt and default. The decision in Vidarbha Industries is applicable only in specific circumstances and not universally. Therefore, it does not assist the Appellant.
# 80. The Respondents have also relied upon the judgment of this Appellate Tribunal in Grand Developers Pvt. Ltd. v. Nitin Batra & Ors. [(2024) ibclaw.in 317 NCLAT], Company Appeal (AT) (Insolvency) No. 899 of 2024, wherein it was held that proceedings under Section 230 of the Companies Act, 2013 are independent of proceedings under the Insolvency and Bankruptcy Code. The said principle squarely applies to the present case. The mere pendency of the proposed Scheme under Section 230 did not create any legal bar to the admission of the Section 7 Application.
# 81. They have also relied upon Vijay Kumar Singhania v. Bank of Baroda & Ors. [(2023) ibclaw.in 787 NCLAT], Company Appeal (AT) (Insolvency) No. 1058 of 2023, wherein this Appellate Tribunal held that the mere filing of a counterclaim or money suit does not negate the existence of financial debt and default. In the present case also, the pendency of OA No. 571/2023 and the Counter Claim before the DRT did not affect the Financial Creditor’s right to maintain the application under Section 7.
# 82. Reliance has further been placed on Sunil Gutte v. Avil Menezes & Ors. [(2025) ibclaw.in 412 NCLAT], Company Appeal (AT) (Insolvency) No. 515 of 2025, wherein this Appellate Tribunal held that equitable considerations cannot override the statutory mandate of the Code. The Appellant’s reliance on the Corporate Debtor’s ongoing projects, payments to suppliers and commercial viability cannot, therefore, constitute valid grounds to postpone the insolvency proceedings once the requirements of Section 7 stand satisfied.
# 83. It is equally important to note that the Appellate jurisdiction under Section 61 of the Code is limited. We do not sit in appeal over every finding merely because another view may also be possible. Interference is warranted only when the impugned order suffers from patent illegality, material irregularity, perversity or jurisdictional error. After carefully examining the Impugned Order as well as the material placed on record, we find that the Adjudicating Authority correctly examined the requirements of Section 7, considered the relevant material and admitted the application only after recording its satisfaction regarding the existence of financial debt and default. No material has been shown before this Court to establish that the findings recorded by the Adjudicating Authority are contrary to law or unsupported by the record.
# 84. In view of our findings recorded hereinabove, we find no legal or factual infirmity in the Impugned Order dated 11.07.2025 passed by the Adjudicating Authority admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The admission of the Corporate Debtor into Corporate Insolvency Resolution Process has been found to be in accordance with law.
# 85. Consequently, Company Appeal (AT) (Ins.) No. 1015 of 2025 is dismissed. Company Appeal (AT) (Ins.) Nos. 815 of 2025 and 816 of 2025 are also dismissed as they arise out of procedural orders passed during the same proceedings. The Company Appeal (AT) (Ins.) Nos. 812 of 2025 and 813 of 2025, which arise out of CP (IB) No. 326 of 2025, which has been disposed of by the Adjudicating Authority in view of the admission of CP (IB) No. 36 of 2024 and accordingly are dismissed being infructuous. All pending Interlocutory Applications, if any, also stand disposed of. There shall be no order as to costs..
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