TaxTMI 
TaxTMI 
2026 (7) TMI 1199
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.... INDEVAR PANDEY, MEMBER (T) 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 App....
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....nd 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 dis....
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....d 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 ....
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....e 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 hol....
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....el 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 a....
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....was reserved for orders. It was contended that these foundational orders were procured by the Respondent Banks through material suppression of facts and misrepresentation regarding the ongoing settlement process and, therefore, the very foundation of the admission order stands vitiated. 12. He submitted that the Corporate Debtor had promptly filed Recall and Restoration Applications specifically pointing out the suppression and misrepresentation practised by the Respondent Banks. However, those applications were dismissed, without examining the allegations on merits or calling upon the Banks to rebut the assertions made therein. The said dismissal orders have already been challenged before this Hon'ble Tribunal in Company Appeals (AT) (Ins.) Nos. 812, 813, 815 and 816 of 2025, which are pending consideration along with the present Appeal. 13. Relying upon the settled principle of sublato fundamento cadit opus, Learned Counsel submitted that once the foundational orders themselves are under challenge for having been procured by suppression and material misrepresentation, every consequential proceeding flowing therefrom, including the Admission Order and the CIRP initiated ....
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....k of India had addressed a communication dated 18.03.2025 to the Corporate Debtor actively engaging with the OTS proposal. Nevertheless, on 19.03.2025, after a change in the composition of the Bench, fresh arguments were heard on behalf of Yes Bank, whereas the Corporate Debtor's right to argue was once again closed, when only its junior counsel was present. According to the Appellant, the Respondent Banks failed to disclose before the Learned Adjudicating Authority that settlement negotiations remained alive, that an OTS communication had been issued only a day earlier, and that proceedings under Section 230 of the Companies Act were listed on the very next day. These material facts, according to the Appellant, were deliberately withheld despite being directly relevant to the exercise of jurisdiction by the Adjudicating Authority. 18. Learned Counsel submitted that when the matter was next listed on 02.04.2025, the Corporate Debtor appeared through a Senior Counsel who was fully prepared to address arguments on merits and had also filed written submissions in compliance with the earlier directions. However, without affording any oral hearing whatsoever, the Learned Adjudica....
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....ended that admitting the Corporate Debtor into CIRP despite an active Court-supervised settlement process was contrary both to the spirit of the Insolvency and Bankruptcy Code and to the earlier directions issued by this Hon'ble Tribunal. 23. Ld. Counsel further submitted that the Corporate Debtor has a substantial Counterclaim of approximately Rs. 817 Crores pending before the Debts Recovery Tribunal-III, New Delhi, wherein it has specifically alleged that the Respondent Banks' unilateral curtailment of sanctioned credit facilities caused the liquidity crisis faced by the Corporate Debtor. It was pointed out that this Counterclaim had already been instituted on 13.10.2023, much prior to the filing of the present Section 7 application by Yes Bank, and even the Learned Adjudicating Authority had taken note of this chronology in its order dated 23.05.2025. 24. The Appellant contends that the Committee of Creditors consists exclusively of the very Banks against whom the Counterclaim has been instituted. Consequently, the failure of the Interim Resolution Professional to actively pursue the Counterclaim has directly benefited those creditors who stand to gain if the claim....
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....n preferred only to delay the CIRP proceedigs initiated pursuant to the order dated 11.07.2025 passed by the Learned Adjudicating Authority. It was submitted that the impugned order has been passed after due consideration of the existence of financial debt and default and after granting sufficient opportunity to the Corporate Debtor to contest the proceedings. 29. He submitted that the Corporate Debtor had availed various credit facilities from YES Bank. After availing the facilities to the maximum extent, the Corporate Debtor failed to maintain financial discipline and committed continuous defaults in repayment of its outstanding obligations despite repeated demands made by the Financial Creditor. Consequently, the loan account of the Corporate Debtor was classified as Non-Performing Asset (NPA) with effect from 05.08.2022 in accordance with the applicable RBI guidelines. 30. It was further submitted that, owing to the persistent default, YES Bank issued a Loan Recall Notice dated 07.03.2023 calling upon the Corporate Debtor to clear the outstanding liability under the Cash Credit Facility, Bank Guarantee Facility and GECL Facility. The Corporate Debtor was called upon to de....
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....e Corporate Debtor before the Learned Adjudicating Authority. Arguments on behalf of YES Bank were heard, and repeated opportunities were granted to the Corporate Debtor to advance its submissions. However, despite several adjournments, the Corporate Debtor failed to proceed with arguments, resulting in closure of its right to argue. Even thereafter, written submissions were permitted to be filed. Therefore, the allegation that the impugned order was passed without granting adequate opportunity of hearing is factually incorrect and contrary to the record. 36. Ld. Counsel submitted that the Corporate Debtor also attempted to delay the Section 7 proceedings by filing applications seeking abeyance of the final hearing on the ground of pendency of proceedings under Sections 230-232 of the Companies Act, 2013. However, such pendency cannot defeat the statutory right of a Financial Creditor under the Code, once debt and default are established, proceedings under Section 7 cannot be indefinitely stalled merely on the basis of a proposed scheme. 37. He further submitted that the Appellant has sought to rely upon the pendency of the counterclaim filed before the Debt Recovery Tribunal....
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.... NeSL record of default and outstanding dues exceeding Rs. 32 Crores. Therefore, there existed no exceptional circumstance requiring the Adjudicating Authority to defer admission of the petition. 41. Ld. Counsel submitted that the settled position of law, as laid down in "Innoventive Industries Ltd. v. ICICI Bank Ltd., E.S. Krishnamurthy v. Bharath Hi Tech Builders Pvt. Ltd." and subsequently reaffirmed in M. Suresh Kumar Reddy v. Canara Bank, is that once the Adjudicating Authority is satisfied regarding the existence of financial debt and occurrence of default, the application under Section 7 of the Code is required to be admitted. In the present case, all statutory requirements were duly fulfilled by YES Bank and no legal ground existed for rejection or deferment of the proceedings. 42. Summing up, Ld. Counsel submitted that the Corporate Debtor had been granted sufficient opportunity before the Ld. Adjudicating Authority. The record demonstrates that the Corporate Debtor participated in the proceedings, filed its reply and was also permitted to file written submissions. The inability or failure of the Corporate Debtor to advance arguments despite repeated opportunities ca....
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....l debt. A party genuinely disputing either the debt or the default would never seek repeated settlements with its lenders. The repeated settlement proposals therefore completely belie the Appellant's attempt to question the existence of debt and default before this Hon'ble Tribunal and furnish yet another independent acknowledgment of liability. 45. Ld. Counsel thereafter addressed the Appellant's reliance upon the alleged counterclaim pending before the Debt Recovery Tribunal. It was submitted that the existence of a counterclaim, cross-demand or even an independent money suit has absolutely no bearing upon the jurisdiction exercised by the Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code. The limited enquiry under Section 7 is confined to determining whether a financial debt exists and whether a default has occurred. Once these jurisdictional facts are established from the material placed on record, the pendency of collateral proceedings elsewhere cannot defeat or postpone admission of the insolvency proceedings. In the present case, the alleged counterclaim raised by the Corporate Debtor does not erase the admitted financial liability o....
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....mmercial inconvenience or business exigencies cannot override the mandatory statutory framework enacted by Parliament. 48. In this regard, Ld. Counsel relied upon the judgment of this Appellate Tribunal in Sunil Gutte v. Avil Menezes & Ors., Company Appeal (AT) (Insolvency) No. 515 of 2025, wherein this Tribunal categorically held that once moratorium has been declared, the suspended management is bound by the statutory mandate of the Code and cannot seek to suspend, keep in abeyance or render inoperative the declaration of moratorium merely by contending that payments to suppliers or other operational creditors are necessary for running the Corporate Debtor as a going concern. The judgment makes it abundantly clear that equitable considerations cannot prevail over the express provisions of Section 14 of the Code. Learned Counsel submitted that the Appellant's prayer seeking suspension or postponement of the CIRP is therefore directly contrary to the law declared by this Hon'ble Tribunal and deserves outright rejection. 49. Ld. Counsel then dealt with the Appellant's reliance upon the judgment of the Hon'ble Supreme Court in Vidarbha Industries Power Limited v....
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....d reaffirmed the ratio laid down in Innoventive Industries and E.S. Krishnamurthy. It was reiterated therein that once the jurisdictional facts of debt and default are established, the Adjudicating Authority is ordinarily bound to admit the application under Section 7. He submitted that the present case is fully governed by these binding precedents, since the existence of financial debt and continuing default is established not merely through the records of the Financial Creditor but also through repeated acknowledgments made by the Corporate Debtor itself. Consequently, the reliance placed by the Appellant upon Vidarbha Industries is entirely misconceived and liable to be rejected. 52. Lastly, Ld. Counsel submitted that this Appellate Tribunal has, by order dated 26.09.2025, already directed the Resolution Professional to take charge of the affairs of the Corporate Debtor. The insolvency process has thus progressed in accordance with the statutory framework prescribed under the Code. At this stage, it would neither be in the interest of the Corporate Debtor nor in the interest of the financial creditors, operational creditors or any other stakeholder to interrupt the CIRP. Rath....
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....n 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 ....
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....ther 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.....
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....ects 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....
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....ing 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 h....
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....cated 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) 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 Se....