Case Note & Summary
The appeal was filed by Kunal Structure India Pvt. Ltd. challenging an order from the National Company Law Tribunal (NCLT) regarding its admission into the Corporate Insolvency Resolution Process (CIRP) initiated by Kotak Mahindra Bank Ltd. The financial creditor had sanctioned various credit facilities to the corporate debtor between September 2017 and March 2021, leading to a claim of financial debt and default amounting to Rs. 18,11,06,790.12. The corporate debtor contested the clubbing of multiple loan agreements and highlighted its ongoing projects and pending arbitral awards against government entities. The NCLT initially kept the proceedings in abeyance for six months based on the Supreme Court's ruling in Vidarbha Industries Power Ltd. The matter was later referred to a third Member due to a split verdict between the Judicial and Technical Members of the NCLT. The third Member agreed with the Judicial Member's opinion to admit the corporate debtor into CIRP, stating that the discretionary power of the adjudicating authority must consider the merits of the case. The appeal was ultimately disposed of with directions for the parties to appear before the NCLT for further proceedings, allowing the corporate debtor to present subsequent events that may affect the outcome of the Section 7 application.
Headnote
A) Insolvency Law - Admission into CIRP - Discretionary Power of Adjudicating Authority - Insolvency and Bankruptcy Code, 2016, Section 7 - The court held that the discretionary power of the adjudicating authority must not be exercised arbitrarily and should consider the merits of the case, including any existing awards in favor of the corporate debtor. The court emphasized that if the awarded amount exceeds the debt, the authority may keep the admission in abeyance unless there are compelling reasons to proceed. (Paras 11-12). B) Insolvency Law - Split Verdict - Referral to Third Member - Companies Act, 2013, Section 419 - The court noted that a split verdict between Judicial and Technical Members necessitated a referral to a third Member for resolution of the differing opinions regarding the admission of the corporate debtor into CIRP. The third Member concurred with the Judicial Member's opinion, leading to the admission of the corporate debtor into CIRP. (Paras 28-30).
Issue of Consideration
Whether the admission of the Corporate Debtor into CIRP can be kept in abeyance based on the order of Vidarbha Industries Power Ltd. and whether the corporate debtor can be admitted/rejected into CIRP on merits.
Final Decision
The appeal was disposed of with directions for the parties to appear before the NCLT on 2nd June 2026, allowing the corporate debtor to present subsequent events that may affect the outcome of the Section 7 application.
Law Points
- Insolvency proceedings
- Corporate Insolvency Resolution Process (CIRP)
- discretionary power of adjudicating authority
- arbitral awards
- financial creditor's claims
