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3 hours ago
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ARTICLE AD BOX
The infra-company had filed an appeal against a decision by the Hyderabad bench of the National Company Law Tribunal, which allowed a creditor, A.S. Met Corp Pvt. Ltd to initiate the Corporate Insolvency Resolution Process (CIRP) against it.
In an unprecedented order, a judicial member of the National Company Law Appellate Tribunal (NCLAT) recused from a case after recording in an order that “ one of the most revered members of the higher judiciary of this country” had tried to influence the outcome of the case.
“We are anguished to observe, that one of us, Member (Judicial), has been approached by one of the most revered members of the higher judiciary of this country for seeking an order in favour of a particular party. Hence, I recuse to hear the matter,” Justice Sharad Kumar Sharma noted in his order dated August 13.
The case was reserved for orders on June 18, and parties were allowed an additional week to file their written submissions. The curious case involves insolvency proceedings being brought against a Hyderabad-based real estate company, KLSR Infratech Ltd.
The infra-company had filed an appeal against a decision by the Hyderabad bench of the National Company Law Tribunal, which allowed a creditor, A.S. Met Corp Pvt. Ltd to initiate the Corporate Insolvency Resolution Process (CIRP) against it.
According to court records, AS Met Corp alleged that an outstanding amount of ₹2,88,79,417, along with mutually agreed-upon interest, remained unpaid by KLSR Infratech. As per the Insolvency and Bankruptcy Code, an operational creditor (who supplies goods or services to a company) can initiate insolvency proceedings if there is a default of payment and provided that there are no disputes over the existence of the debt.
Court records show that the corporate debtor (KLSR Infra) contended that it was “a profit-making company with a turnover of over Rs 300 crores for the past five years and therefore not insolvent.” It also claimed that an FIR had been filed on June 30 2022, against the creditor’s directors, alleging misconduct, and claimed that the directors were absconding. It was argued that the pendency of the criminal proceedings showed the existence of disputes between the parties, and hence, insolvency proceedings must not be initiated.
The creditor responded that the FIR was lodged only after the issuance of the demand notice and, therefore, could not constitute a pre-existing dispute. It also clarified that the directors had been granted anticipatory bail by the Telangana High Court and were not absconding, and that a petition for quashing of the FIR was also pending before the High Court. The NCLT agreed with this submission and allowed for insolvency proceedings to be initiated. This decision was challenged before the appellate body.
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