NCLAT Dismisses As Premature Kunal Structure Appeal Against Third Member Opinion Favouring Its CIRP Admission

The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently declined to examine Kunal Structure India Pvt Ltd's challenge to a third member's opinion favouring its admission into the corporate insolvency resolution process. It held that the Ahmedabad bench of the National Company Law Tribunal must first pass a final order in the matter.

“The opinion of third Member impugned in the Appeal is opinion, which is to be placed before the NCLT Ahmedabad Bench to pass appropriate order with regard to Company Petition (IB) No.76 of 2022. We are of the view that at this stage various submissions raised by the Appellant, need no consideration.”

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra said the company would remain free to place subsequent developments before the adjudicating authority if they materially affect the insolvency proceedings.

The dispute arose from Kotak Mahindra Bank Ltd's insolvency plea against Kunal Structure, claiming a financial debt and default of ₹18.11 crore.

Kunal Structure opposed admission, contending that it had arbitral awards in its favour against the National Highways Authority of India and Rajkot Municipal Corporation, with recoverable amounts exceeding the bank's claim. It argued that execution proceedings were pending.

Relying on the Supreme Court's ruling in Vidarbha Industries Power Ltd v Axis Bank Ltd, it contended that insolvency admission could be deferred where a corporate debtor had substantial recoverable claims exceeding the debt.

The Ahmedabad bench had initially accepted that contention to the extent of keeping the insolvency proceedings in abeyance for six months. In January 2023, it observed that although the ingredients for admission were made out, the Supreme Court's ruling justified deferring admission.

After the six-month period expired, the matter was reheard, resulting in a split verdict on January 10, 2025.

Judicial Member held that the insolvency plea satisfied all requirements for admission and favoured the commencement of the corporate insolvency resolution process.

Technical Member rejected the plea, granting liberty to initiate fresh proceedings after invoking guarantee facilities under the Emergency Credit Line Guarantee Scheme.

Because of the difference of opinion, the President of the National Company Law Tribunal referred two questions to a third member under Section 419(5) of the Companies Act. These included whether admission could once again be kept in abeyance in light of Vidarbha Industries and whether the corporate debtor ought to be admitted or rejected on merits.

On September 17, 2025, the third member agreed with the Judicial Member and held that the company should be admitted into insolvency proceedings. The third member then directed that the opinion be placed before the Ahmedabad bench for passing an appropriate order.

Kunal Structure challenged that opinion before NCLAT, arguing that Vidarbha Industries squarely applied because arbitral awards in its favour exceeded Rs 76 crore with interest as of September 2025.

The company told the appellate tribunal that execution proceedings against Rajkot Municipal Corporation and the National Highways Authority of India were progressing, that the National Highways Authority of India's challenge to one arbitral award had been dismissed, and that the Supreme Court's ruling in Periyammal v Rajamani requiring speedy disposal of execution proceedings supported its case.

It also argued that commencement of insolvency proceedings would adversely affect its ongoing government infrastructure projects and its workforce of 728 employees, while recoveries from execution proceedings could satisfy creditor claims.

Kotak Mahindra Bank opposed the appeal, arguing that it was premature because the impugned order was only the opinion of a third member on a reference arising from a split verdict. It said this was not a final adjudicatory order.

The bank also argued that the arbitral awards relied upon by the company had remained unrealised for years and that the debt and default were undisputed.

Accepting the bank's objection, NCLAT said the statutory scheme required that where tribunal members differ, the matter is decided according to the majority view after the reference process is completed.

“Section 419 sub-section (5) require reference by President on point of difference between Members and decision on the opinion of majority Members.”

The appellate tribunal said the third member's opinion was only one step in that process and had yet to be acted upon by the Ahmedabad bench.

However, it clarified that parties could place subsequent events before the adjudicating authority if those developments had a material bearing on the insolvency proceedings.

“We make it clear that we are not expressing any opinion on merits of submission of either of the parties and it is for the Adjudicating Authority to take a decision in accordance with law.”

The appellate tribunal disposed of the appeal and directed both parties to appear before the Ahmedabad bench of the National Company Law Tribunal on June 2, 2026.