NCLAT Upholds Insolvency Admission Against Karanja Terminal Over ₹330 Crore Default

The National Company Law Appellate Tribunal has upheld the initiation of insolvency proceedings against Karanja Terminal & Logistics Private Limited, a port operator, after rejecting its claim that a proposed settlement with lenders had stalled insolvency action.

A bench comprising Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra agreed with the National Company Law Tribunal that the corporate insolvency resolution process was rightly admitted.

The tribunal said the existence of financial debt and default stood clearly established and was never denied by the borrower. Appeals filed by the company's suspended director, Brig. Vikram Singh, were dismissed.

The dispute centered on a one-time settlement offer of Rs. 472.10 crore. The company argued that the settlement, reached through a Swiss Challenge process, had crystallised into a binding contract and should have halted insolvency proceedings.

The tribunal disagreed.

Karanja had borrowed about Rs. 386.48 crore from a consortium of banks led by Canara Bank. After defaults under an earlier restructuring, the bank filed a Section 7 application in September 2024, claiming defaults of over Rs 330 crore.

During the pendency of the case, the borrower made multiple settlement offers, the highest being Rs. 472.10 crore. Canara Bank and Punjab & Sind Bank issued conditional acceptance letters. However, the proposal expressly required approval from all consortium lenders. Bank of Baroda did not grant its consent. As a result, the lenders annulled the settlement process.

Recording this, the appellate tribunal observed that “in absence of unanimous consent, OTS proposal has not become effective or binding.” It held that the settlement never progressed beyond a proposal and could not stall insolvency proceedings.

On the insolvency admission itself, the NCLAT noted that “the debt and default is fully proved and, in fact, was never denied by the corporate debtor,” and said this alone was sufficient to uphold the initiation of the corporate insolvency resolution process.

The tribunal also rejected allegations that the insolvency proceedings were initiated fraudulently or with malicious intent, noting that the Section 7 petition pre-dated the settlement talks and was founded on admitted defaults. Subsequent negotiations, it said, could not invalidate the initiation of insolvency.

While dismissing the appeals, the NCLAT granted limited liberty to the borrower to pursue a settlement under Section 12A of the Insolvency Code, subject to approval by the committee of creditors.

For Appellant: Senior Advocates Arun Kathpalia, Abhijeet Sinha, and P. Nagesh with Advocates Saurabh Kalia, Sameer Chaudhary, S. Sishir, Rishabh Dhanuka, Aman Kacheria, Anisha Didwania, Mahima, and Zaki Ansari.

For Respondents: Advocates Anuj Tiwari, Shalini Basu, Vaibhav Vats, and Sameer Mishra for RP; SG Tushar Mehta, Advocates Anoop Rawat, Arushi Chandra, Snigdha Saraff, and Diksha Sharma for Canara Bank; Senior Advocates Darius Khambata, S. Niranjan Reddy, and Krishnendu Datta with Advocates Aakanksha Kaul, Aman S. and Tushar Hathi Ramani for R3.