The National Company Law Appellate Tribunal (NCLAT) in Delhi has held that a proposed scheme of compromise under the Companies Act and ongoing one-time settlement (OTS) negotiations cannot prevent the admission of insolvency proceedings once financial debt and default are established.
A bench of Judicial Member Justice N. Seshasayee and Technical Members Arun Baroka and Indevar Pandey held that the National Company Law Tribunal (NCLT) was justified in admitting insolvency proceedings against KKSPUN India Limited over Yes Bank's claim of about ₹32.57 crore.
"Until such Scheme under section 230 is approved in accordance with law and becomes binding upon all stakeholders, it remains only a proposal. The Court cannot refuse to admit a Section 7 application merely because settlement negotiations are taking place or because there exists a possibility that the parties may arrive at a future settlement. Judicial decisions must be based on existing legal rights and obligations and not on uncertain future events.", the tribunal ruled.
The tribunal dismissed five connected appeals filed by KKSPUN India Limited and its suspended director, Kavish Gupta. One appeal challenged the NCLT's July 11, 2025, order admitting the company into the Corporate Insolvency Resolution Process (CIRP), while the remaining four challenged procedural orders passed during the insolvency proceedings.
The NCLT had admitted Yes Bank's insolvency petition over a default of about ₹32.57 crore. It also disposed of State Bank of India's insolvency petition after admitting the earlier petition filed by Yes Bank.
KKSPUN is an MSME engaged in manufacturing precast concrete products for large engineering, procurement and construction (EPC) companies, particularly Larsen & Toubro. It had availed itself of credit facilities from Yes Bank and SBI.
The company's loan accounts with both lenders were classified as non-performing assets in August 2022. Yes Bank initiated insolvency proceedings in December 2023. SBI later filed a separate insolvency petition claiming defaults exceeding ₹190 crore.
During this period, the company also initiated proceedings for a scheme of compromise and arrangement before the NCLT. It proposed settling the dues owed to the consortium lenders outside the insolvency process.
Before the appellate tribunal, the company argued that it remained a commercially viable going concern executing government infrastructure projects. It contended that insolvency proceedings were unwarranted.
The company also submitted that it had been denied an effective opportunity to present its case after the NCLT closed its right to make oral submissions and later reserved the matter for orders. According to the company, the lenders failed to disclose ongoing OTS negotiations and the pending compromise proceedings before the NCLT.
KKSPUN also relied on a counterclaim of about ₹817 crore pending before the Debt Recovery Tribunal against the lenders. It further referred to arbitral claims of nearly ₹1,200 crore against various government authorities. According to the company, these were valuable assets that the NCLT failed to consider while admitting the insolvency petition.
Yes Bank and SBI opposed the appeals. They contended that financial debt and default stood established through loan documents, NeSL records, balance sheets, and repeated settlement proposals submitted by the company. The lenders also argued that the company had been given several opportunities to file pleadings, written submissions and advance oral arguments. Despite those opportunities, it failed to utilise them. They further submitted that pending compromise proceedings and counterclaims could not prevent admission of insolvency proceedings once debt and default had been established.
Rejecting the company's challenge based on alleged denial of natural justice, the tribunal held that the record showed it had been given repeated opportunities to present its case before the NCLT.
"The above sequence of proceedings shows that the Corporate Debtor was not denied an opportunity to present its case. The record reflects that the Corporate Debtor participated in the proceedings, filed its pleadings, placed its defence before the Adjudicating Authority and was repeatedly granted opportunities to advance submissions. The closure of the right to argue was not an immediate consequence but followed only after several opportunities had already been provided.", the tribunal noted.
The tribunal observed that the principles of natural justice do not require proceedings to continue indefinitely when adequate opportunities have already been granted.
"The principles of natural justice require a fair and reasonable opportunity of hearing. They cannot be interpreted to mean that proceedings must continue indefinitely despite repeated opportunities being granted.", the tribunal observed.
The tribunal further held that the company's repeated OTS proposals amounted to acknowledgments of liability. It observed that the scope of an insolvency application by a financial creditor is confined to determining whether financial debt and default exist. Commercial viability, pending settlement negotiations and counterclaims, cannot prevent admission once debt and default are established.
Finding no error in the NCLT's order admitting Yes Bank's insolvency petition, the appellate tribunal dismissed all five appeals.
For Petitioner: Advocates Kartik Malhotra and Anindit Mandal
For Respondents: Advocates Hasmat Nabi, Farah Naaz an Toshib Ahmed for Yes Bank, Advocate Rashi Gupta, for IRP; Advocates Siddharth Sangal, Richa Mishra, Kashish Tewatia, Mrinalini Tandon, for SBI