NCLT Amaravati Admits Insolvency Plea Against KGOC Terminals, Says Pre-COVID Loan Default Not Protected

The National Company Law Tribunal (NCLT), Amaravati Bench, has admitted Canara Bank's insolvency plea against KGOC Terminals Private Limited.

It held that the company could not rely on the COVID-19 suspension on insolvency filings because it had already defaulted on its loan repayments before that period began. The later classification of the loan account as a non-performing asset (NPA) did not change that position.

The bench of Judicial Member Kishore Vemulapalli and Technical Member Umesh Kumar Shukla initiated the Corporate Insolvency Resolution Process (CIRP). It also declared a moratorium and appointed an Interim Resolution Professional (IRP).

The tribunal observed, "Therefore, merely because the account was classified as NPA on 01.12.2020, the same cannot obliterate the earlier defaults, which had already occurred prior to the commencement of the suspension period under Section 10A. The material on record clearly demonstrates that default had commenced much prior to 25.03.2020 and continued thereafter."

Canara Bank had sanctioned a term loan of ₹44.21 crore to KGOC Terminals in July 2017. The money was meant to set up 23 bulk liquid terminals for storing petroleum and petrochemical products.

According to the bank, the company stopped servicing the loan. The account was classified as an NPA on December 1, 2020, when the outstanding dues stood at about ₹64.69 crore. The bank first began recovery proceedings under the SARFAESI Act. It later approached the NCLT seeking to initiate insolvency proceedings.

KGOC Terminals opposed the plea. It argued that since the NPA date fell within the COVID-19 suspension period, the insolvency petition could never be maintained. The company also disputed the amount claimed by the bank. It maintained that the proceedings were being used to recover money instead of resolving insolvency.

The tribunal was not persuaded. It found that the crucial date was when the company first failed to repay the loan, not when the account was later declared an NPA. The record showed that interest payments had been overdue since May 31, 2019. The first principal repayment default occurred on February 15, 2020. Both dates fell before the COVID-19 suspension period.

The tribunal also noted that the company's one-time settlement proposals amounted to acknowledgements of the debt. Those acknowledgements extended the limitation period. Referring to the Supreme Court's rulings in Laxmi Pat Surana and Ramesh Kymal, the tribunal admitted the insolvency petition, declared a moratorium and appointed an IRP)