NCLT Amaravati Bench Admits Insolvency Plea Against Kallam Textiles Over ₹210 Crore Default

The National Company Law Tribunal's Amravati Bench has admitted Union Bank of India's insolvency plea against Kallam Textiles Ltd. over a default exceeding Rs 210 crore.

The Bench of Judicial Member Kishore Vemulapalli and Technical Member Umesh Kumar Shukla said there was no reason to refuse admission once debt and default were clearly established. It rejected the company's claim that the proceedings were being used merely for recovery.

Kallam Textiles, incorporated in 1992, had been availing credit facilities since 1999 from Andhra Bank, now merged with Union Bank. The accounts turned non-performing on June 29, 2023. A demand notice under the SARFAESI Act was issued on September 11, 2024 for dues of over Rs185 crore, followed by recovery proceedings before the Debt Recovery Tribunal.

Before the tribunal, the bank relied on account statements, CIBIL records, and the company's own financials to show default. It also pointed to the company's balance sheet for the year ending March 31, 2025, where the debt stood acknowledged.

The company disputed the claim, saying the figures were not properly reconciled and were tied up in issues involving consortium lending and enforcement of securities, which are already pending before the DRT. It argued that parallel proceedings under SARFAESI and the Insolvency and Bankruptcy Code amounted to misuse of the insolvency framework. It also said it was continuing operations and taking steps to regularise its dues.

The tribunal was not persuaded. It said that at the stage of admission, the scope is limited to examining whether a financial debt exists and whether there has been a default. Questions over the exact quantum of debt, it noted, are not decisive at this stage.

On the issue of parallel proceedings, the bench said there is no bar on initiating insolvency proceedings even when action under SARFAESI or before the DRT is pending.

"In view of the aforesaid discussions, we are of the considered view that there is a financial debt extended by the Financial Creditor to the Corporate Debtor and there is a default in repayment thereof, when it became due and payable and the default exceeds the minimum threshold of Rupees one crore. The invocation of the Code by the FC is in accordance with law and cannot be characterised as mere recovery proceedings", the tribunal observed.

Finding no exceptional circumstances to deny admission, the tribunal initiated the corporate insolvency resolution process, imposed a moratorium, and appointed Rajesh Chillale as the interim resolution professional.

For the Financial Creditor: Advocate Peri Rama Krishna

For the Corporate Debtor: Advocate P. Aditya Harsha Vardhan