NCLT Mumbai Admits Canara Bank's ₹282 Crore Insolvency Plea Against Reliance Infra SPV HK Toll Road

The Mumbai Bench of the National Company Law Tribunal (NCLT) has admitted Canara Bank's insolvency petition against HK Toll Road Private Limited.

The company is a Reliance Infrastructure-promoted special purpose vehicle executing the Hosur-Krishnagiri six-laning highway project in Tamil Nadu. The admission was over a default of Rs. 282.59 crore.

A bench of Judicial Member Nilesh Sharma and Technical Member Sameer Kakar held that the bank's Section 7 application was complete in all respects.

“Applying the ratio of Power Trust (supra), we are of the view that the Application is complete in all respects; the Applicant has advanced a financial debt which is in default for an amount exceeding Rs. 1 Crore. The Applicant has placed necessary proof, being a record of default issued by the information utility which clearly indicates that the debt is in default. It is noted that the Respondent/Corporate Debtor has not denied the disbursement and default,” the Tribunal said.

The dispute arose from a concession agreement dated July 2, 2010. Under the agreement, HK Toll Road was awarded the project for construction, operation, and six-laning of the 59.87-km Hosur-Krishnagiri stretch of NH-7 in Tamil Nadu.

The project was estimated at Rs. 925.44 crore. It was financed through a consortium led by Canara Bank, which had an exposure of Rs. 310 crore.

The project achieved provisional commercial operation on April 5, 2016. NHAI subsequently issued a termination order on January 22, 2024, amid disputes with the company.

The loan account was classified as a non-performing asset on March 30, 2024. The date of default was recorded as December 31, 2023.

The Tribunal held that potential future recoveries from termination payments, toll collections or arbitral claims could not substitute repayment of an existing financial debt.

Holding that such claims remained disputed and uncrystallised, the Tribunal said the pendency of arbitration or proceedings before the Supreme Court did not bar a creditor from invoking remedies under the Insolvency and Bankruptcy Code.

It observed, “However, such prospective and contingent recoveries cannot be treated as a substitute for repayment of presently due and payable financial debt. The entitlement claimed by the Applicant towards termination payments, toll collections and arbitral claims remains disputed and uncrystallised. Mere pendency of proceedings before the Arbitral Tribunal or the Hon'ble Supreme Court does not create an embargo on the statutory remedy available to the FC under Section 7 of the IBC.”

The tribunal further observed that even if the company's contention that the default was caused by NHAI's actions were accepted, the occurrence of default itself remained undisputed.

It said the IBC does not require the Adjudicating Authority to determine whether the default was commercially justified. Nor does it require the Tribunal to examine whether the corporate debtor may eventually recover money from third parties.

“Even if such contention is assumed to be correct, the cause of default does not extinguish the occurrence of default itself. The IBC does not require this Adjudicating Authority to adjudicate whether the default was commercially justified, whether it arose due to third party conduct, or whether the corporate debtor may eventually recover monies from another entity.”, the court noted.

Rejecting the company's request for a sine die adjournment pending the outcome of proceedings before the Supreme Court, the Tribunal held that such a course would defeat the time-bound framework of the IBC. It would also indefinitely suspend creditor remedies on the basis of uncertain future outcomes.

Accordingly, the tribunal admitted the petition, declared a moratorium, and appointed Sanjay Kumar Mishra as the Interim Resolution Professional. He will carry out functions under the IBC.