NCLAT Quashes Insolvency, Slaps ₹10 Lakh Costs After Influence Attempt
Tribunal stresses integrity of insolvency process
Corporate disputes must be resolved without external interference
By Our Legal Correspondent
New Delhi: March 24, 2026:
On March 23, 2026, the NCLAT led by Chairperson Justice Ashok Bhushan overturned an order of the NCLT Hyderabad that had admitted insolvency proceedings against KLSR Infratech Ltd. The case gained attention when Justice Sharad Kumar Sharma, a judicial member of the Chennai Bench, recused himself in 2025 after disclosing that attempts were made to influence him through a retired High Court judge.
The tribunal not only set aside the insolvency but also imposed ₹10 lakh costs, underscoring the seriousness of attempts to undermine judicial independence.
Background of the Case
- The dispute arose from a Section 9 petition filed by AS Met Corp, claiming unpaid dues of about ₹3.79 crore.
- The NCLT Hyderabad admitted the petition in July 2023, initiating the Corporate Insolvency Resolution Process (CIRP).
- KLSR Infratech challenged the order, alleging fraudulent transactions, fake invoices, and collusion between employees and suppliers.
- An FIR was registered in June 2022 alleging cheating, forgery, and criminal conspiracy.
Court’s Observations
- Judicial independence compromised: The recusal highlighted the seriousness of external influence attempts.
- Costs imposed: ₹10 lakh penalty was levied to deter such practices.
- Fraud allegations considered: The tribunal noted discrepancies in invoices and transactions raised by the corporate debtor.
- Integrity of insolvency process: The ruling emphasized that insolvency proceedings must remain free from manipulation.
Implications of the Judgment
- For corporate debtors: Strengthens their ability to challenge insolvency admissions based on fraud or irregularities.
- For creditors: Reinforces the need for genuine claims backed by evidence.
- For judiciary: Sets a precedent against attempts to influence tribunal members.
- For insolvency law: Highlights the importance of transparency and fairness in CIRP.
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Conclusion
The NCLAT’s ruling is a milestone in protecting judicial integrity within India’s insolvency framework. By quashing the insolvency and imposing costs, the tribunal reinforced that corporate disputes must be resolved transparently and without external interference. This case will likely serve as a reference point for future insolvency proceedings, ensuring that justice remains impartial and corruption-free.
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