NCLT Guwahati rejects Srei Equipment Finance’s ₹333 crore insolvency plea against Kitply over disputed debt claims.

June 2, 2026 : The National Company Law Tribunal (NCLT), Guwahati Bench, has rejected a ₹333.58 crore insolvency plea filed by Srei Equipment Finance Limited (SEFL) against Kitply Industries Limited, holding that the dispute involved complex questions regarding the legitimacy and enforceability of the underlying transactions that could not be decided through the summary insolvency mechanism under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The case arose from a petition filed by SEFL seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Kitply Industries on the ground that the company had defaulted in repaying loans allegedly extended by SEFL and its group entity, Srei Infrastructure Finance Limited (SIFL). According to the financial creditor, the outstanding financial debt stood at more than ₹333.58 crore as of April 2024, with the date of default claimed to be January 28, 2024.

The matter, however, evolved into a wider dispute involving allegations of round-tripping of funds, fraudulent structuring of transactions, prior insolvency proceedings, and questions over whether the loans relied upon by SEFL represented genuine financial debt under the IBC. The corporate debtor, Kitply Industries, opposed the insolvency proceedings and simultaneously filed an application under Section 65 of the IBC alleging that the Section 7 petition had been initiated fraudulently and with malicious intent. A separate intervention petition was also filed by 130 workers and employees of the company, who argued that the insolvency proceedings were collusive and could adversely affect the livelihood of employees despite the company allegedly being a solvent and operational business.
Kitply argued that the disputed transactions originated from its earlier CIRP, which had been resolved in 2018 through a resolution plan submitted by SREI Multiple Asset Investment Trust’s Vision India Fund. According to the company, entities associated with the SREI group effectively controlled the resolution process and subsequently arranged financing through SEFL and SIFL. The company contended that funds disbursed under the loan arrangements were largely routed back to SIFL as part of the implementation of the resolution plan, making the transactions circular in nature rather than genuine lending arrangements. It further relied on allegations raised in separate proceedings initiated by the administrator of SEFL and SIFL under Section 66 of the IBC, where the same transactions had allegedly been questioned as fraudulent and involving round-tripping of funds.

SEFL, on the other hand, maintained that substantial sums had been disbursed to Kitply under valid loan agreements executed in January 2019 and that the loans carried consideration for the time value of money, thereby satisfying the definition of “financial debt” under Section 5(8) of the IBC. The lender argued that the corporate debtor had executed security documents, mortgages, hypothecation deeds, and pledge agreements in support of the borrowings and had acknowledged the debt over several years. It also contended that proceedings under Section 66 and Section 7 of the IBC operate in distinct fields and that allegations of fraud elsewhere could not defeat an otherwise valid insolvency application.
After examining the pleadings, supplementary affidavits, documents and rival submissions, the NCLT observed that the case was far from a routine insolvency matter. The Bench noted that the record disclosed a “peculiar factual matrix” involving an earlier CIRP, implementation of an approved resolution plan, allegations of connected-party transactions, claims of round-tripping, pending fraudulent trading proceedings before the NCLT Kolkata Bench, and arbitration proceedings arising from orders passed by the Calcutta High Court. The Tribunal stated that the dispute extended beyond a mere calculation of dues and instead involved foundational questions concerning the existence and genuineness of the alleged debt itself.
In one of its significant observations, the Tribunal stated that “the present proceedings do not disclose a routine or ordinary case of financial ‘debt’ and ‘default’.” It further noted that “serious and substantial disputes exist regarding the nature and legitimacy of the underlying transactions, allegations of sham arrangements and round-tripping of funds, the relationship between the entities involved and the effect of pending proceedings before the Hon’ble NCLT, Kolkata Bench and the Hon’ble Calcutta High Court.”
The Bench concluded that such disputed and complicated issues were not suitable for determination within the limited summary jurisdiction exercised under Section 7 of the IBC. It emphasized that insolvency proceedings are intended for resolving clear cases of debt and default and not for adjudicating intricate disputes concerning the validity and legitimacy of the underlying transactions.

While considering the applications filed under Section 65 of the IBC, the Tribunal clarified that rejection of the insolvency petition did not automatically establish fraudulent or malicious initiation of proceedings. The Bench noted that loan agreements had been executed, funds had been disbursed, and security interests had been created in favour of the financial creditor. Therefore, although serious doubts existed regarding the true nature of the transactions, the available material did not meet the higher threshold required to impose penalties for malicious initiation under Section 65. The Tribunal observed that it was “unable to conclusively hold” that the proceedings had been initiated solely with fraudulent or malicious intent.

Consequently, the NCLT rejected SEFL’s Section 7 insolvency petition and declined to initiate CIRP against Kitply Industries. At the same time, it partly allowed the applications filed by Kitply and the intervening workers only to the extent of securing dismissal of the insolvency petition, while refusing their request for imposition of penalties against the financial creditor under Section 65 of the IBC.

The ruling is significant because it reiterates that insolvency proceedings cannot be used as a substitute for adjudicating complex commercial disputes where the very existence and legitimacy of the debt remain contested. The decision also highlights the limits of the NCLT’s summary jurisdiction under Section 7 and underscores the importance of resolving allegations of fraudulent transactions, sham arrangements, and round-tripping through appropriate adjudicatory forums before insolvency proceedings can be invoked.

Case Reference: Srei Equipment Finance Limited v. Kitply Industries Limited; IA (IBC)/59/GB/2025; Inv. Pet. (IBC)/1/GB/2024.