NCLT admits Canara Bank’s insolvency plea against HK Toll Road over ₹282 crore default under the IBC.

June 11, 2026 : The National Company Law Tribunal (NCLT), Mumbai Bench, has admitted a corporate insolvency resolution process (CIRP) petition filed by Canara Bank against HK Toll Road Private Limited, a Reliance Infrastructure-promoted special purpose vehicle engaged in the Hosur-Krishnagiri highway project in Tamil Nadu. The case highlights the growing intersection between infrastructure disputes, arbitration proceedings, and insolvency law under the Insolvency and Bankruptcy Code, 2016 (IBC).

Canara Bank approached the NCLT under Section 7 of the IBC seeking initiation of insolvency proceedings against HK Toll Road Pvt. Ltd. after alleging a financial default exceeding ₹282.59 crore. According to the bank, the company’s loan account was classified as a non-performing asset (NPA) on 30 March 2024, while the date of default was recorded as 31 December 2023. The claimed outstanding amount included a principal liability of more than ₹234 crore and interest of over ₹48 crore.

The dispute traces its origins to a major highway concession project awarded by the National Highways Authority of India (NHAI). HK Toll Road was established as a special purpose vehicle for widening and operating a nearly 60-kilometre stretch of the Hosur-Krishnagiri section of National Highway-7, now NH-44, under the Design, Build, Finance, Operate and Transfer (DBFOT) model. The project was financed through a consortium of lenders led by Canara Bank, which had an exposure of ₹310 crore out of the total debt financing of approximately ₹555 crore.

Canara Bank argued that the corporate debtor had availed substantial term loan facilities and executed multiple financing, escrow, and security agreements in favour of the lender consortium. The bank submitted that despite restructuring discussions and attempts to explore substitution options following financial stress, the company ultimately failed to service its repayment obligations. According to the bank, NHAI terminated the concession agreement in January 2024, after which toll collections were shifted away from the escrow mechanism, resulting in severe cash-flow disruptions and eventual default.

HK Toll Road strongly opposed the insolvency proceedings and contended that the alleged default was not caused by financial mismanagement but by NHAI’s allegedly wrongful termination of the concession agreement. The company maintained that it had regularly serviced its debt obligations until the termination order deprived it of the toll revenues that formed the primary source of repayment. It argued that the project remained commercially viable and that the lenders themselves had earlier supported restructuring proposals.

The corporate debtor further relied on ongoing arbitration proceedings against NHAI. It pointed out that an arbitral tribunal had earlier stayed the termination notice and observed that infrastructure projects of this nature should continue in the interest of all stakeholders, including lenders. The tribunal had noted that the project was becoming financially viable and that termination could jeopardize recovery of public funds advanced by banks. The arbitral tribunal observed that “continuity in such projects is of importance” and that substantial public money could only be recovered through toll collections deposited into the escrow account.

HK Toll Road also informed the NCLT that it had challenged adverse orders before the Supreme Court and was pursuing substantial claims and termination payments against NHAI through arbitration. According to the company, the amounts claimed from NHAI far exceeded the alleged debt default and could potentially discharge all outstanding obligations if the claims succeeded. The company therefore argued that insolvency proceedings would undermine ongoing legal remedies and jeopardize the prospects of revival.

The company additionally filed an interlocutory application under Section 65 of the IBC alleging that Canara Bank had initiated insolvency proceedings with a malicious intent and for purposes other than genuine insolvency resolution. It sought dismissal of the insolvency petition, imposition of penalties on the bank, and postponement of proceedings until the Supreme Court decided the pending dispute involving NHAI.

After examining the loan documents, security agreements, account statements, default records, and submissions of both sides, the NCLT considered whether a financial debt existed and whether a default had occurred within the meaning of the Insolvency and Bankruptcy Code. The Tribunal reiterated that at the admission stage of a Section 7 application, its primary duty is to determine the existence of a financial debt and a default, rather than adjudicate broader contractual disputes between the parties.

The ruling is significant because it reinforces the settled principle that insolvency proceedings under the IBC are not defeated merely because parallel arbitration, contractual, or commercial disputes are pending elsewhere. The existence of claims against a third party, including government authorities, does not automatically negate a lender’s right to invoke insolvency remedies when a financial default is established.

The decision is expected to have important implications for infrastructure concessionaires, lenders, and public authorities involved in long-term public-private partnership projects. It underscores that companies operating under concession agreements must continue to meet debt obligations and that financial creditors may invoke insolvency remedies notwithstanding ongoing arbitration proceedings relating to project contracts.

With the commencement of CIRP, the management of HK Toll Road is expected to come under the supervision of an Interim Resolution Professional, while a moratorium under Section 14 of the IBC will protect the corporate debtor’s assets during the resolution process. The outcome of the insolvency proceedings may also influence the future of the highway project and the competing claims being pursued before arbitral and judicial forums.

Case Reference: The Canara Bank Limited v. HK Toll Road Private Limited, C.P. (IB) No. 522/MB/2025 with IA (IBC) No. 5338/MB/2025