NCLT Admits Union Bank’s ₹210 Crore Insolvency Plea Against Kallam Textiles, Starts CIRP

April 6, 2026 : The Amaravati Bench of the National Company Law Tribunal (NCLT) has admitted a Section 7 insolvency petition filed by Union Bank of India against Kallam Textiles Limited, holding that the existence of financial debt and default was clearly established and met the statutory threshold under the Insolvency and Bankruptcy Code (IBC).

The Bench, comprising Judicial Member Kishore Vemulapalli and Technical Member Umesh Kumar Shukla, passed the order on April 6, 2026, initiating the Corporate Insolvency Resolution Process (CIRP) against the company.

Debt, Default Established Beyond Threshold

Union Bank of India approached the Tribunal seeking initiation of CIRP, claiming that Kallam Textiles had defaulted on dues exceeding ₹210 crore. The bank submitted that multiple credit facilities had been extended over time, secured through hypothecation of assets, guarantees, and mortgaged properties.

The loan accounts were classified as non-performing assets (NPA) on June 29, 2023. A demand notice under Section 13(2) of the SARFAESI Act was subsequently issued, but the corporate debtor failed to repay the outstanding dues.

The Tribunal noted from the record, including account statements, CIBIL reports, and balance sheet disclosures (as seen in financial extracts on pages 14–15 of the order), that the debt was acknowledged and default was continuous. Even though different documents reflected varying outstanding figures, all amounts were well above the ₹1 crore statutory threshold.

Disputes on Quantification Not Relevant at Admission Stage

Kallam Textiles opposed the petition, arguing that the claim amount had not been properly reconciled and that disputes regarding consortium lending, securities, and computation of dues were pending before the Debt Recovery Tribunal (DRT). It also contended that insolvency proceedings were being used as a recovery tool and that parallel proceedings under SARFAESI and IBC were impermissible.

Rejecting these objections, the Tribunal reiterated the settled legal position that, at the stage of admission under Section 7, the Adjudicating Authority is only required to determine whether a financial debt exists and whether default has occurred.

It held that disputes relating to exact quantification or reconciliation of accounts do not bar admission, so long as the default exceeds the statutory threshold. The Bench also relied on judicial precedents to clarify that “pre-existing disputes” are not a ground to reject a Section 7 application filed by a financial creditor.

Parallel SARFAESI and IBC Proceedings Permissible

On the issue of parallel proceedings, the Tribunal held that initiation of action under the SARFAESI Act or pendency of proceedings before the DRT does not bar insolvency proceedings under the IBC.

Referring to established NCLAT rulings, the Bench observed that the IBC is a resolution mechanism and not merely a recovery tool, and that Section 238 of the Code gives it overriding effect over other laws.

No Exceptional Circumstances to Deny Admission

The Tribunal further rejected the corporate debtor’s reliance on the Supreme Court’s ruling in Vidarbha Industries, noting that no exceptional circumstances were demonstrated to justify refusal of admission despite clear evidence of debt and default.

It concluded that the financial creditor had successfully established the existence of financial debt and default exceeding ₹1 crore, and that the petition was complete and filed within limitation.

CIRP Initiated, IRP Appointed

Accordingly, the Tribunal admitted the petition and declared a moratorium under Section 14 of the IBC, prohibiting institution or continuation of proceedings, transfer of assets, enforcement of security interests, and recovery actions against the corporate debtor.

Rajesh Chillale was appointed as the Interim Resolution Professional (IRP), with directions to take control of the company’s affairs, manage operations as a going concern, and invite claims from creditors.

Case Title: Union Bank of India v. Kallam Textiles Limited
Case No.: CP (IB)/3/7/AMR/2026
Coram: Kishore Vemulapalli (Judicial Member), Umesh Kumar Shukla (Technical Member)