Case Overview

The National Company Law Tribunal (NCLT) Mumbai Bench heard two connected matters: Company Petition (IB) No. 522/MB/2025 filed by Canara Bank (Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code (IBC), and IA (IBC) No. 5338/MB/2025 filed by HK Toll Road Private Limited (Corporate Debtor) under Section 65 read with Section 60(5) of the IBC.

Canara Bank sought initiation of Corporate Insolvency Resolution Process (CIRP) against HK Toll Road Private Limited, claiming a default amount of ₹282,59,57,619.45 (Rupees Two Hundred Eighty-Two Crore Fifty-Nine Lakh Fifty-Seven Thousand Six Hundred Nineteen and Forty-Five Paise Only) as of 28 February 2025. This comprised principal of ₹234,22,72,778 and interest of ₹48,36,84,841.45. The date of default was stated as 31 December 2023, and the account was classified as NPA on 30 March 2024.

The Corporate Debtor is a special purpose vehicle promoted by Reliance Infrastructure Ltd., incorporated to implement a highway project involving construction, operation, maintenance, and toll collection on the Hosur-Kishnagiri section of NH-7 (now NH-44) in Tamil Nadu under a DBFOT (Design, Build, Finance, Operate, and Transfer) arrangement with NHAI. The project cost was estimated at ₹925.44 crore, funded through debt of ₹555.26 crore (with Canara Bank's exposure at ₹310 crore) and equity of ₹370.18 crore.

The Corporate Debtor contended that the default occurred due to NHAI's wrongful termination of the Concession Agreement on 22 January 2024, which disrupted toll revenue collection—the primary source for debt servicing. Prior to termination, the CD had regularly serviced its debt obligations until August 2023. The CD highlighted that it had challenged NHAI's termination through arbitration and subsequent proceedings before the Delhi High Court and Supreme Court (SLP(C) No. 11501/2025). The Arbitral Tribunal had initially stayed the termination on 8 August 2024, but this was set aside by the Delhi High Court on 17 April 2025. The matter is pending before the Supreme Court, listed for final disposal in September 2026.

The CD filed an application under Section 65 IBC, alleging that the Financial Creditor initiated the insolvency proceedings maliciously and for purposes other than resolution, given that the default was caused by NHAI's actions and the CD had strong prospects of recovering termination payments (ranging between ₹678-823 crore as per CA clauses) or toll revenues (₹532 crore collected by NHAI from January 2024 to March 2026). The CD sought dismissal of the Section 7 petition, imposition of a ₹1 crore penalty on the FC, and sine die adjournment pending Supreme Court outcome.

The Financial Creditor argued that the existence of debt and default was undisputed, and the Adjudicating Authority's role under Section 7 was limited to verifying these aspects. The FC contended that pending disputes with third parties (NHAI) and contingent future recoveries could not defeat its statutory right to initiate CIRP. The FC denied allegations of malice, stating the petition was filed bona fide for resolution purposes.

Analysis and Findings

The Tribunal dismissed the CD's application under Section 65, holding that the burden to establish malicious initiation was not discharged. The Tribunal relied on its earlier judgment in Canara Bank v. Supreme Best Value Kolhapur (Shiroli) Sangli Tollways Private Limited (CP (IB) No. 414/MB/2025), which held that speculative future recoveries, pending arbitration claims, or disputes with third parties do not destroy an admitted default under Section 7.

The Tribunal emphasized that the scope of inquiry under Section 7 is limited to ascertaining the existence of financial debt and default. Referring to the Supreme Court's judgment in Power Trust v. Bhuvan Madan (Civil Appeal No. 2211/2024), the Tribunal noted that the Adjudicating Authority is not required to examine the inability of a corporate debtor to pay its debt or adjudicate collateral disputes. The existence of debt (₹555.26 crore consortium loan with FC's exposure of ₹310 crore) and default (from 31 December 2023) was undisputed. The cause of default—whether due to NHAI's actions—was deemed irrelevant for Section 7 admission.

The Tribunal also rejected the prayer for adjournment pending Supreme Court outcome, noting that the IBC mandates expeditious determination and that no interim relief had been granted by the Supreme Court in its order dated 19 May 2026.

Final Outcome

The Tribunal admitted the Section 7 application and initiated CIRP against HK Toll Road Private Limited. A moratorium was declared under Section 14 IBC with effect from the order date until completion of CIRP or approval of resolution plan or liquidation order. The Tribunal appointed Mr. Sanjay Kumar Mishra (Registration No. IBBI/IPA-001/IP-P01047/2017-18/11730) as the Interim Resolution Professional. The Financial Creditor was directed to deposit ₹3,00,000 as initial CIRP cost, to be treated as interim finance.

The moratorium prohibits: (a) institution or continuation of suits/proceedings against the CD; (b) transfer or disposal of the CD's assets; (c) any action to foreclose or enforce security interest; and (d) recovery of property by owners/lessors. Essential goods/services to the CD shall not be terminated during moratorium. The IRP must make public announcement, submit monthly progress reports, and issue notices to statutory authorities.

Topics: Insolvency Proceedings, Contract Dispute, Infrastructure Project