NCLT Dismisses Kunnel Engineers' Insolvency Petition Against Nest Realtors

Case Details

Case Name: Kunnel Engineers and Contractors Private Limited vs Nest Realtors India Private Limited

Court/Authority: National Company Law Tribunal (NCLT), Kochi Bench

Case Number: CP(IBC)/05/KOB/2026

Date of Filing: 16 April 2026

Order Date: 25 May 2026

Period of Dispute: Construction agreement dated 16 April 2010; Settlement agreement dated 21 January 2016; Default alleged from 30 June 2019

Parties Involved

Petitioner/Operational Creditor: Kunnel Engineers and Contractors Private Limited (Registered Office: 3rd Floor, Puthuran Plaza, KPCC Junction, M.G. Road, Ernakulam, Kerala 682011)

Respondent/Corporate Debtor: Nest Realtors India Private Limited (Registered Office: XIX/346, Stone House, Market Road, Aluva, Ernakulam, Kerala 683101)

Legal Representatives: Mr. Akhil Suresh, Advocate (for Petitioner); Mr. Shankar P Panicker, Advocate (for Respondent)

Adjudicating Authority: Hon'ble Member (Judicial) Shri. Vinay Goel

Issues / Allegations / Violations

• The Petitioner claimed default of Rs 8,84,30,997 (Principal: Rs 3,16,89,550 + Interest: Rs 5,67,41,447) as of 31 January 2026, originating from civil construction works executed for the Respondent's Orchid Park project in Kottayam under a contract dated 16 April 2010.
• The Petitioner alleged that despite a comprehensive settlement dated 15 December 2015 quantifying dues at Rs 5,61,53,894, and subsequent agreement dated 21 January 2016, the Respondent failed to discharge liabilities.
• The settlement involved adjustment of Rs 1,21,23,662 towards two villas and proposed discharge of remaining liability through allotment of twelve apartments valued at Rs 3,99,45,250 in the Orchid Park project.
• The Respondent failed to complete construction and hand over possession of the twelve apartments, though undivided share of land for six apartments was registered in Petitioner's favor.
• The Petitioner issued a Demand Notice in Form-3 under Section 8 of IBC dated 16 February 2026 demanding Rs 8,84,30,997, which the Respondent failed to pay.
• The Respondent contended the petition was not maintainable as the original operational debt stood novated and extinguished by the 2016 settlement agreement, transforming the claim into a property dispute.
• The Respondent argued the claim was below the IBC threshold of Rs 1 crore, citing Petitioner's audited financial statements (2018-2025) showing only Rs 33.66 lakhs as operational liability.
• The Respondent raised defenses of limitation, pre-existing disputes, lack of authority regarding acknowledgment document (Annexure A-14 dated 12 April 2022), and mala fide invocation of IBC.

Findings & Observations

• The Tribunal found no dispute regarding the existence of the original construction agreement (16 April 2010) or subsequent settlements (2015-2016).
• The critical finding was that the agreement dated 21 January 2016 specifically contained recitals terminating the original construction agreement and extinguishing all mutual obligations and liabilities under it.
• The Tribunal held this settlement constituted novation under Section 62 of the Indian Contract Act, 1872, whereby the original operational debt was extinguished and substituted by a new arrangement.
• The subsequent claim arose from breach of obligations under the settlement agreement (non-handover of apartments), not from the original provision of construction services.
• The Petitioner's alteration of its accounting treatment post-settlement (showing Rs 3.99 crores as asset/advance for flats rather than operational receivables) supported the finding of novation.
• The Tribunal noted substantial inconsistencies between two demand notices issued by the Petitioner (dated 30 December 2025 and 14 February 2026) regarding characterization of debt, principal amount, default date, limitation basis, and interest computation.
• The second notice could not be treated as mere clarification but represented a fresh demand with materially different particulars, undermining the certainty of the claim.
• The acknowledgment in Annexure A-14 (12 April 2022) was found to relate to fulfillment of obligations under the settlement agreement, not revival of the original operational debt.

Penalties / Settlements / Directions

• The Tribunal dismissed the petition (CP(IBC)/5/KOB/2026) in its entirety.
• No costs were awarded.
• No moratorium was declared.
• No Interim Resolution Professional was appointed.
• The Registry was directed to send a copy of the order to the Insolvency and Bankruptcy Board of India for their records.

Final Ruling & Enforcement

• The petition was dismissed based on the finding that the original operational debt stood extinguished by novation through the settlement agreement dated 21 January 2016.
• The current claim arising from breach of the settlement agreement (non-handover of apartments) does not constitute an "operational debt" under Sections 5(20) and 5(21) of the IBC.
• The Petitioner was precluded from invoking Section 9 of IBC on the basis of the original operational debt after having agreed to its substitution through the settlement arrangement.
• The Tribunal declined to examine other defenses (limitation, pre-existing dispute) given the fundamental finding on novation.
• The ruling prevents the initiation of Corporate Insolvency Resolution Process against Nest Realtors India Private Limited based on this claim.