Karvy Digikonnect faces insolvency resolution after unpaid dues dating back to 2019

Karvy Digikonnect Ltd, a Hyderabad-based services company, has invited bids from prospective resolution applicants after the National Company Law Tribunal (NCLT), New Delhi, admitted insolvency proceedings against the company over unpaid dues to a technology services provider dating back to 2019.

The company is now seeking a buyer or investor under the corporate insolvency resolution process (CIRP), with the last date for submission of expressions of interest (EoIs) set for September 6, 2026. Resolution plans will have to be submitted by October 24.

The insolvency proceedings stem from a petition filed by Telenetix Pvt Ltd, which had provided computer programming, consultancy and related services to Karvy Digikonnect. Telenetix had supplied its TX contact blended and audio-recording software to the company on a monthly licence basis.

Dues remained unpaid since 2019

According to the NCLT order, Karvy Digikonnect failed to make payments for services provided between October 2019 and February 2020. Telenetix also alleged that Karvy Digikonnect used the input tax credit on GST invoices without making the corresponding payments.

The technology company subsequently stopped issuing tax invoices and raised proforma invoices for services provided between March and December 2020. It also alleged that Karvy Digikonnect deducted tax at source but failed to deposit it with the government.

The dispute was taken to the Micro and Small Enterprises Facilitation Council (MSEFC), Mysore, in February 2021.

Arbitration award went unpaid

An arbitrator subsequently awarded Rs 1.42 crore to Telenetix, along with interest, taking the awarded amount to Rs 1.68 crore, besides arbitration costs. The MSEFC confirmed the award on March 30, 2022 and directed Karvy Digikonnect to pay compound interest at three times the RBI bank rate until the dues were realised.

Karvy Digikonnect did not challenge the arbitral award within the prescribed 90-day period and did not comply with the award. Telenetix subsequently filed an execution petition before the Patiala House Courts in New Delhi in July 2022.

By April 2024, Telenetix’s demand had risen to Rs 2.49 crore, comprising the awarded amount of Rs 1.68 crore, compound interest of nearly Rs 79.6 crore—correction: Rs 79.6 lakh—and arbitration costs. The demand notice went unanswered and the dues remained unpaid.

NCLT rejects defence of pre-existing dispute

The NCLT found that the liability had already been conclusively determined through the arbitral award and that there was no pre-existing dispute between the two parties.

Importantly, even after excluding interest and arbitration costs, the principal amount of Rs 1.68 crore was above the statutory insolvency threshold of Rs 1 crore. Even after excluding Rs 58.5 lakh relating to disputed proforma invoices, the remaining principal amount was Rs 1.10 crore, still above the threshold.

The tribunal therefore admitted Telenetix’s petition under Section 9 of the Insolvency and Bankruptcy Code and initiated CIRP against Karvy Digikonnect.

Company had argued insolvency petition was not maintainable

Karvy Digikonnect had opposed the insolvency petition, arguing, among other things, that the case was hit by Section 10A of the IBC and that there was a pre-existing dispute between the parties.

The operational creditor, however, argued that the relevant default was linked to the final arbitral award of March 28, 2022, whereas the IBC’s Section 10A suspension applied only to defaults occurring between March 25, 2020 and March 24, 2021.

The tribunal ultimately found that the insolvency petition met the statutory requirements and that the debt was due, payable and above the threshold.

No employees, assets mainly in Hyderabad

The EoI document describes Karvy Digikonnect as a services-sector company with no employees or workmen.

Its registered office is at Barakhamba Road in New Delhi, while the majority of its fixed assets are located at Karvy Gateway, Financial District, Nanakramguda, Hyderabad. The document does not specify installed capacity or the quantity/value of services sold in the last financial year.

Resolution process kicks off

Following the NCLT’s insolvency order, Aegis Resolution Services Pvt Ltd, through resolution professional Siddhant Agrawal, has invited EoIs from prospective resolution applicants.

The process schedule is:

• September 6: Last date for EoIs
• September: Provisional list of resolution applicants
• September 15: Deadline for objections
• September 19: Final list of applicants
• September 24: Information memorandum, evaluation matrix and request for resolution plans
• October 24: Last date for submission of resolution plans

The company is not registered as an MSME, according to the EoI document.

Also See: Consortium of three power cos acquires Karvy Data Management Services for Rs 159 crore