KLSR Infratech gets SC relief as insolvency plea gets dismissed; courts flag pressure tactics

The Supreme Court has upheld an order of the National Company Law Appellate Tribunal (NCLAT) setting aside insolvency proceedings initiated against KLSR Infratech Limited by operational creditor A.S. Met Corp Pvt. Ltd., while also endorsing observations that the insolvency framework appeared to have been used as a “pressure tactic” against the infrastructure company.

A Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan on Wednesday dismissed special leave petitions challenging the NCLAT’s March 23, 2026 ruling, which had quashed the corporate insolvency resolution process (CIRP) initiated against the Hyderabad-based engineering and infrastructure company.

The apex court also dismissed a similar petition filed by another operational creditor, Bengal Cold Rollers Pvt. Ltd..

The dispute stemmed from transactions between 2019 and 2022 involving the supply of steel products, with A.S. Met Corp alleging unpaid dues of around ₹3.79 crore. However, KLSR had contended that several invoices relied upon by the creditor were fictitious and formed part of an alleged fraudulent arrangement involving former employees and third parties.

In its detailed order earlier this year, the NCLAT held that there was a genuine and pre-existing dispute between the parties, making the initiation of insolvency proceedings under the Insolvency and Bankruptcy Code legally untenable.

The appellate tribunal noted that KLSR had raised objections relating to fake invoices, alleged non-supply of goods and financial irregularities well before the issuance of the statutory demand notice under the IBC. It also relied on contemporaneous records, including internal audit findings, returned goods and cessation of business transactions between the parties.

The Supreme Court agreed with the NCLAT’s assessment that KLSR Infratech was a financially sound and profit-making company and observed that the insolvency mechanism could not be invoked as a substitute for debt recovery or coercive recovery proceedings.

KLSR Infratech is engaged in civil construction, water supply systems and urban infrastructure projects for government entities across multiple states.

The company and its director, A.S. Reddy, were represented by senior advocates Mukul Rohatgi, Niranjan Reddy and D.S. Naidu, along with a team from Karanjawala & Co. led by senior partner Ruby Singh Ahuja.

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