NCLAT Justice recuses himself alleging pressure from senior member for favourable outcome for one party

A case before the National Company Law Appellate Tribunal (NCLAT) has taken an unexpected turn after a judicial member recused himself, citing alleged attempts by a senior member of the higher judiciary to influence the outcome, according to reports.

Justice Sharad Kumar Sharma, a judicial member of the NCLAT, reportedly recorded in his order dated August 13 that he had been approached by “one of the most revered members of the higher judiciary of this country” seeking a decision in favour of a particular party. Stating that he was “anguished” by the incident, he recused himself from hearing the matter any further.

The case reportedly involves Hyderabad-based KLSR Infratech Ltd, which has challenged an order of the National Company Law Tribunal (NCLT) allowing creditor AS Met Corp Pvt Ltd to initiate insolvency proceedings against it.

AS Met Corp had alleged that KLSR Infratech failed to clear dues of ₹2.88 crore plus agreed interest, prompting it to move the NCLT. Under the Insolvency and Bankruptcy Code (IBC), operational creditors can trigger insolvency proceedings if payment defaults occur and there are no disputes over the debt, according to reports.

KLSR Infratech, however, reportedly claims it is a profit-making company with an annual turnover exceeding ₹300 crore and therefore cannot be considered insolvent. It also pointed to a police FIR filed against the creditor’s directors in 2022, alleging misconduct, to argue that disputes existed and insolvency should not proceed.

The creditor countered that the FIR was lodged only after the demand notice was served and, therefore, could not establish a pre-existing dispute. It further clarified that the directors had secured anticipatory bail from the Telangana High Court and that a petition to quash the FIR was pending, as per reports.

The NCLT sided with the creditor and permitted insolvency proceedings, a decision now under appeal before the NCLAT.