Supreme Court Upholds NCLAT's Decision Setting Aside Malafide Insolvency Proceedings Against KLSR Infratech

The Supreme Court in a significant relief to KLSR Infratech Limited and its Director Mr. A.S. Reddy, a leading Indian infrastructure construction and engineering company headquartered in Hyderabad, Telangana has upheld the directions and findings of the NCLAT, New Delhi that had set aside the malafide insolvency proceedings initiated against the company by A.S. Met Corp Pvt. Ltd. 

A Bench of Justice JB Pardiwala and Justice KV Vishwanathan has upheld the order passed in favour of KLSR which primarily undertakes civil contracts, water supply systems, and urban infrastructure projects for government entities across several.

The NCLAT, vide its detailed judgment in March 2026, had held that there existed a genuine and pre-existing dispute between the parties, making the initiation of CIRP proceedings unsustainable in law. A similar SLP filed by one of the other operational creditors [Bengal Cold Rollers Pvt. Ltd.] of the company, challenging the NCLAT order was also dismissed today vide the same order.

The primary dispute had arisen out of transactions involving supply of steel products between 2019 and 2022, where A.S. Met Corp alleged non-payment of dues of approximately ₹3.79 crore. However, KLSR consistently maintained that several invoices were fictitious and formed part of a larger fraudulent scheme involving collusion with former employees and third parties.

NCLAT in its detailed order accepted KLSR’s contention that detailed objections regarding fake invoices, non-supply of goods and financial irregularities had already been raised prior to the issuance of the insolvency demand notice. The Tribunal has held that the dispute was bonafide and supported by contemporaneous material, including internal audits, returned goods and cessation of transaction.

Supreme Court has agreed with the observation of the NCLAT that KLSR Infratech is a financially sound and profit-making infrastructure company and that the insolvency proceedings appeared to have been used as a pressure tactic rather than a genuine insolvency resolution mechanism.

KLSR Infratech and its Director were represented by Senior Advocates Mr. Mukul Rohatgi, Niranjan Reddy and D.S. Naidu assisted by the team from Karanjawala & Co. led by Ms. Ruby Singh Ahuja, Senior Partner; Ms. Roopali Gupta, Senior Associate and Mr. Devang, Senior Associate.

In the insolvency case against KLSR, the Supreme Court had intervened last year as well, when it had ordered an inquiry into a startling disclosure made by Justice Sharad Kumar Sharma, Judicial Member of the National Company Law Appellate Tribunal (NCLAT) Chennai, that he had been approached by “one of the most revered members of the higher judiciary of this country” to deliver a favourable order in an insolvency case.

The Apex Court had directed its Secretary General to conduct the probe to ascertain the identity of the judge; whether from the Supreme Court or a High Court, who allegedly attempted to influence the outcome.

The case involved insolvency proceedings against Hyderabad-based real estate firm KLSR Infratech Ltd, and was being heard by a two-member bench comprising Justice Sharma and Technical Member Jatindranath Swain. Although the bench had concluded hearings and reserved judgment on June 18, the matter was referred to the NCLAT Chairperson following Justice Sharma’s recusal.

Supreme Court’s decision to step in underscored the gravity of the disclosure, which had sent ripples across the legal fraternity. An inquiry into such an allegation is rare and raises pressing concerns about judicial integrity and independence at the highest levels.

The case, Attluru Sreenivasulu Reddy, Suspended Director of M/s. KLSR Infratech Ltd. v. M/s. AS Met Corp Pvt. Ltd. & Anr., concerned an Appeal against the admission of Hyderabad-based KLSR Infratech Ltd. into the Corporate Insolvency Resolution Process (CIRP). The matter was before a two-member Bench comprising Justice Sharma and Technical Member Jatindranath Swain, which had reserved the matter for orders. Following the disclosure, the supreme court had directed that the case be placed before the NCLAT Chairperson for reallocation to another bench.