NCLT Admits Karnataka Government Irrigation Body CNNL to Insolvency Proceedings
The National Company Law Tribunal (NCLT) has admitted Karnataka’s state-owned irrigation body, Cauvery Neeravari Nigama Limited (CNNL), into the Corporate Insolvency Resolution Process (CIRP). The Bengaluru Bench passed this order on an application filed by SPML Infra Limited under Section 9 of the Insolvency and Bankruptcy Code (IBC).
SPML approached the tribunal claiming non-payment of dues for work carried out under the Nanjapura Lift Irrigation Scheme. The tribunal found that CNNL had defaulted on payment of operational debt related to extra items of work executed by SPML.
In its order dated December 10, the NCLT noted that earlier mediation efforts between the parties had failed. The Bench clearly stated that being a government-owned company or a running enterprise does not exempt CNNL from meeting its financial obligations.
SPML’s claim arose from extra item rate works carried out under a contract dating back to 1999. While the work was completed by 2009 and final bills were submitted in 2013, payments were not released. Over the years, CNNL acknowledged the pending dues in multiple official communications while seeking internal approvals, but no payment was made.
SPML claimed an amount of ₹9.36 crore, including interest. CNNL opposed the insolvency plea, arguing that the claim was disputed and that related matters were already pending before an arbitrator appointed in 2004.
However, the tribunal examined CNNL’s letters issued between 2009 and 2019 and found consistent acknowledgements of liability. A 2012 order by CNNL’s Chief Engineer directing expedited approval of pending payments was treated as a valid acknowledgement of debt. The tribunal rejected CNNL’s argument that these communications were merely internal and had no legal effect.
On the issue of pre-existing dispute, the NCLT held that the arbitration initiated in 2004 related to earlier disputes and had no connection with the extra item works completed later. Since no genuine dispute was raised before the statutory demand notice, CNNL failed to meet the test laid down in the Mobilox judgment.
The tribunal also observed that CNNL’s replies in 2020 and 2021 were vague and did not specifically dispute the extra item claims, making them insufficient to block insolvency proceedings.
Following this, the NCLT admitted the petition, imposed a moratorium under Section 14 of the IBC, and appointed Addanki Haresh as the Interim Resolution Professional (IRP). The IRP has been directed to keep CNNL functioning as a going concern and to initiate the insolvency process, including inviting claims and forming the Committee of Creditors.
