The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, has stayed the Corporate Insolvency Resolution Process (CIRP) against Kallam Textiles Ltd , allowing the company time to reformulate and submit a restructuring proposal. The order, dated 18 June 2026, directs the Committee of Creditors to evaluate the plan within four weeks to maximize value and prevent business erosion. The tribunal has ruled that the Interim Resolution Professional and the Committee of Creditors shall not proceed further with the CIRP process until a decision on the restructuring proposal is reached.

The appeal was filed by GV Krishna Reddy, a suspended director of Kallam Textiles, challenging an order dated 06 April 2026 by the NCLT, Amaravati Bench. The NCLT had admitted a Section 7 application filed by Union Bank of India, a financial creditor, to commence CIRP against the textile manufacturer. The appellant argued that the company is a fully operational, commercially viable entity that was classified as a Non-Performing Asset (NPA) on 29 June 2023 due to COVID-19-related cash flow issues.

Counsel for the appellant stated that the company employs approximately 400 people directly and over 2000 indirectly. They detailed efforts to resolve the crisis, including adhering to a Cut-Back Arrangement with Union Bank of India in December 2024 and submitting restructuring proposals under the MSME Scheme in March 2026. The appellant also noted that a prospective investor, Classic Solvent Pvt. Ltd., was brought in August 2025 but was rejected by the bank.

Union Bank of India opposed the stay, arguing that the loan sanctioned exceeds ₹25 crores, precluding special considerations under MSME revival guidelines. The bank's counsel emphasized that recent amendments to the Insolvency and Bankruptcy Code prevent settlements with a single party and that any proposal must be considered by the Committee of Creditors. The Interim Resolution Professional confirmed that the Committee of Creditors had been constituted and expressions of interest had been called for.

The NCLAT observed that the Corporate Debtor is a fully operational entity and that proceeding with CIRP could lead to value erosion. Consequently, the tribunal disposed of IA No.820/2026, which sought the stay, and listed the appeal for hearing on 12 August 2026. The company has disclosed that business operations will continue during this period.

kallam textiles has requested an extension from BSE to submit its audited financial results for the quarter and financial year ended March 31, 2026. The company has sought a new deadline of June 15, 2026, citing operational challenges arising from the ongoing Corporate Insolvency Resolution Process (CIRP).

The delay in finalizing the accounts is due to the transition in management control and the suspension of the Board of Directors' powers following the initiation of CIRP. The Hon'ble National Company Law Tribunal (NCLT), Amravati Bench, admitted the petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the company on April 6, 2026.

Consequent upon the commencement of CIRP, the powers of the Board of Directors are currently being exercised by the Interim Resolution Professional or Resolution Professional (IRP/RP). The company stated that the collection and reconciliation of financial information, along with coordination with various stakeholders, have created practical difficulties in finalizing the results within the timeline prescribed under Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The request was submitted by Rajesh Chillale, the Resolution Professional (IRP), on behalf of Kallam Textiles Limited. The company assured the exchange that all efforts are being made to complete the financial statements and statutory audit at the earliest possible time.

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