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Mukesh Kumar Aggarwal Versus Anurag Gupta and Ors.
Court / Forum : National Company Law Appellate Tribunal Citation : Company Appeal (AT) (Insolvency) No. 1264 of 2019 Coram : Justice Venugopal M, Member (Judicial), Mr. V.P. Singh, Member (Technical), Ms. Shreesha Merla, Member (Technical) Subject : Section 7 of the Insolvency and Bankruptcy Code, 2016 Date of Decision : June 8, 2020
Respondent No. 2 i.e. M/s B.K. Educational Services Pvt. Ltd. (“Corporate Debtor”) had passed a resolution in Board of Directors meeting dated September 1, 2015 (“Resolution”) which provided that as the Corporate Debtor is facing financial difficulties due to non-availability of funds for making payment to Greater Noida Industrial Development Authority (“GNIDA”) and for continuing construction of school therefore, Directors are authorised to take unsecured loans from shareholders, directors as well as relatives/ related parties. The amount received will be returned with interest @ 12 % p.a. In furtherance of the Resolution, Respondent No. 1 had disbursed loan to the Corporate Debtor in his capacity as a Director.
The Corporate Debtor committed default and Respondent No. 1 filed application under section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”) which was admitted by the Hon’ble Adjudicating Authority vide order dated October 10, 2019 (“Impugned Order”).
Aggrieved by the Impugned Order, the Appellant preferred appeal before Hon’ble National Company Law Appellate Tribunal (“NCLAT”).
Whether the amount deposited by Respondent No. 1 falls within the ambit of financial debt?
The Hon’ble NCLAT held that the Adjudicating Authority had admitted the petition under section 7 of the Code by treating the alleged debt as financial debt based on the judgement of this Tribunal in case of Shailesh Sangani vs. Joel Cardoso and Another [2019 SCC Online NCLAT 52] and noted that Promoter/ Shareholder/ Director of the Company can also be its Creditor. The Respondent No. 1 is a director and has a status different than that of creditor.
The Respondent No. 1 in the present matter, had invoked the provisions of Code as one of the Creditor of the Corporate Debtor and the amount claimed by Respondent No. 1 is a financial debt within the meaning of the Code. The bank statements reveal that on behalf of the Corporate Debtor and on the basis of the Resolution, the Respondent No. 1 had made payments to GNIDA. Further, the balance sheets from year 2015, 2016 and 2017 show that borrowings from Directors, Shareholders and related parties’ stood under ‘Short Term Borrowings’. The record is sufficient to show that the amount as claimed by Respondent No. 1 is due and payable.
The sums were advanced by Respondent No. 1 to the Corporate Debtor for solving liquidity crunch, improving economic prospects and for saving the allotment made to the Corporate Debtor. In the abovementioned judgement, it was held at Para 6 that monies advanced by a Director for improving the financial health of a Company would have the commercial effect of borrowing even if no interest is claimed on the same.
The amount deposited by the Respondent No. 1 in the account of GNIDA to save Corporate Debtor on account of financial crunch and to save the allotment made in favour of the Corporate Debtor falls within the ambit of financial debt.
Accordingly, the Hon’ble NCLAT dismissed the Appeal.