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2023 (8) TMI 481 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAICIRP - Legality of admitting Section 7 Application - Existence of Financial Debt - Time Value of Money - no Privity of Contract between the Corporate Debtor and the 1st Respondent / Financial Creditor / Petitioner. - Nature of loan / money borrowed from bank to pay / settle the dues of another bank. - Scope of Article of association - Delegation of power to Directors / Borrowing Powers of Directors. Aggrieved person being Shareholder and Suspended Director - the Corporate Debtor, is a family business of the Appellant. HELD THAT:- There is no embargo in Law, for a Director of a Company, to infuse the Funds, into the Company, with a view to rescue a Company from Financial Distress / Crisis, and the monies advanced clearly come within the umbrage of Section 5(8) of the Code. - It cannot be gainsaid that a ‘Financial Debt’, is to be understood to include ‘Interest Free Loans, given to a ‘Company’ / ‘Entity’, for its ‘Business purpose’ / ‘Operations’, as the case may be. It is brought to the fore on behalf of the ‘1st Respondent / Financial Creditor / Petitioner’, that a Sum of Rs.3,97,85,000/-, was advanced to the ‘Corporate Debtor’, by the ‘1st Respondent / Financial Creditor / Petitioner’, and the same was used by the ‘Corporate Debtor’, to ‘repay the Loans’, taken by the ‘Corporate Debtor / Company’, from the ‘State Bank of India’ (earlier State Bank of Hyderabad), under the ‘One Time Settlement Scheme’, provided by the ‘Bank’, to save the ‘Corporate Debtor’, from ‘distress’. In reality, the ‘State Bank of India / Lender’, had issued a ‘No Due Certificate’, dated 30.01.2021. Suffice it for this ‘Tribunal’, to point out that a Sum of Rs.3,97,85,000/- advanced to the ‘Corporate Debtor’, by the ‘1st Respondent / Financial Creditor / Petitioner’, was through numerous Bank Transactions and all these, would unerringly prove the ‘Existence of a ‘Financial Debt’ of an ‘Amount of Rs.1 Crore’, ‘Due and Payable’, by the ‘Corporate Debtor’, to the ‘1st Respondent / Financial Creditor / Petitioner’. If the Articles, have a provision which ‘prohibited the Directors’, from ‘delegating their power’, to ‘Borrow Monies’, does not prevent them from ‘empowering one of the Directors’, to execute a ‘Mortgage Deed’. - It is not necessary that while specifying the ‘Borrowing Powers’ of a ‘Company’, the ‘Articles’, should state the manner, in which, the ‘Borrowing’, is made. Notice of Default - HELD THAT:- The question of whether, there is a ‘Debt and Default’, can be looked into, only, if the ‘Corporate Debtor’, disputes the ‘Debt’ or takes a stand that ‘there is no Default’, although, there is ‘Debt’. - An ‘Adjudicating Authority’, this ‘Tribunal’, pertinently points out is to see the ‘Records of Information Utility’ or ‘other evidence’, produced by a ‘Financial Creditor’, to satisfy itself, that a ‘Default’, has occurred. The other factors, such as, the ‘Existence of a Dispute’ or ‘Discrepancy’, are not ‘Germane’, as long as, it has not been ‘Disputed’, that the same ‘Debt’, is ‘Due’ and is ‘Payable’, to the ‘Financial Creditor’, and the ‘Corporate Debtor’, has ‘Defaulted’. This Tribunal, taking note of the contentions, advanced on respective sides, considering the surrounding facts and circumstances of the instant case, in a holistic manner, comes to an irresistible and inescapable conclusion that the aspect of Debt and Default, committed by the Corporate Debtor, were established by the 1st Respondent / Financial Creditor / Petitioner, to the subjective satisfaction of this Tribunal. Appeal dismissed.
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