TMI Blog2021 (1) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... he doctrine of constructive notice allow the outsiders to have notice of internal affairs of the company , the answer is no, because doctrine of constructive notice is subject to exception i.e Indoor Management and that is the reason petitioner has taken this plea. In view of Section 179(3) (d) the Board of Director of Company shall exercise its powers subject to the provision contained in the Act or in the memorandum or articles and one of the power which is referred in Section 179 (3)(d) of the Companies Act, 2013 is also to borrow the money, of course, in view of Section 180(1)(c) that is subject to special resolution passed by the Board of Directors and in view of Section 180(5) of the Companies Act, 2013 no debt incurred by the company in excess of the limit imposed by Clause C of Sub Section 1 shall be valid or effectual unless the lender proves that he advanced the loan in good faith without knowledge that the limit imposed by that clause had been exceeded but herein the case in hand, we notice that it is not the case of respondent that the debt incurred by the company is in excess of the limit imposed by Section 180(1) (c) of the Companies Act 2013 rather the claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Loan Agreement. As per the Loan Agreement, the said loan facility was extended by the Applicant to the Corporate Debtor for a period of six years. Further, as per clause 1 of the Loan agreement, the Corporate Debtor was liable to pay interest at the rate of 12% per annum to the Applicant. The amount of INR 3,59,24,490/- was disbursed by the Applicant to the Corporate Debtor till 28.05.2014. iii. Further, out of the total principal amount disbursed to the Corporate Debtor, on 17.12.2014, the Corporate Debtor made a payment to the Applicant towards the principal amount of INR 15,75,510/- and thereafter stopped making further payments towards the principal amount and no payment was received thereafter till recently. The Corporate Debtor also made some payments amounting to ₹ 61,24,769/- to the Applicant towards the interest till 19.01.2016 and thereafter stopped making further payments towards the interest and no payment was received thereafter till recently. iv. Further, since the loan was for a period of six years from the date of agreement, the said period has already expired on 03.08.2019. Accordingly, on 03.08.2019, the entire outstanding amount (Principal as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mention here that the respondent has never authorized Mr. Nimish Arora or any other person representing the Aarone Group to take any credit facility on behalf of the Company. v. That the alleged credit facility extended by the Applicant to the respondent was also part of such fraud and sham transactions executed by Mr. Nimish Arora without any authority in its favour. Further, the funds transferred by the Applicant to the Respondent were also later siphoned off/transferred to the various companies under the Aarone Group. vi. Further, any such alleged credit facility extended by the Applicant to Mr. Nimish Arora or the alleged loan agreement dated 02.08.2013, signed by Mr. Nimish Arora is unenforceable qua the Respondent and are void ab-initio. It is pertinent to note here that as per Section 292 of the Companies Act, 2013, and Section 179(3)(d) of the Companies Act, 2013, the Board of Directors of the Company shall exercise the power to borrow moneys only by means of resolution passed at the meeting of the Board of Directors. It is also no longer res-integra that any action which requires to be approved in the meeting of the Board of Directors or shareholder; if not appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he form of web of entries conducted by the former director of the Corporate Debtor. Further, the said forensic audit report also reveals that the alleged transaction of the applicant is not only unauthorized and illegal but also collusive between the former director of the Respondent and the Applicant. Therefore, it is of utmost importance to bring the said forensic audit report on record for the efficient and effective disposal of the present application. 5. We have heard the Ld. Counsel for the applicant and respondent and perused the averments made in the application, reply and averment made in IA/5412/2020 filed by the respondent. 6. Ld. Counsel for the applicant in course of his arguments submitted that on the basis of agreement dated 02.08.2013, the Corporate Debtor had entered into a loan agreement with the applicant for a period of 6 years commencing from the date of execution of agreement and accordingly, the amount was disbursed to the Corporate Debtor. He further submitted that on 17.12.2014, the Corporate Debtor made a payment of ₹ 1575510/- and thereafter stopped making payments. He further submitted that recently the Corporate Debtor has also made some pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of accounts of the company as debt payable to Indian Delco as unsecured loan. No written loan agreement is found in the records of the company pertaining to the aforestated alleged loan. No record is found as regard any authorization or resolution ever passed in the meeting of Board of Directors to raise afore stated loan and or authorizing any of the directors to execute corresponding agreement with Indian Delco Private Limited. Thus, there is clear infringement of Section 179 of the Companies Act, 2013 and the alleged transaction is not binding on the company . 13. He further submitted that in view of Section 180(1)(c) of the Companies Act, 2013, a Special Resolution was needed to secure a loan in absence of which the transaction stands void. 14. He further submitted that no Special Resolution was introduced at the first instance in any Board Meeting of the Company or presented for approval in general meeting of the company. 15. He further submitted that the applicant owns several equity shares in group companies belonging to the Aarone Group and the applicant has made investments in a project developed by the Aarone Group, therefore, that transaction is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of IA/5412/2020 and the same is quoted below: - From the above data, it can safely be inferred that fund received from Indian Delco Private Limited was ₹ 375 lakhs but simultaneously a total sum of ₹ 225 lakhs is diverted to other company leaving only ₹ 150 lakhs in the company for proper utilization in the project whereas entire sum of ₹ 375 lakhs in the books of accounts of the company as debt payable to Indian Delco as unsecured loan. No written loan agreement is found in the records of the company pertaining to the aforestated alleged loan. No record is found as regard any authorization or resolution ever passed in the meeting of Board of Directors to raise afore stated loan and or authorizing any of the directors to execute corresponding agreement with Indian Delco Private Limited. Thus there is clear infringement of Section 179 of the Companies Act, 2013 and the alleged transaction is not binding on the company . 24. From the above averment, we notice that even in the Forensic Audit Report, the Auditor has admitted this fact that the fund of ₹ 375 lakhs was received from the applicant that is Indian Delco Private Limited and it is also admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of companies under this Act, certified to be a true copy by the Registrar (whose official position it shall not be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document. 27. Mere plain reading of the provision shows that under this provision any person may inspect the documents, which are kept in the office of Registrar regarding the incorporation of the company, which includes the Article of Association and Memorandum of Association. 'The documents which a person is entitled to get from the office of Registrar u/s 399 of the Companies Act and if he fails to see and verify it prior to entering with a contract with the company then the company is not liable for that act, if it is done by the Director, because it comes under the doctrine of constructive ' notice. But the question is does the doctrine of constructive notice allow the outsiders to have notice of internal affairs of the company , the answer is no, because doctrine of constructive notice is subject to exception i.e Indoor Management and that is the reason petitioner has taken this plea. 28. At this juncture, we would also like to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of monies on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of monies or, as the case may be, a making of loans by a banking company within the meaning of this section.] Explanation I.-Nothing in clause (d) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act. Explanation II.-In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause (d) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of. (4) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in relation to the exercise of the powers referred to in clause (c) of sub-section (1) shall specify the total amount up to which monies may be borrowed by the Board of Directors. (3) Nothing contained in clause (a) of sub-section (1) shall affect- (a) the title of a buyer or other person who buys or takes on lease any property, investment or undertaking as is referred to in that clause, in good faith; or (b) the sale or lease of any property of the company where the ordinary business of the company consists of, or comprises, such selling or leasing. (4) Any special resolution passed by the company consenting to the transaction as is referred to in clause (a) of sub-section (1) may stipulate such conditions as may be specified in such resolution, including conditions regarding the use, disposal or investment of the sale proceeds which may result from the transactions: Provided that this sub-section shall not be deemed to authorise the company to effect any reduction in its capital except in accordance with the provisions contained in this Act. (5) No debt incurred by the company in excess of the limit imposed by clause (c) of sub-section (1) shall be valid or ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement and to receive the loan, therefore, in the absence of such document, we are of the considered view that the respondent has failed to establish this fact that the person who signed the loan agreement was not authorized under the Articles of Association or memorandum of Association to borrow the loan for the benefit of the company. 32. At this juncture, we would like to refer the submission of the Ld. Counsel for the respondent as well as the Forensic Audit report referred in para 4 of the written submission and the IA/5412/2020 and we notice that it is also admitted by the Forensic Auditor in Forensic Audit Report that the amount was received from the applicant and part of the amount was utilised for the benefit of the project of the respondent company and so far the decision upon which the respondent has placed reliance is concerned in view of the facts and law discussed by us in the aforementioned Paragraph, in our considered view, in the absence of Articles of Association or Memorandum of Association, we cannot disbelieve the contention of the applicant that the loan agreement was duly executed by the Director of the respondent company as per the provision contained un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be deemed to be withdrawn before its admission. Explanation.-For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3). Provided that if the Adjudicating Authority has not ascertained the existence of default and passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority has no option but to admit the application filed under Section 7 of the IBC. So far the dispute is concerned like Section 9 the Corporate Debtor is not required to raise under Section 7 of the IBC and we further notice that the applicant has also proposed the name of the IRP Mr. Rakesh Kumar Jain who has also given their consent in Form 2 which is available at page 25 of the application and he also gave a declaration that no disciplinary proceeding is pending against him. 35. In the light of that, when we consider the case in hand then we find that the applicant has succeeded to establish that there is a financial debt and Corporate Debtor is in default in making the payment of that financial debt, the application is complete and also proposed the name of IRP Mr. Rakesh Kumar Jain having registration number IBBII IPA-001/IPP01297/2018-19/12068 Who have also sent the written consent and there is no disciplinary proceeding pending against him. 36. Under such circumstances, we hereby inclined to admit this application. Accordingly, we hereby ADMIT this application. The applicant has proposed the name of the IRP therefore, we appoint Mr. Rakesh Kumar Jain having regist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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