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TMI Blog2022 (11) TMI 1095X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : Mr. Aditya Dewan Advocate for Liquidator For the Respondents : Mr. Savla, Sr. Advocate For the Appellant : Mr. Savla, Sr. Advocate For the Respondents : Mr. Aditya Dewan Advocates for Liquidator JUDGMENT DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER 1. The Appellants have filed cross appeals under Section 61 of the 'Insolvency and Bankruptcy Code 2016' (the Code) against the impugned order dated 27.10.2020 passed by the 'National Company Law Tribunal, Bench -V, New Delhi (the Adjudicating Authority) in C.P (IB) No. 1874/(ND)/2019 (IA -3642 & 3790 of 2020). 2. In Appeal No. i.e. CA (AT) (Ins) No. 1104 of 2022, the Appellant Bank has sought following reliefs: Allow the present cross Appeal and set aside the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial debt in terms of the law laid down in the Code. It was also submitted by Ld. Counsel for the RP that lender is to demonstrate that the security document relating to the loan transaction are legally valid and enforceable and further the mortgage was created validly in favour of the lender by the subsidiary of the Principal Borrower. It was also mentioned that the claim of the Bank as a secured financial creditor on the basis of corporate guarantee dated 06th May, 2017 is untenable on the ground that it has not complied with the provisions of Section 185 & 186 of the Companies Act, 2013 (the Act) though then prevailing in 2017. The Ld. Counsel also submitted that the constitutional courts have held that if there is a clear breach of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l paper book, various limit sanctioned appearing at page 87 - various security created, extract of various Board Meeting appearing at Annexure -2, Board Resolution Passed by CD on 02.02.2013 appearing at Annexure 4, Guarantee Agreement appearing at Annexure -5 page 93 of the appeal paper book, Credit sanction intimation appearing at Annexure -6 page 100 of the Appeal Paper Book, Board Resolution dated 20.06.2013 and Corporate Guarantee dated 28.06.2013 appearing at page 115 Annexure -7, Sanction letter dated 05.12.2013 appearing at page 123 Annexure -8, Board Resolution dated 09.12.2013 appearing at page 129, Annexure - 9, Sanction letter dated 31.03.2017 appearing at page 142, Annexure - 10. Guarantee Agreement dated 06.05.2017 appearing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment) and thereby the Respondent bank approached the Adjudicating Authority under Section 60(5) of the Code in August, 2020. g. It is also not in dispute that the Corporate Debtor has gone into liquidation. h. Both the Ld. Sr. Counsels/Ld counsel took us through the provisions of Section 185 of the Act and through the letter of Corporation bank dated 14.10.2016 regarding regularization of overdues and pending reply to the audit observation address to the holding company wherein it has been mentioned that the properties held as collateral securities implication of section 185 and 186 of the Act not ascertained from legal department appearing at page 159 of the Appeal paper book. For brevity and clarity, Section 185 of the Act is dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal business activities. Explanation - for the purposes of this section, the expression "to any other persons in whom Director is interested" means - (a) Any Director of the lending company, or of a company which is its holding company or any partner or relative of any such director; (b) Any firm in which any such director or relative is a partner; (c) Any private company of which any such director is a director or member; (d) Anybody corporate at a general meeting of which not less than twenty-five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or (e) Anybody corporate, the Board of Directors, Managing Director or manager, whereof is accustom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntravention of provision of Section 185 of the Act prevailing as on that date (pre -07.05.2018 amendment to the Act) is concerned, it is very much clear that this is the provision which the company has to comply internally and if they fail to comply the necessary punishment is available in the same section i.e. Section 185, both monetary penalty and /or imprisonment. As far as bank is concerned, they have been provided time to time the Board Resolution showing the approval of the Board. Hence, if there is any irregularity then for that the Members of the Board are responsible. If the official of the bank have committed some irregularity, then it is the Bank who has to prosecute these officers against the provisions laid down under the law a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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