NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT CHENNAI (APPELLATE JURISDICTION)

Company Appeal (AT) (CH) (Ins) No.431/2024 (IA No.1181/2024)

IN THE MATTER OF:

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VASUDEV BISSA, DIRECTOR OF M/s. ARISU RETAIL PRIVATE LIMITED, No.20/3, AK Road, KB Nagar, Bangalore, Karnataka - 560026 Having its Registered Office at No.93/1, G.A. Road, Old Washermenpet, Chennai – 600021. …Appellant V M/s. PDB VENTURE PVT. LTD., Having its registered office at

4A, Syed Sally Street, Kolkata- 700 073. …Respondent Present:

For Appellant : Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. A. Ram Kumar & Mr. Mohan Kumar, Advocates For Respondent : Mr. Perikal K Arjun, Advocate

JUDGMENT

(Hybrid Mode)

Per: Justice Sharad Kumar Sharma, Member (Judicial):

The challenge in the instant Company Appeal is to the impugned order dated 07.01.2024, as it was rendered by the Learned NCLT, Bengaluru Bench, in CP(IB) No. 20/BB/2023, by virtue of which the Section 7 Application preferred by the Respondent (M/s. PDB Venture Pvt. Ltd.), the Financial Creditor, was directed to be admitted, and as a consequence, CIRP proceedings were directed to be commenced against the Corporate Debtor, M/s. Arisu Retail Private Limited of which Mr. Vasudev Bissa is a Director.

2. The brief facts which require consideration herein for adjudication of the instant Company Appeal, particularly in the context of the submissions of the Learned Counsel for the Appellant, are from the perspective that the admission of the proceedings under Section 7 of the I&B Code, at the behest of Respondent No. 1, was bad in law, because the alleged loan of Rs.2,05,00,000/- (Rupees Two Crores Five Lakhs Only), which was treated as a debt due from the Corporate Debtor, was said to have been given on the basis of an “oral agreement”. The Learned Counsel for the Appellant contends that, under corporate law, no financial assistance can be extended to a Corporate Debtor on the basis of an oral agreement, as such a concept is alien to procedural requirements. Hence, he argues that since the very foundation of the proceedings rests upon an alleged oral agreement relating to the extension of financial assistance of Rs. 2,05,00,000/-, the same cannot constitute a valid basis for initiation of proceedings under Section 7 of the I&B Code.

3. The Appellant, in his capacity as Director/Promoter of the Corporate Debtor, admits that he met the Respondent/Financial Creditor in July 2020, and that they agreed to extend a loan of Rs.2,05,00,000/-. According to the Appellant’s own pleadings, it was agreed that the said financial assistance would be independent of all other financial transactions between the Corporate Debtor and the Financial Creditor. It is also an admitted case of the Appellant that the financial borrowing did take place, and the amount was disbursed in ten tranches, including the last tranche of Rs.25,00,000/- having been disbursed on

21.09.2020, which itself demonstrates the borrowing of debt by the Appellant.

4. It is the Appellant’s own admitted case that the company partially repaid the amount, but since the payment of the amount was not substantiated by proof, the proceedings under Section 7 of the I&B Code were initiated by the Respondent. The Appellant further admits that as against the loan advances, an interest of 7% was agreed to be paid, amounting to Rs.7,44,780/-, and that Tax deducted at source (TDS), on the said amount has been deducted as reflected in Form 16A submitted under Rule 31(1)(b) of the Income Tax Act, 1961. The Learned Counsel for the Respondent argued that since the Appellant’s own pleadings and documents, including Form 16A, show that TDS was deducted, the financial assistance of Rs.2,05,00,000/- stands established, and cannot be denied merely because it is alleged to be based on an oral agreement—which is not prohibited in law, so long as it is supported by the books of accounts or other authenticated documents.

5. The concept of an “oral agreement” becomes relevant only to the extent that, for i