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The NCLAT allowed the appeal and set aside the impugned order dismissing the Section 7 application under the IBC. The Tribunal erred in rejecting the claim solely on the ground of alleged violation of Section 186 of the Companies Act regarding loan advancement. The continuous acknowledgment of the unsecured loan in the respondent's balance sheets from 2016-17 to 2020-21, without any caveat, constituted a clear admission of debt. The debt was due and payable, and the respondent's failure to repay despite repeated demands amounted to default. The respondent could not evade liability by relying on Section 186 to claim the loan was irregular or void. The decision in M Sai Eswara Swamy was distinguished as it concerned maintainability of the petition due to lack of board resolution, not the validity of debt under Section 186. Consequently, the application under Section 7 was held maintainable and the appeal was allowed.
The NCLAT allowed the appeal and set aside the impugned order dismissing the Section 7 application under the IBC. The Tribunal erred in rejecting the claim solely on the ground of alleged violation of Section 186 of the Companies Act regarding loan advancement. The continuous acknowledgment of the unsecured loan in the respondent's balance sheets from 2016-17 to 2020-21, without any caveat, constituted a clear admission of debt. The debt was due and payable, and the respondent's failure to repay despite repeated demands amounted to default. The respondent could not evade liability by relying on Section 186 to claim the loan was irregular or void. The decision in M Sai Eswara Swamy was distinguished as it concerned maintainability of the petition due to lack of board resolution, not the validity of debt under Section 186. Consequently, the application under Section 7 was held maintainable and the appeal was allowed.
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