https://www.taxtmi.com/caselaws?id=775078 The NCLAT Principal Bench allowed an appeal challenging dismissal of a Section 7 IBC application. The Tribunal had initially rejected the application arguing that a loan advanced in violation of Section 186 of the Companies Act could not form basis for insolvency proceedings. The NCLAT held that continuous reflection of the amount as unsecured loan in the respondent's balance sheets from 2016-17 to 2020-21 constituted acknowledgment of debt. The appellate tribunal ruled that irregularity in loan advancement cannot render debt unrecoverable, and the corporate debtor cannot invoke Section 186 to deny liability for amounts due and payable. The NCLAT distinguished the M Sai Eswara Swamy case, noting it concerned lack of board resolution authority rather than Section 186 violations. Since debt and default were established through undisputed disbursement records, balance sheet entries, and five demand notices, the Tribunal erred in dismissing the Section 7 application. The appeal was allowed. en-us Tue, 15 Jul 2025 00:00:00 +0530 Thu, 17 Jul 2025 14:27:42 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=775078 The NCLAT Principal Bench allowed an appeal challenging dismissal of a Section 7 IBC application. The Tribunal had initially rejected the application arguing that a loan advanced in violation of Section 186 of the Companies Act could not form basis for insolvency proceedings. The NCLAT held that continuous reflection of the amount as unsecured loan in the respondent's balance sheets from 2016-17 to 2020-21 constituted acknowledgment of debt. The appellate tribunal ruled that irregularity in loan advancement cannot render debt unrecoverable, and the corporate debtor cannot invoke Section 186 to deny liability for amounts due and payable. The NCLAT distinguished the M Sai Eswara Swamy case, noting it concerned lack of board resolution authority rather than Section 186 violations. Since debt and default were established through undisputed disbursement records, balance sheet entries, and five demand notices, the Tribunal erred in dismissing the Section 7 application. The appeal was allowed. Case-Laws IBC Tue, 15 Jul 2025 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=775078