Company Cannot Give Loan To Director Without Special Resolution In General Meeting : Supreme Court

The Supreme Court yesterday (April 2) cancelled the bail of businessman Satinder Singh Bhasin for violating the bail conditions imposed by it. One of the conditions imposed was that Bhasin must deposit Rs. 50 crores to the Supreme Court Registry. However, it came to light that he has siphoned off the funds of his company, Bhasin Infotech and Infrastructure Private Limited (BIIPL), in order to fulfil this condition.

A bench comprising Justice Sanjay Karol and Justice NK Singh noted that Bhasin was required to comply with this condition in his individual capacity. It also said that this was not a case where he had taken a loan from his Company as a Director.

"Upon a consideration of the above submissions and the breakup as filed by the petitioner himself, it cannot be disputed that the amount of Rs. 50 crores has originated from the funds of BIIPL and other related entities. We are inclined to agree with the submissions advanced by the respondents. The condition requiring deposit as a prerequisite for grant of bail, was imposed upon the petitioner in his individual capacity. This condition required bonafide, if not strict, compliance.

It stated that in order to take a loan from the Company, Section 185 of the Companies Act, 2013, requires that a special resolution be passed to sanction the required loan. In the absence of any special resolution, Bhasin had actually misappropriated the funds of BIIPL, the Court observed.

"On a plain reading of the above Section[185 of the Company Act], it is evident that a company cannot directly or indirectly give a loan to its director without passing a special resolution in a general meeting or unless the funds correlate to the principal business activities of the company. In the present case, it cannot be said that the loan to secure bail for the petitioner was connected to the company's principal business activities by any stretch of imagination. Therefore, the deposit of the amount through the purported loan taken by the petitioner from BIIPL, in the absence of any documentary approval or compliance with statutory requirements of Section 185 of the Companies Act, 2013, cannot be sustained."

It further noted that Bhasin did not invest a single rupee from his personal fund for the deposit but had actually availed an interest-free commercial benefit from BIIPL, which does not make any sense for the Company.

"The absence of even basic safeguards, such as pledging of shares or provision of security is representative of how these transactions lack any bonafide/lawful financial structure."

The Court ordered that the money be forfeited and 5 crore would go to NALSA and the rest would be used in the insolvency proceedings which is ongoing against petitioner's company.

Headnote

Criminal Procedure – Bail – Cancellation of Bail – Violation of Conditions – Siphoning of Funds – Fabrication of Documents – Failure to Settle Claims – The Supreme Court cancelled the bail granted to the petitioner (Director of Bhasin Infotech and Infrastructure Pvt. Ltd.) for blatant non-compliance with the primary condition of settling allottees' claims in the 'Grand Venice' project - that the petitioner was directed to deposit Rs. 50 Crores in his personal capacity as a pre-condition for bail - the petitioner sourced these funds from the Corporate Debtor (BIIPL) and related entities without any Board Resolution or compliance with Section 185 of the Companies Act, 2013 - Held, utilizing interest-free commercial benefits from the company to secure personal liberty lacks bona fides.

Settlement of Claims – Meaning of "Attempt to Settle" – Supreme Court clarified that Condition (viii) of the bail order required a real and effective resolution of claims, either through valid possession or refund - Mere execution of mediation agreements without implementation does not constitute compliance - The project remains incomplete, lacking essential services (lifts, water, fire safety NOCs), rendering any "notional possession" delivered to allottees legally invalid.

Conduct of Petitioner – Fabrication and Fraud – Supreme Court noted the inclusion of "GST" in an allotment agreement purportedly dated 15.04.2015, whereas GST was only introduced in 2017 - Held, such an inclusion is not a clerical error but points directly at the fabrication of documents to derive commercial benefits - Further, the petitioner engaged in "double allotment" and created third-party rights using fabricated stamp papers – Following the initiation of the Corporate Insolvency Resolution Process (CIRP), the petitioner siphoned off approximately Rs. 74 Crores to entities controlled by his immediate family members (wife, daughter, and sons) - Held, such conduct during a moratorium is ex-facie impermissible and lends credence to allegations of committing similar offences while on bail - Due to intentional and established violations of bail conditions, the Court ordered the forfeiture of the entire Rs. 50 Crore deposit along with accrued interest - Rs. 5 Crores was directed to be transmitted to NALSA, and the remainder to the Interim Resolution Professional (IRP) for IBC proceedings. [Relied on Ashok Dhankad v. State (NCT of Delhi), 2025 SCC OnLine SC 1690; Satinder Singh Bhasin v. Col. Gautam Mullick and Ors, Civil Appeal Nos. 13779 and 13812 of 2025; P. v. State of Madhya Pradesh, (2022) 15 SCC 211; Daulat Ram v. State of Haryana, (1995) 1 SCC 349; Paras 65-80, 122-128]