A Loan Payable On Demand Becomes Due And Payable On Receipt Of Demand Notice: NCLT Mumbai
Udai Yashvir Singh
18 April 2023 7:00 AM GMT
The National Company Law Tribunal, Mumbai Bench, comprising Shri Kishore Vemulapalli (Judicial Member) and Shri Prabhat Kumar (Technical Member), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Praful Satra vs MD Development Private Limited has held that a loan payable on demand becomes due and payable on the receipt of...
The National Company Law Tribunal, Mumbai Bench, comprising Shri Kishore Vemulapalli (Judicial Member) and Shri Prabhat Kumar (Technical Member), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Praful Satra vs MD Development Private Limited has held that a loan payable on demand becomes due and payable on the receipt of Demand Notice
Background Facts
Praful Satra (“Financial Creditor”) extended an interest-free loan for a sum of Rs. 9,37,52,350/- to MD Development Private Limited (“Corporate Debtor”) for a period of 02.05.2018 to 05.03.2019 with the condition that the loan was repayable on demand. The Corporate Debtor repaid Rs. 7,52,94,500/-, with the balance of 1,84,57,850/- remaining outstanding. The Financial Creditor made several calls to demand the repayment of money but the balance amount remained unpaid and this constrained the Financial Creditor to issue a Demand Notice dated 26.08.2021.
On the Contrary, the Corporate Debtor contended that the petition is false and vexatious. It was submitted that The Financial Creditor has not referred any correspondence between the parties and no proof is provided in the petition against the claim made by the Financial Creditor.
Findings of the Tribunal
The Tribunal observed that the Financial Creditor has filed confirmation of accounts for the years 2018-19, 2019-20 and 2020-21 duly signed by the Corporate Debtor which show outstanding balances owed to the Financial Creditor by the Corporate Debtor. Hence there is an amount payable to the Financial Creditor.
The Tribunal further held that since the loan was repayable on demand, the debt became due and payable on receipt of the Demand Notice dated 26.08.2021. Further interest-free loans form part of financial debt. Reliance was placed on the Supreme Court judgment of M/s. Orator Marketing Pvt. Ltd. Vs. M/s. Samtex Desinz Pvt. Ltd. (2021) ibclaw.in 68 SC wherein the SC had held that if there is no interest payable on the loan, only the outstanding principal would also qualify as a Financial Debt.
With the aforesaid observations, the Tribunal admitted the petition.
Case: Praful Satra vs MD Development Private Limited
Case No. CP(IB)-1018(MB)/2021
Counsels for the ApplicantsAdv. Rima Desai a/w Adv Krushi N Barfiwala and Adv. Divyanshu Gupta i/b Parinam Law Associates
Counsel for the Respondent Adv. Prakhar Tandon i/b Adv. Prakhar Tandon
