The National Company Law Tribunal in the case Praful Satra vs MD Development Private Limited, wherein the Mumbai bench comprising of Judicial Member, Shri Kishore Vemulapalli and the Technical Member, Shri Prabhat Kumar observed and has held while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 that the loan payable on demand becomes due and payable on the receipt of Demand Notice
Facts of the Case:
In the case the Financial Creditor, Praful Satra extended an interest-free loan for an amount of Rs. 9,37,52,350/- to Corporate Debtor, MD Development Private Limited for the period of 02.05.2018 to 05.03.2019 with the condition that the loan was being repayable on demand. Therefore, the Corporate Debtor repaid an amount of Rs. 7,52,94,500/-, with the balance remaining of Rs 1,84,57,850/- and the same is outstanding. Thus, several calls were made by the Financial Creditor to demand the repayment of money but the balance amount remained unpaid and this constrained the Financial Creditor to issue a Demand Notice dated August 26, 2021.
It has been contended by the Corporate Debtor, MD Development Private Limited that the petition filed is false and vexatious. It was also being submitted before the court 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.
Tribunal Findings:
It has been observed by the National Company Law Tribunal that the Financial Creditor has filed confirmation of accounts for the year 2018-2019, the year 2019-2020 duly being signed by the Corporate Debtor which show outstanding balances which being owned to the Financial Creditor by the Corporate Debtor. Therefore, the said amount is payable to the Financial Creditor.
Further, it has been held by the Tribunal that since the loan was repayable on demand, the debt became due and payable on receipt of the Demand Notice dated August 26, 2021. Further, the said interest-free loans form part of financial debt. The court placed Reliance on the Supreme Court judgment in the case M/s. Orator Marketing Pvt. Ltd. Vs. M/s. Samtex Desinz Pvt. Ltd, wherein the Top Court held that if there is no interest payable on the loan, only the outstanding principal would also qualify as a Financial Debt.
Accordingly, the Tribunal admitted the plea.
