The New Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) held that the corporate debtor ( CD ) cannot escape liability by contending to be mere agent of the principal.
The present appeal was filed by Mr. Mukund Rajhans, Suspended Director Topaki Media Private Limited (“TMPL”) under Section 61 of the Insolvency and Bankruptcy Code, 2016 ( IBC ).
The appellant submitted that TMPL had only been acting as an agent of VIL. In terms of Section 230 of the Indian Contract Act, 1872. TMPL could not have been made liable to repay the dues of Videocon Industries Limited (VIL), even though, the Purchase Orders (POs) were issued by TMPL to the Respondent and the Respondent delivered the invoices to TMPL. As per Section 230 of the Indian Contract Act, TMPL / an agent is bound by a contract entered into by it on behalf of its Principal / VIL, even though, their did not exist any contract binding TMPL’s in such manner.
It was submitted that TMPL did not owe any operational debt to the Respondent because it was merely acting as an agent of VIL while dealing with the Respondent. Therefore, in terms of Section 230 of Indian Contract Act, 1872, TMPL could not have been made liable to repay the dues owed by VIL.
The respondent submitted that the impugned order dated 10.08.2023 is decided on merits and is well-reasoned. There is no error either on factual or legal basis. There is a clear existence of debt and default and the impugned order satisfies all the elements under Section 9 of the IBC.
A Three Member Bench comprising Justice Ashok Bhushan, Chairperson, Barun Mitra, Member (Technical) and Arun Baroka, Member (Technical) observed that “There is no tripartite agreement on record which could have guided the mode and responsibilities of payment. Without any agreement in place, in the facts of the instant case, the responsibility to repay the outstanding dues remains on the Appellant. As the IBC proceedings are self-contained which govern the course of action in such situations, the Appellant cannot take refuge of Section 230 Indian Contract Act, 1872 that the “agent cannot personally enforce, nor be bound by, contracts on behalf of principal” and pass on its liability to VIL.”
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