Loan to Director Illegal Under Section 185
The Supreme Court on April 2 cancelled the bail granted to businessman Satinder Singh Bhasin. The Court found that he had violated the conditions attached to his bail. Earlier, it had directed him to deposit ₹50 crore with the Supreme Court Registry. However, instead of using his personal resources, he arranged the amount from his company, Bhasin Infotech and Infrastructure Private Limited (BIIPL).
Why the Court Held the Loan to Director Illegal
A bench of Justice Sanjay Karol and Justice NK Singh held that Bhasin had to satisfy this condition in his individual capacity. Therefore, the Court rejected the claim that the transaction could stand as a loan from the company.
After reviewing the financial details and submissions, the bench noted that the ₹50 crore had come from BIIPL and related entities. Accordingly, it accepted the respondents’ arguments. The Court stressed that the bail condition required genuine compliance by the petitioner himself.
The bench then examined Section 185 of the Companies Act, 2013. Under that provision, a company can grant a loan to a director only after passing a special resolution in a general meeting. In this case, however, no such approval existed.
The Court further stated that Section 185 clearly restricts companies from giving loans to directors without following statutory requirements. Moreover, it observed that such loans must relate to the company’s principal business activities. Here, by contrast, securing bail had no connection with BIIPL’s business.
Company Funds Could Not Be Used for Personal Bail Deposit
As a result, the bench held that the transfer of funds lacked legal backing. It found that Bhasin had misused company funds. The Court also noted that he did not contribute any personal money. Instead, he obtained an interest-free benefit from the company.
The Court also highlighted the absence of basic safeguards. For instance, there was no pledge of shares or any security. Thus, the bench found that the transaction lacked a lawful financial structure.
Court Orders Forfeiture of the Deposited Amount
Finally, the Court ordered forfeiture of the deposited amount. It directed that ₹5 crore be paid to the National Legal Services Authority (NALSA). The remaining amount, meanwhile, will go toward the ongoing insolvency proceedings against the company.
Case Details: Satinder Singh Bhasin v. Government of NCT of Delhi, MA 239/2024 in W.P. (Crl.) No. 242/2019
Citation: 2026 INSC 316
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