# In the matter of Temple Leasing and Finance Limited IA. No. 2536-ND-2022 in Company Petition No. (IB)-637(PB)-2020

> NCLT judgment dated 2023-05-09. Citation: TCN-2023-NCLT-03436. The Resolution Professional filed an application alleging that the Suspended Directors of the…

- **Court:** NCLT
- **Order date:** 9 May 2023
- **Citation:** TCN-2023-NCLT-03436
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/temple-leasing-and-finance-limited-ia-no-2536-nd-2022-in-company-petition-no-ib-2fa494e6

## Summary

### Background

The Resolution Professional filed an application alleging that the Suspended Directors of the Corporate Debtor made imprudent investments in equity shares without due diligence, making them liable to contribute Rs. 28,50,000/- to the Corporate Debtor's assets under Section 66 of IBC, 2016.

## Facts

The Resolution Professional (RP) filed an application against the Suspended Directors of Temple Leasing and Finance Limited (Corporate Debtor or CD), alleging that they made an investment of Rs. 28,50,000/- in equity shares of Unno Industries Limited and Jayant Mercantile Company Limited without exercising due diligence. The RP contended that these transactions were imprudent and that the directors are liable to contribute this amount to the CD's assets under Section 66 of the Insolvency and Bankruptcy Code, 2016. The Transaction Auditor, M/s APT & Co. LLP, appointed by the RP, audited the CD's financial records from April 1, 2016, to June 25, 2021. The audit revealed that the Suspended Directors invested in equity shares that were not actively traded.

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## Issues and analysis

### Issue 1: Whether the Suspended Directors of the Corporate Debtor failed to exercise due diligence in making …

**Ratio:** Directors are liable under Section 66 of IBC, 2016, if they knew or ought to have known

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**Reasoning:** The NCLT found that the shares purchased were not actively traded, no Demat account was

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**Interpretation:** Section 66(2) of IBC, 2016, imposes civil liability on directors who fail to

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**Application:** The Suspended Directors invested in non-traded shares without proper due

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## Parties

- **Judges:** Sh. Ashok Kumar…; L. N. G…
- **Appellants:** Guardian Finance…; M/s Guardian…; +2 more
- **Respondents:** TEMPLE LEASING &…; Temple Leasing…; +4 more
- **Advocates:** For the Applicant:…

## Timeline

- **February 3, 2015 — Last trade of Jayant Mercantile Co. Limited…**: Equity shares of Jayant Mercantile Co. Limited…
- **February 29, 2016 — Last trade of Unno…**: Equity shares of Unno Industries Limited…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 66 — Fraudulent trading or wrongful trading](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-66)

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