'Company Cannot Fund Director's Bail Under Companies Act': Supreme Court Cancels BIIPL Director's Bail

The Supreme Court on Thursday held that a company cannot grant a loan to its director without special resolution of shareholders and where it is not for its business purposes and cancelled the bail of Satinder Singh Bhasin after finding that the Rs. 50 crore deposit was arranged using company funds in violation of the Companies Act.

Bhasin, director of Bhasin Infotech and Infrastructure Pvt Ltd (BIIPL), had been granted bail on November 6, 2019 in connection with multiple FIRs arising out of allegations of non-delivery of units, diversion of funds, and other irregularities in the 'Grand Venice' real estate project in NCR region.

The bail was subject to conditions, including a deposit of Rs. 50 crore and a requirement to make every possible effort to settle claims of aggrieved investors within six to eight months.

A bench of Justices Sanjay Karol and Nongmeikapam Kotiswar Singh found that the amount was not deposited from Bhasin's personal funds but was sourced from BIIPL and related entities through a purported loan arrangement, without any special resolution or documentary approval.

Referring to Section 185 of the Companies Act, the court observed:

“On a plain reading of the above Section, it is evident that a company cannot directly or indirectly give a loan to its director without passing a special resolution in a general meeting or unless the funds correlate to the principal business activities of the company. In the present case, it cannot be said that the loan to secure bail for the petitioner was connected to the company's principal business activities by any stretch of imagination. Therefore, the deposit of the amount through the purported loan taken by the petitioner from BIIPL, in the absence of any documentary approval or compliance with statutory requirements of Section 185 of the Companies Act, 2013 cannot be sustained.”

Apart from the illegality of the funding arrangement, the court found that Bhasin had failed to comply with the core condition of bail requiring settlement of investors' claims. It noted that despite more than six years having elapsed since the grant of bail and repeated opportunities granted by the court, there was no genuine or complete effort to resolve all claims.

The court said the purpose of granting bail was to enable settlement with investors but noted that this had not happened.

It also noted submissions that nearly 190 FIRs were pending against him in connection with the project.

The court further noted that insolvency proceedings had been initiated against BIIPL under the Insolvency and Bankruptcy Code. The corporate insolvency resolution process was admitted by the National Company Law Tribunal, Delhi on December 4, 2023 and was later upheld up to the Supreme Court in February 2026. It also took on record submissions by the Interim Resolution Professional alleging mismanagement and diversion of funds.

Holding that the loan arrangement violated the statutory framework governing corporate lending and that the conditions of bail had not been complied with in letter or spirit, the court cancelled Bhasin's bail.

The court also ordered forfeiture of the entire Rs. 50 crore deposit along with accrued interest. It directed that Rs. 5 crore be transferred to the National Legal Services Authority, with the remaining amount to be handed over to the Interim Resolution Professional for the purposes of the insolvency proceedings.

For Petitioner: Senior Counsel Shyam Divan for the petitioner;

For IRP: Senior Counsel Vipin Sanghi; Senior Counsel Dhruv Mehta;

For Allottees: Senior Counsel Meenakshi Arora; Senior Counsel Gopal Sankaranarayanan; Counsel Aditi Mohan; Counsel Shyam D. Nandan; Counsel Kumud Lata Das; Counsel Akshaya Ganpath; Counsel Sahil Sethi

For UPSIDA: Senior Counsel Atmaram N.S. Nadkarni

Counsel Mandeep Kalra for the Court-appointed committee.