Decision of the BOD to write off the bad debt is a commercial decision, which does not warrant any judicial interference-NCLAT

Facts of the case

• The Appellant filed a case contending that bogus transactions and siphoning of funds is taking place in the company and filled a company petition in NCLT, Chennai for oppression and mismanagement.
• After having heard the parties the NCLT, Chennai Bench dismissed the case stating that the acts complained of are not falling within the purview of Oppression and mismanagement.
• Being aggrieved by the said order of the NCLT, the appellant filed the present appeal to NCLAT.
• The contention of the Appellant that during the financial year 2017-18, an amount of Rs. 48,41,801/- has been written off as bad debts, and the details as to identity of the party, whether related party or otherwise is not disclosed.

Decision

The NCLAT upheld the decision of the NCLT, Chennai bench that decision of the Board of Directors to write off the bad debt is a commercial decision, which does not warrant any judicial interference.

Reason

• NCLT has rightly put its reliance on the Judgement of NCLAT in Upper India Steel Manufacturing and Engineering Co. Ltd. & Ors. Vs. Gurlal Singh Grewal & Ors. where it was held that cheque signing power is solely a business decision and cannot be interfered.
• Similarly, the decision of the Board of Directors to write off the bad debt is a commercial decision, which does not warrant any judicial interference.

Sahil Goyal, Audit Associate, SW India