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2019 (7) TMI 1891 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT - The balance sheet of the Respondent for 2015-16 reflects the amount claimed by the Applicant under the head 'Other Liabilities', which amounts to a written acknowledgment of the liability by the Respondent extending the limitation period. This means that the limitation period will be calculated from 31.032016 and the present application was filed before the expiry of three years from such date. Thus, the application is not barred by limitation. Whether the share application money can be categorized as financial debt? - HELD THAT - It is clear from a reading of Section 42 of the Act and the Deposit Rules that if the shares are not allotted within 60 days of the receipt of the money the share application money has to be refunded and of the refund does not take place within 15 days from the expiry of the 60 days' time limit, then the share application money will be treated as a deposit. On the non-allotment of shares, after the expiry of the time limit of 75 (60 15) days the share application money will be a deposit advanced to the company, which has to be returned by the company at the rate of 12% per annum from the expiry of the 60th day. The person applying for the shares will get compensation for the time vale of the share application money given by him to the company, which makes the money advanced a financial debt to be repaid by the company - In the present case the money was transmitted in 2008 and the allotment has not been made till date, thus, the money transmitted is a deposit and can be treated as a financial debt. Whether there is a default on behalf of the Respondent in payment of the amount claimed? - HELD THAT - This issue cannot be answered in favour of the Applicant as a perusal of the documents show that the Respondent has been ready to refund the money after it receives the required letter from the Applicant. Although the Applicant has placed on record a letter dated 03.07.2015 signed by the Applicant's representative, there is nothing to show that the said letter was actually delivered to the Respondent. Even if it was delivered by hand as claimed by the Applicant, there should have been an acknowledgment of receipt by the Applicant on the copy of the letter. In the absence of anything to show that the delivery was actually made and that the Applicant has fulfilled all its formalities, it cannot be said that it is the Respondent's fault that the refund of the money has not been made - application allowed.
Issues Involved:
1. Whether the Applicant's claim is barred by limitation. 2. Whether the share application money can be categorized as financial debt. 3. Whether there is a default on behalf of the Respondent in payment of the amount claimed. Issue-wise Detailed Analysis: 1. Whether the Applicant's claim is barred by limitation: The Respondent argued that the claim was barred by limitation since the share application money was given in 2008-2009, and the last correspondence regarding the refund was on 03.07.2015. The application was filed on 13.02.2019, which is more than three years from the last alleged default. However, the Tribunal held that the balance sheet of the Respondent for 2015-16 reflected the amount claimed by the Applicant under the head "Other Liabilities," which amounts to a written acknowledgment of the liability by the Respondent, thus extending the limitation period. Consequently, the limitation period was calculated from 31.03.2016, and the application was filed within three years from that date. Therefore, the application is not barred by limitation. 2. Whether the share application money can be categorized as financial debt: The Tribunal examined the definition of financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016, which includes any debt disbursed against the consideration for the time value of money. The Hon'ble Appellate Tribunal in Nikhil Mehta & Sons vs. AMR Infrastructure Ltd. described financial debt as involving consideration for the time value of money. The Tribunal also referred to Section 42(6) of the Companies Act, 2013, and the Companies (Acceptance of Deposits) Rules, 2014, which state that if the shares are not allotted within 60 days of receipt of the money, the share application money has to be refunded within 15 days. Failure to refund within this period converts the share application money into a deposit, which has to be returned with interest at 12% per annum. Thus, the share application money, after the expiry of the time limit, is treated as a deposit and can be categorized as a financial debt. In this case, the money was transmitted in 2008, and the allotment has not been made till date, making the money a deposit and a financial debt. 3. Whether there is a default on behalf of the Respondent in payment of the amount claimed: The Tribunal found that the Respondent was ready to refund the money upon receiving the required letter from the Applicant. Although the Applicant submitted a letter dated 03.07.2015 requesting the refund, there was no evidence that the letter was actually delivered to the Respondent. The absence of acknowledgment of receipt by the Respondent indicated that the delivery was not proven. Therefore, it could not be established that the Respondent defaulted in refunding the money. The Tribunal emphasized that allowing the application without proof of delivery would allow the Applicant to benefit from its own wrong. The Tribunal directed the Applicant to fulfill the formalities required by the RBI for the refund within three months from the date of the order. If the Respondent fails to refund the money after the Applicant complies with the formalities, the Applicant has the liberty to revive the application. Consequently, the application was dismissed with the liberty to revive if the refund is not made following the required formalities. Conclusion: The Tribunal concluded that the application was not barred by limitation, the share application money could be categorized as financial debt, but there was no default on the part of the Respondent in refunding the money due to lack of evidence of delivery of the refund request. The Applicant was directed to complete the necessary formalities for the refund, and the application was dismissed with liberty to revive if the refund is not made after compliance with the formalities.
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