Tribunal admits petition as financial debt under Insolvency & Bankruptcy Code

The Tribunal found that the amount claimed by the Applicants constituted a "financial debt" under the Insolvency and Bankruptcy Code, as it was disbursed against the consideration for the time value of money. Despite objections raised by the Respondent Corporate Debtor Company regarding the maintainability of the petition and a settlement deed between the parties, the Tribunal admitted the petition. It declared a moratorium, appointed an Interim Resolution Professional, and directed cooperation from all connected parties for the Corporate Insolvency Resolution Process. The petition was admitted on 16.03.2020.

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Issues Involved:
1. Whether the amount claimed by the Applicants from the Respondent Corporate Debtor Company constitutes a "financial debt" under the Insolvency and Bankruptcy Code, 2016.
2. Whether the petition filed by the Applicants is maintainable.
3. Whether the settlement deed dated 20.06.2018 affects the claims of the Applicants.
4. Whether the application is filed within the limitation period.

Detailed Analysis:

1. Financial Debt:
The primary issue was to ascertain if the amount claimed by the Applicants is a "financial debt" as defined under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. The Applicants argued that their remuneration as Directors was converted into Unsecured Loans, which were reflected in the balance sheets and supported by TDS certificates showing interest payments at 10% per annum. The Respondent Corporate Debtor Company admitted the debt and deducted TDS on the interest payable. The Tribunal concluded that the debt constituted a financial debt as it was disbursed against the consideration for the time value of money.

2. Maintainability of the Petition:
The Respondent Corporate Debtor Company raised objections regarding the maintainability of the petition, arguing that it was filed on behalf of three persons but signed by only one. The Tribunal, however, did not find this argument sufficient to dismiss the petition.

3. Settlement Deed:
The Respondent Corporate Debtor Company contended that a settlement deed dated 20.06.2018 between the parties precluded the Applicants from raising any claims. The Tribunal decided not to consider the settlement agreement while disposing of the present petition, focusing instead on the statutory requirements under the Insolvency and Bankruptcy Code.

4. Limitation Period:
The Tribunal verified that the default occurred on 31st August 2017, and the petition was filed on 19th February 2019, which is within the three-year limitation period as prescribed by law.

Observations and Order:
The Tribunal observed that the debt was acknowledged by the Respondent Corporate Debtor Company, reflected in their balance sheets, and TDS was deducted on the interest payable. The Tribunal found that:
- The existence of debt is above Rs. One Lac.
- The debt is due and defaulted.
- The default occurred on 31st August 2017.
- The petition was filed within the limitation period.
- The application filed by the Petitioner is complete for the initiation of Corporate Insolvency Resolution Process.

The Tribunal admitted the petition and declared a moratorium prohibiting suits, transferring of assets, and other actions against the corporate debtor. Mr. Parag Sheth was appointed as the Interim Resolution Professional to manage the Corporate Insolvency Resolution Process and make a public announcement of the moratorium. The Tribunal directed all personnel connected with the Corporate Debtor to cooperate with the Interim Resolution Professional.

The Tribunal ordered that an authentic copy of the order be communicated to the Operational Creditor, Corporate Debtor, Interim Resolution Professional, and the Registrar of Companies. The petition CP(IB) No. 161/7/NCLT/AHM/2019 was admitted on 16.03.2020 with the above observations and directions.

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