Share Application Refund Granted Despite Limitation; Applicant's Claim Extended, Refund Process Initiated

The application was not barred by limitation as the Respondent's balance sheet for 2015-16 acknowledged the liability, extending the limitation period. The share application money was considered a financial debt due to non-allotment of shares within the specified time frame. However, there was no default by the Respondent in refunding the money as evidence of delivery of the refund request was lacking. The Applicant was directed to complete formalities for the refund, with the application dismissed but the liberty to revive if the refund was not made post-compliance.

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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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