Tribunal admits application against Corporate Debtor, initiates CIRP. Financial Creditors recognized.

The Tribunal held that the application was maintainable and not time-barred. It found the applicants to be Financial Creditors with a financial debt. Consequently, the application was admitted, and the Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor. An Interim Resolution Professional (IRP) was appointed, and a moratorium was ordered under Section 14 of the Insolvency and Bankruptcy Code. The Corporate Debtor was directed to cooperate with the IRP and provide required documentation.

---

---

Issues Involved:
1. Maintainability of the application and whether the debt is time-barred.
2. Whether the applicants are Financial Creditors and the debt due is a Financial Debt.

Issue-wise Detailed Analysis:

1. Maintainability of the application and whether the debt is time-barred:

The Corporate Debtor argued that the application is barred by limitation as the debt became due on 31-6-2016, and the three-year limitation period expired on 30-6-2019. The Corporate Debtor relied on several Supreme Court judgments to support this argument. The Tribunal referenced the Supreme Court decision in B.K. Educational Services (P.) Ltd., which clarified that the Limitation Act applies to applications filed under sections 7 and 9 of the Insolvency and Bankruptcy Code (IBC) from its inception. According to Article 137 of the Limitation Act, the right to sue accrues when a default occurs, and if the default occurred over three years before the application, it would be barred unless Section 5 of the Limitation Act is applied to condone the delay.

The Tribunal also considered the judgment in Innovative Industries Ltd. v. ICICI Bank Ltd., which stated that the adjudicating authority only needs to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. Additionally, the Tribunal referenced the Supreme Court judgment in ITC Ltd. v. Blue Coast Hotels Ltd., which held that an acknowledgment of liability, even if made "without prejudice," constitutes an acknowledgment under Section 18 of the Limitation Act.

The Tribunal found that the WhatsApp communication dated 23-5-2019 from the Corporate Debtor constituted an acknowledgment of liability, thereby bringing the application within the limitation period.

2. Whether the applicants are Financial Creditors and the debt due is a Financial Debt:

The Tribunal examined whether the amount disbursed by the Financial Creditors constituted a "financial debt" under Section 5(8) of the IBC. The Financial Creditors had entered into an agreement with the Corporate Debtor on 17-8-2015 to invest in a project and purchase a 1/6th undivided interest in a resort. The Corporate Debtor agreed to pay 1/6th of the rental pool income and, if the rental pool income was less than 9% of the total consideration, to pay 9% of the total consideration for the initial four years. The Corporate Debtor also undertook to buy back the fraction at 140% of the original sale price after five years.

The Tribunal found that the amount disbursed by the Financial Creditors had the commercial effect of a borrowing, as it involved the consideration for time value of money. The agreement included elements such as sharing rental income and a buyback condition, which indicated an economic gain or commercial effect of borrowing. Thus, the amount paid by the Financial Creditors was deemed to be a "financial debt."

Conclusion:

The Tribunal held that the application was maintainable and not barred by limitation. It also determined that the Financial Creditors were indeed Financial Creditors and the debt due was a Financial Debt. Consequently, the application was admitted, and the Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor. The Tribunal appointed an Interim Resolution Professional (IRP) and ordered a moratorium as per Section 14 of the IBC. The Tribunal also directed the management of the Corporate Debtor to cooperate with the IRP and submit necessary documents and information.

---