Case Title: Pramod Sharma v. Karanaya HeartCare Pvt. Ltd.
The National Company Law Appellate Tribunal has observed that failure to repay the amount given as ‘Share Application Money’ cannot trigger CIRP u/s 7 of the Code.
It is the case of the Appellant that he had given Rs.1,03,00,000/- in the share capital of Respondent but no share was allotted in lieu of such money nor was any of the amount returned. Therefore, it became a ‘deposit’ with the Respondent, eligible to be covered u/s 7 of the Code.
While hearing the submissions of both sides, the contents of the Impugned Order dated 11.10.2017 were looked into and it was found that the matter between both parties was amicably settled, and the Appellant failed to show any agreement to substantiate the fact that money was paid as a financial debt or that the money was paid against the payment of interest. In light of this the Adjudicating Authority dismissed the Section 7 application and held thus:
“...share application money does not fall under any of the clauses of Section 5(8) of the Code and it cannot be said to fall under the definition “a debt along with interest, if any, which is disbursed against the consideration for the time value of money” since no debt was disbursed by the Applicant to the Respondent and no time value has been attached with the share application money. Thus, since the claim is not a financial debt the present application under Section 7 of the Code is not maintainable and is dismissed with no costs.”
The Appellate Tribunal also upheld the order and findings of the Adjudicating Authority and kept it open for the Appellant to resort to an appropriate legal remedy for the dishonoured cheque produced in this Tribunal.