The court held that the Financial Creditor's application under Section 7 was barred by limitation as the cause of action arose when the redevelopment project failed to commence, not upon the termination of the agreement.

J U D G M E N T

ASHOK BHUSHAN, J.

This Appeal has been filed challenging the Order dated 25.07.2023 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench – IV) admitting a Section 7 Application filed by the Respondents No. 1 to 3 herein. The Appellant, Suspended Director of the Corporate Debtor, Atul Projects India Private Limited, aggrieved by the Order has come up in this Appeal.

2. Brief facts of the case necessary to be noticed for deciding the Appeal are:

i. A Memorandum of Understanding (MoU) was entered on 16.05.2010 between the Owners and M/s. Atul Projects India Private Ltd., the Developers for redevelopment of Project on the piece of land admeasuring 576.93 m², Malabar and Cumbula Hill Division Mumbai.

ii. Under the MoU, the Developer had proposed to pay amount of ₹9.40 Crores to Owners and ₹3.5 Crores to the Confirming Parties, detailed terms and conditions for carrying out the redevelopment and payment as well as details of total 22 floors to be redeveloped was contained in the MoU.

iii. Thakkars, namely Deepak Vinod Thakkar and Prashant Vinod Thakkar entered with Articles of Understanding (AoU) with the Developers who desired to jointly redevelop the Project.

iv. AoU was also executed on same date 16.05.2023. Under the AoU, Developers were entitled to sell/dispose of 4 entire floors of the new building and Thakkars were entitled to sell/dispose of 2 entire floors, namely, 18th and 19th floor in the new building. Thakkars were liable to get investment of ₹6 Crores which shall be paid to the Developer. ₹50 lakhs was investment paid by Thakkars and the amount of ₹6.5 Crores was supposed to be used by Developer to pay the Owners and Confirming Parties, the respective shares of ₹3 Crores and ₹3.5 Crores.

v. The AoU further noticed that Thakkars did not have requisite initial investment, hence it was agreed that they can obtain the same from Investors i.e., Respondents No. 1 to 3 to the Appeal.

vi. Thakkars entered into Articles of Agreement (AoA) on the same day dated 16.05.2010 with Respondents No. 1 to 3, the Investors which contemplated the Developer was Confirming Party.

vii. The AoA contemplated that Vendors i.e., Thakkars could be liable to get initial investment of ₹6 Crores and in lieu of payment of ₹6Crores, Investor shall be entitled for allotment of 18th floor out of 2 floors of the Vendors. The amount of ₹6 Crores was to be paid by Investors on behalf of the Vendors to the Developers.

viii. The Developers were to utilise the amount as per the MoU. It was further agreed that in event the Developer failed to comply with these obligation and other terms and conditions or fail to enter into Development Agreement with the Owners within 6 months from date of execution of AoA, then a grace period of 1 month will be provided to the Developers. The Investor shall have an option to terminate the Agreement and Developer shall return the sum of ₹3 Crores to the Investor along with interest @ 18% p.a. within 15 days of the Investor making demand of the same in writing to the Developers.

ix. The amount of ₹3 Crore was paid by the Investors on behalf of the Vendors i.e. Thakkars to the Developers. Due to some dispute with the Owners, the redevelopment could not begin.

x. On 04.11.2011, the Corporate Debtor returned an amount of ₹1.3 Crores to the Respondents No. 1 to 3. The Developer also paid certain amount to Thakkars out of ₹3 Crores received from the Investors.

xi. Appellant’s case is that amount of ₹1.95 Crore was paid to the Thakkars. The entire debt of ₹3 Crore given by Investors were paid. The project did not commence. The Corporate Debtor send a Complaint dated 04.07.2019 to the Senior Police Inspector, giving the details of transactions entered between the Developers, Deepak Vinod Thakkar and Prashant Vinod Thakkar. The Complaint mentioned that amount paid to the Investors payments were made to the Owner of ₹3 Crores.

On request of the Investor, amount of 1.3 Crore was returned.

xii. It was s