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IBC

Insufficiency Of Stamp Duty Irrelevant In S. 7 Proceedings Under IBC: NCLT Mumbai Bench

LIVELAW NEWS NETWORK
11 Feb 2022 11:33 AM GMT
Insufficiency Of Stamp Duty Irrelevant In S. 7 Proceedings Under IBC: NCLT Mumbai Bench
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The NCLT Mumbai Bench comprising of H.V. Subba Rao (Judicial Member) in Vistra ITCL India Ltd. v. Satra Properties (India) Ltd. held that insufficiency of stamp duty is not to be looked at in a Section 7 application, more so when 'debt' and 'default' are proved otherwise than by looking into these documents. The application was referred to H.V Subba Rao by the then Acting President...

The NCLT Mumbai Bench comprising of H.V. Subba Rao (Judicial Member) in Vistra ITCL India Ltd. v. Satra Properties (India) Ltd. held that insufficiency of stamp duty is not to be looked at in a Section 7 application, more so when 'debt' and 'default' are proved otherwise than by looking into these documents.

The application was referred to H.V Subba Rao by the then Acting President for his opinion as a third person due to a difference of opinion between Smt. Suchitra Kanuparthi, Judicial Member and V. Nallasenapathy, Technical Member on the following question of law, in an application u/s 7 of the Insolvency and Bankruptcy Code, 2016-

Whether the Debenture Trust Deed dated 1st March, 2014 and Redeemable Non-convertible Debenture Subscription Agreement dated 1st March, 2014, shall be impounded and be sent for payment of requisite stamp duty in accordance with the Maharashtra Stamp Act.

M/s Vistara ITCL/ Financial Creditor filed an application for initiation of CIRP u/s 7 of the Code against the M/s Satra Properties (India) Ltd./Corporate Debtor.

The Corporate Debtor opposed this application on the ground that Secured Redeemable Non-Convertible Debenture Subscription Agreement and Debenture Trust Deed cannot be relied upon by the Financial Creditors till deficit stamp duty is paid on the abovementioned two instruments.

Both members allowed the application initiating CIRP against the Corporate Debtor, holding that 'debt' and 'default' stand proved against the corporate debtor even without relying on the Debenture Trust Deed and NCD Subscription Agreement. However, they differed on the issue of impounding and payment of deficit stamp duty on these documents.

The Judicial Member went a step further and partially allowed the application holding that the Debenture Trust Deed and Redeemable Non-Convertible Debenture Subscription Agreement shall be impounded and sent for payment of requisite stamp duty in accordance with the Maharashtra Stamp Act.

The Technical Member, on the other hand, did not express any opinion on stamp duty and directed the Registry to immediately place the record before the President for constituting an appropriate bench so that the order is rendered in accordance with the opinion of the majority.

Thereafter, the case was referred for independent opinion of the third member- H.V. Subba Rao.

Issues

i.Whether the pleas of deficit stamp duty, non-payment of stamp duty can be raised by a Corporate Debtor in a Section 7 application more so when the 'debt' and 'default' are proved even without relying on those documents ?

ii. If so at what stage and before whom?

Decision

The Tribunal relied on a decision of the Bombay High Court in this regard, when it was dealing with a winding up petition wherein the Court stated that it was not concerned with insufficiency of stamp duty, but rather on whether the company is unable to pay its debts.

A similar view was also held by the NCLAT, Chennai Bench in Ashique Ponnamparambath Vs. The Federal Bank Limited wherein the Tribunal rejected the appeal on the ground that even if the loan documents are insufficiently stamped, then also the debt and default are proved beyond doubt.

The Tribunal held-

"I am of the opinion that the above plea of Stamp Duty is not available to the Corporate Debtor in the present case when once the debt and default are proved without looking into the above documents and accordingly the first issue is answered in negative."

Regarding the issue- when and before whom the above issue of stamp duty has to be raised, it was held-

"It is very clear from the plain reading of the provisions of Maharashtra Stamp Act and Indian Stamp Act, that a duty is cast upon the authority before whom the document is sought to be used as evidence by the party for the purpose of enforcing the contractual rights and obligations."

The Tribunal dismissed the present application and held that getting into the issue of stamp duty at this stage is irrelevant and uncalled for in a Section 7 application, more so when 'debt' and 'default' are proved otherwise without looking into those documents. However, it granted liberty to the Corporate Debtor to raise the above issue before the appropriate authority before whom the Financial Creditor relies on the above documents as evidence for enforcing their rights under the above documents.

Case Title:Vistra ITCL India Ltd. v. Satra Properties (India) Ltd.

Counsel For The Applicant: Mr. Nausher Kohli, Advocate

Counsel For The Respondents: Mr. Pulkit Sharma, Advocate

Click Here To Read/Download Order

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