NCLT Mumbai-1 (03.08.2020) in Vistra ITCL (India) Limited Vs. Satra Properties (India) Limited [M.A. 180/2020 in C.P. 1632/I&B/MB/2019] while admitting section 7 application, plea of the CD in respect of deficient stamp duty on Debenture Trust Deed, attracted split verdict of the bench, on the issue of impounding of documents under the provisions of Maharashtra Stamp Act. The matter was referred to third member judge on the following question;
43. The question of law framed is as below - 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.
Excerpts of the order;
# 26. FINDING:
ISSUES:
A. Whether the Debenture Subscription Agreement and Debenture Trust deed executed and registered in Delhi are insufficiently stamped in the State of Maharashtra in accordance with Maharashtra Stamp Act 1958, where they are sought to be enforced?
B. Whether these documents are liable to be impounded under Sec 33 & 34 of Maharashtra Stamp act 1958, in a summary proceedings under IBC?
C. Whether there is novation of contract?
D. Whether the petitioners are entitled to recover the outstanding sums due to be redeemed under the Debenture Subscription Agreement and Debenture Trust Deed?
• In the backdrop of factual matrix, the issue for consideration is whether the Debenture Subscription Agreement and Debenture Trust Deed are enforceable contracts as they have been executed in Delhi and registered at Delhi and are being brought into the State of Maharashtra for the purpose of enforcement or realization of outstanding amounts due under the said deeds.
• The court, while admitting a petition under sec.7 of I & B code has the power to examine the contracts between the parties, rights accrued to the parties and has to look into the enforceability of the document in the light of objection raised that these documents are insufficiently stamped. The basic rights of recovery of monies under 4330 Debentures will have to be considered harmonizing the charging section envisaged under Sec 33 & 34 of Maharashtra Stamp Act, which will have to be addressed to ensure revenue recoveries. Sec 33 of Maharashtra Stamp Act is extracted below: . . . . .
Section 33- Examination and impounding of instruments.
1) Subject to the provisions of sections 32-A, every person having by law or consent of parties authority to receive evidence and every person in charge of a public office, except an officer of police or any other officer, empowered by law to investigate offences under any law for the time being in force, before whom any instrument chargeable, in his opinion, with duty, is produced or comes in the performance of his functions shall, if it appears to him that such instrument is not duly stamped, impound the same irrespective whether the instrument is or is not valid in law.
2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him in order to ascertain whether it is stamped with a stamp of the value and description required by the law for the time being in force in the State when such instrument was executed or first executed:
Provided that, -
(c) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court to examine or impound, if he does not think fit so to do any instrument coming before him in the course of any proceeding other than a proceeding under Chapter IX or Part D of Chapter X of the Code of Criminal Procedure, 1973;
(d) in the case of a Judge of a High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court may appoint in this behalf.
3) For the purpose of this section, in cases of doubt, -
(c) the State Government may determine what offices shall be deemed to be public offices.
(d) the State Government may determine who shall be deemed to be persons in charge of public offices.
Similarly, Section 33 of the Indian Stamp Act, 1899 which is parimateriato the aforesaid Section 34 reads thus:
Section 33- Examination and impounding of instruments-
(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(2) For that purpose very such person shall examine every instrument so chargeable and so produced or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in India when such instrument was executed:
Provided that-
(a) Nothing herein contained shall be deemed to require any Magistrate or Judge of Criminal Court to examine or impound, if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (5 of 1898)
(b) in the case of a Judge of a High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court appoints in this behalf.
(3) for the purpose of this section, in cases of doubt,-
(a) the State Government may determine what offices shall be deemed to be public offices; and
(b) the State Government may determine who shall be deemed to be persons in charge of public offices.
• This section cast an obligation on the Court, Adjudicating Authority, Judicial officer, Quasi judicial officer not to admit any document which is not duly stamped. In view of Sec 19 of Maharashtra Stamp Act 1958, the documents executed in Delhi and sought to be enforced in Mumbai are subject to pay the difference of duty. Sec.19 is extracted as follows: . . . ,
• Though the debenture trust deeds and agreements are not admitted or marked as evidence before the Adjudicating Authority, the very basis of admission of any claim is the contractual obligation between the parties and the very basic document is insufficiently stamped and necessarily has to comply with the fiscal measure of the state and in the interest of revenue.
• The Petitioners are enforcing their rights and obligations of the parties as entailed under the Debenture Subscription Agreement and debenture Trust deed. The Debentures were to be issued in dematerialized form through electronic records as maintained by the Respondent Company. These Debentures under Sec.71 of Companies Act 2013 are mere certificate indicating the indebtedness of the company and the rights of enforcement are thus captured in the Debenture Subscription Agreement and debenture trust deed. The events of default as envisaged in the Debenture Subscription Agreement, gives a right of enforcement of contract and as such the petitioners have filed a petition to initiate CIRP under Sec.7 of I & B Code and the rights attached to Debentures under Companies Act 2013 are not being enforced and hence every document which is insufficiently stamped has to be impounded for payment of stamp duty in the interest of revenue and is a curable defect.
• The Hon’ble Mumbai High Court in Antifriction Bearing Corporation Ltd. Vs, State Of Maharashtra reported in AIR 1999 Bombay page 37., dealt with the similar question of law wherein the petitioner company held in properties in Gujarat and registered in the state of Gujarat, constituency issued debenture trust deed and these documents were also registered in the state of Gujarat. Petitioner-Companies then filed copy of the instruments under Section 125 of the Companies Act, 1956 with the Registrar of Companies at Bombay, where they are having registered offices. The Companies thereupon obtained the Certificates as envisaged by Section 132 and accordingly at Bombay issued Debentures. The Superintendent of Stamp, Bombay, observed that the Instrument is chargeable under Art. 40(b) and 48(d) of Schedule I of the Act 1958.
The Court at para 6 & 7 observed as below:
“6. Impugned provisions have incorporated a special scheme to prevent the evasion of stamp duty, What is explicit in Section 7, that, on arrival of the copy of the instrument in this State, original instrument becomes chargeable in the same manner as if received in the State in terms of Section 19. This section deals with increased duty on certain documents in State of Maharashtra, Section 19 (as it stood prior to Amendment of 1993) reads thus:— “Payment to duty on certain instruments liable to increased duty where any instrument of the nature described in any article in Schedule I and relating to any property situate or to any matter or thing done or to be done in this State is executed out of the State and subsequently received in the State.— (a) the amount of duty chargeable on such instrument shall be the amount of duty chargeable under Schedule I on a document of the like description executed in this State less the amount of duty, if any, already paid under any law in force in India excluding the State of Jammu and Kashmir on such instrument when it was executed.” (Emphasis supplied)
7. These provisions operate when the Scheduled Instrument is registered in some other State, and in relation thereto some matter or things done or to be done in this State and subsequently received in the State. What is significant that these provisions take note of the duty already paid on the instrument in other State and seeks to recover only difference between duty chargeable in this State and duty already paid when registered in some other State. Doing something pursuant to the instrument in this State is a chargeable transaction and what is recoverable is additional duty payable according to rates prevailing in this State. Receipt of the copy could only be a chargeable event. It however, could not be construed that Section 7 attempts simplicter to levy a stamp duty on the copy of the instrument.”
The court held that the petitioners are liable to pay stamp duty as directed by Superintendent of Stamp, Maharashtra. The above dictum would categorically demonstrate that documents received in the State of Maharashtra, if insufficiently stamped would be subject to levy of specific stamp duty under sec.19 of Maharashtra Stamp Act and impounding of the documents under Sec 33 & 34 Maharashtra Stamp act 1958 is a consequential order.
• The Hon’ble Supreme Court in SMS Tea Estate Pvt. Ltd. Vs. Chandmari Tea Company Pvt. Ltd. Reported in (2011 14 SSC pg 66) wherein it was held that the insufficiently stamped / unstamped documents cannot be enforced and or acted upon. The Court at para 12 held as follows:
“12. We may therefore sum up the procedure to be adopted where the arbitration clause is contained in a document which is not registered (but compulsorily registrable) and which is not duly stamped:
(i) The court should, before admitting any document into evidence or acting upon such document, examine whether the instrument/document is duly stamped and whether it is an instrument which is compulsorily registrable.
(ii) If the document is found to be not duly stamped, Section 35 of Stamp Act bars the said document being acted upon. Consequently, even the arbitration clause therein cannot be acted upon. The court should then proceed to impound the document under Section 33 of the Stamp Act and follow the procedure under Section 35 and 38 of the Stamp Act.
(iii) If the document is found to be duly stamped, or if the deficit stamp duty and penalty is paid, either before the Court or before the Collector (as contemplated in Section 35 or 40 of the Stamp Act), and the defect with reference to deficit stamp is cured, the court may treat the document as duly stamped.
(iv) Once the document is found to be duly stamped, the court shall proceed to consider whether the document is compulsorily registrable. If the document is found to be not compulsorily registrable, the court can act upon the arbitration agreement, without any impediment.
(v) If the document is not registered, but is compulsorily registrable, having regard to Section 16(1)(a) of the Act, the court can de-link the arbitration agreement from the main document, as an agreement independent of the other terms of the document, even if the document itself cannot in any way affect the property or cannot be received as evidence of any transaction affecting such property. The only exception is where the Respondent in the application demonstrates that the arbitration agreement is also void and unenforceable, as pointed out in para 8 above. If the Respondent raises any objection that the arbitration agreement was invalid, the court will consider the said objection before proceeding to appoint an arbitrator.”
Even in an arbitration matter, the Supreme Court remitted the matter to Chief Justice, Guwahati, to decide the issue of stamp duty and then appoint the arbitrator.
• The petitioner also relied upon the judgment of the Hon’ble Supreme Court in Garware Wall Ropes Ltd. Vs. Coastal Marine Construction and Engineering Ltd. reported in AIR2019 SC 2053, the Hon’ble Supreme court in this matter held that an agreement is not enforceable by law as the documents which is sought to be acted upon has not been registered. The court also held at para 27, 28 & 29 as follows;
“Para 27: One reasonable way of harmonising the provisions contained in Sections 33 and 34 of the Maharashtra Stamp Act, which is a general statute insofar as it relates to safeguarding revenue, and Section 11(13) of the 1996 Act, which applies specifically to speedy resolution of disputes by appointment of an arbitrator expeditiously, is by declaring that while proceeding with the Section 11 application, the High Court must impound the instrument which has not borne stamp duty and hand it over to the authority under the Maharashtra Stamp Act, who will then decide issues qua payment of stamp duty and penalty (if any) as expeditiously as possible, and preferably within a period of 45 days from the date on which the authority receives the instrument. As soon as stamp duty and penalty (if any) are paid on the instrument, any of the parties can bring the instrument to the notice of the High Court, which will then proceed to expeditiously hear and dispose of the Section 11 application. This will also ensure that once a Section 11 application is allowed and an arbitrator is appointed, the arbitrator can then proceed to decide the dispute within the time frame provided by Section 29A of the 1996 Act.
28. Arguments taken of prejudice, namely, that on the facts of this case, the Appellant had to pay the stamp duty and cannot take advantage of his own wrong, are of no avail when it comes to the application of mandatory provisions of law. Even this argument, therefore, must be rejected.
29. We, therefore, allow the appeal and set aside the judgment of the Bombay High Court. The matter is remitted to the Bombay High Court to dispose of the same in the light of this judgment.
In view of the recent decision of the Supreme Court, this bench is of the view that all registered documents which are insufficiently stamped shall be impounded and sent for payment of adequate stamp duty.
# 27. Reverting to the series of communication quoted by the Corporate Debtor/Respondent with reference to the larger settlement between the parties namely;
1) Minutes of the meeting dated 31/01/2018 and other meetings, which captured the proposal to settle the loans of MJS group and others to a tune of INR 200 crore, with a specific rider that “the benefit under existing security package in relation to all loans of IIFL & MJS shall continue in the new SPV”,
2) The communication letter dated 18/07/2018 addressed to IIFL issue of NOC,
3) Minutes of Meeting dated 17/09/2018, MOM dated 27/09/2018,
4) Letter from escrow agent dated 1/10/2018,
5) Supplemental letter agreement and
6) Final letter dated 1/11/2018 from petitioners has cancelled of entire understanding between the parties, demonstrate that the larger understanding between parties did not work out and was eventually cancelled by the petitioners.
7) Letter dated 3/04/2019 addressed by Corporate Debtor to BSE.
8) Letter dated 8/04/2019 addressed by Petitioner’s counsel to BSE.
9) Letter dated 16/04/2019 seeking redemption of NCD by Petitioner No.2 & 3 to the Corporate Debtor.”
# 28. I have no hesitation to take the view that there is no Novation of contract as the larger understanding was revoked by the petitioner vide letter dated 1/11/2018 and thus it clearly demonstrates that the so called larger understanding was not acted upon, and therefore the earlier liability of payment of the outstanding dues were never subsumed in the overall settlement as claimed by the Corporate Debtor/Respondent, hence the liability of the Corporate Debtor is not discharged. I therefore conclude that there was no consensus arrived between the parties and the settlement was revoked by the petitioners. Therefore, it can be said that all the rights accrued to the Petitioners no.2 & 3 under the Debenture Trust Deed and Agreements are enforceable subject to the payment of difference of stamp duty.
# 29. The Corporate Debtor/respondent never disputed the execution of the above documents nor the liability arising there under. The entire endeavor to settle the claims between the parties was on the basis of outstanding dues under the Debenture Subscription Agreement and Debenture trust deeds, the same did not work out and acted upon by the parties. Infact, the Corporate Debtor admitted its liability and sought to revise the dates of redemption vide letters dated 14th February 2018, 27th March 2018 and 10th May 2018 related to restructuring of the outstanding NCDs and revised date of redemption. It is not the case of the Corporate Debtor that the Debenture Subscription Agreement and Debenture trust deeds were revoked and Debentures issued by the Corporate Debtor were cancelled, in view of the larger settlement between parties.
# 30. In view of the above observation, it can be said that the Corporate Debtor has defaulted in paying the outstanding sum due under the Secured Redeemable Non-Convertible Debenture Subscription Agreement dated 1st March 2014 and Debenture Trust Deed dated 1st March 2014 and that there is no novation of contract as claimed by the Corporate Debtor/Respondent.
# 31. Both the Debenture Trust Deed dated 1st March 2014 and Debenture Subscription Agreement dated 1st March 2014 demonstrate that the stamp duty upon the same has been paid in Delhi for an amount of Rs. 300/- (Rupees Three Hundred Only) for the Debenture Trust Deed and for the Secured Redeemable Non-Convertible Debenture Subscription Agreement and it can be said are grossly insufficient and the only object of impounding would be to pay penalty and requisite stamp duty to render these documents enforceable in the eyes of law.
# 32. In view of the Maharashtra Stamp Act, 1958 and in particular Article 27 of Appendix 8 of the Maharashtra Stamp Act, 1958, an amount of Rs.2,80,000/- (Rupees Two Lakhs Eighty Thousand Only) would be payable towards stamp duty on the Secured Redeemable Non-Convertible Debenture Subscription Agreement dated 1st March 2014. Similarly, under the same provisions, an amount of Rs.2,80,000/- (Rupees Two Lakhs Eighty Thousand Only) would be payable towards stamp duty on the Debenture Trust Deed dated 1st March 2014.
# 33. In view of the above discussion, I am of the view that corporate debtor is liable to pay the sums outstanding amounting to ₹65,24,33,104/- (principal amount of Rs. 43,33,00,000/- plus interest @ 9 % p.a. from the respective date of subscription to till 21st April, 2019 amounting to Rs. 21,74,10,733/- and penal interest @ 6% p.a. amounting to Rs. 20,22,371/-) to the petitioner No.2 & 3. The petition is complete and deserves admission. The Adjudicating Authority in the light of Innoventive judgement while admitting a petition under Sec.7 has to examine whether there is a debt and default.
# 34. The petition is admitted and the documents namely Debenture Trust Deed dated 1st March, 2014 and Redeemable Non-convertible Debenture Subscription Agreement dated 1 March, 2014, are impounded for adequate stamping are being sent to the Sub Registrar of Assurance, Mumbai. The Interim Resolution Professional shall consider the above documents upon payment of requisite stamp duty.
# 35. M.A.180/2020 is partly allowed to the extent that the Debenture Trust Deed dated 1st March, 2014 and Redeemable Non-convertible Debenture Subscription Agreement dated 1 March, 2014, shall be impounded and be sent for payment of requisite stamp duty in accordance with the Maharashtra Stamp Act 1958.
# 36. This Bench having been satisfied with the application filed by the Petitioner which is in compliance of provisions of Section 7 of the Insolvency & Bankruptcy Code admits this application declaring Moratorium with the directions as mentioned below:
a. that this bench hereby prohibits the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgement, decree or other in any court of law; transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.
b. that the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period.
c. that the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
d. that the order of moratorium shall have effect from this date till the completion of the CIRP or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under section 33, as the case may be.
e. That the public announcement of the CIRP shall be made immediately as specified under Section 13 of the Code.
f. That this Bench hereby appoints Mr. Devarajan Raman, having Registration No. IBBI/IPA-02/IP-N00323/2017-18/10928 as an Interim Resolution Professional to carry out the functions as mentioned under the Code.
g. The Registry is hereby directed to communicate this order to both the parties and to the Interim Resolution Professional immediately.
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Dissent Judgement
Per: V. Nallasenapathy, Member (T)
ORDER
# 37. I have gone through the order of my learned sister. I agree with the finding that the Petition deserves admission for which I would also like to adduce reasons separately. However, I respectfully disagree with the decision of my learned sister in MA No.180 of 2020 which is partially allowed to the effect that the Debenture Trust Deed (“Deed”) dated 1st March, 2014 and Redeemable Non-convertible Debenture Subscription Agreement (“Agreement”) dated 1st March, 2014, shall be impounded and be sent for payment of requisite stamp duty in accordance with the Maharashtra Stamp Act, before the Interim Resolution Professional considers the above documents for claim purpose, for the following reasons:
a. Subsequent to the execution of the above said deed and agreement, the Corporate Debtor issued debentures to the Petitioners and the same has been shown in the Balance Sheet of the Corporate Debtor for several years. Some of the debentures were redeemed by the Corporate Debtor. The claim in the Petition is based on the debentures which are remaining unredeemed.
b. It is beneficial to refer Form-1 filed by the petitioner wherein apart from the above said deed and agreement the following documents are enclosed in proof of the debt:
i) The copy of agreement for a deposit of the title deeds of the immovable property dated 3 March 2014.
ii) Debenture allotment intimation by the corporate debtor to the Petitioner nos. 2 and 3 dated 21/03/14, 19/04/14, 06/05/14, 18/07/14 and 12/11/14.
c. One of the above debenture allotment intimation dated 12/11/14 is extracted below for ready reference.
d. A copy of the standalone financial statements of the Corporate Debtor annexed to the annual report 2018 – 19, produced during the hearing, is extracted below to show that the debenture borrowings were reflected in the financial statements. . . .
e. In my view, the above said documents are sufficient to adjudicate the main Petition, without going into the details whether the debenture trust deed and redeemable non-convertible debenture subscription agreement both dated 01.03.2014 were unstamped or insufficiently stamped. In fact the same has rightly happened and the petition is admitted.
f. The deed and the agreement are only ancillary/ collateral / incidental documents which need not be given any weightage at this point of time for deciding a petition under section 7 especially where debentures were issued, part of which were redeemed and remaining part is complained as defaulted. The debenture holders in their capacity as secured creditors are also petitioners before us apart from the debenture trustee.
g. It is to be noted that as far as the Petition under section 7 of the Code is concerned, the mandate of the Hon’ble Supreme Court, as held in the case of Mobilox Innovations Private Limited Vs Kirusa Software Private Limited MANU/SC/1196/2017, is that the adjudicating authority is to see whether debt and default is proved and nothing else. The relevant portion of the judgement is extracted below:
“30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.’’
h. The following judgements were quoted by the Corporate Debtor in support of their contention that the deed and agreement have to be impounded.
i) Antifriction Bearing Corporation Ltd. Vs. State Of Maharashtra1998 Scc Online Bom 409,wherein the Hon’ble Bombay High Court, accepting the stand of the Superintendent of Stamps at Bombay held that, when the petitioner company having registered office at Bombay, filed Debenture Trust Deed (instrument) executed at Gujarat with Registrar of Companies, Mumbai under section 125 of the Companies Act,1956 for obtaining a certificate under section 132 of the said Act, have to be stamped as provided under Maharashtra stamp Act,1958.
ii) SMS Tea estate Pvt. Ltd. Vs. Chandmari Tea Company Pvt. Ltd. (2011) 14 Supreme Court Cases 66, wherein it was held that the court before appointing an arbitrator under section 11 of the Arbitration and conciliation Act,1996, on the basis of an unstamped arbitration agreement, which requires compulsory registration, has to impound the agreement as required under the provisions of Stamp Act,1899 and ensure that stamp duty and penalty is paid before appointing an arbitrator.
iii) Garware Wall Ropes Limited v.s Coastal Marine Constructions and Engineering Limited (2019) 9 Supreme Court Cases 209, wherein it was held that section 11(6-A), which has been introduced by way of the Arbitration and conciliation(Amendment) Act,2015, has not removed the basis of the judgement in the case of SMS Tea estate Pvt. Ltd. Vs. Chandmari Tea Company Pvt. Ltd. and the unstamped arbitration agreement has to be impounded for payment of stamp duty and penalty, and thereafter the High Court can proceed to appoint an arbitrator under section 11 of the said Act.
i. In the Antifriction Bearing Corporation Ltd’s. case, supra, it relates to registration of a charge. In the cases of SMS Tea estate Pvt. Ltd. and Garware Wall Ropes Limited, the issue is regarding the enforceability of a compulsorily registrable Arbitration Agreement which was not registered. The above said judgements are distinguishable from the facts of the case on hand and will not apply to the proceedings under the Code especially when the debentures were already issued and a part of them were also redeemed. That apart, it is not the case here that the agreement and deed were not at all stamped as in the case of arbitration agreements which was not at all stamped. Stamp duty was paid on those documents at Delhi at the time of execution. Further, the arbitration agreement is a compulsorily registrable document by paying required stamp duty but debentures issued does not require any registration. Hence the reliance of the applicant on these judgements is of no avail.
j. It is not the case of the Corporate Debtor that the debentures were to be stamped. In fact, debentures are exempted from payment of stamp duty under Article 27 of Appendix 8 of the Maharashtra Stamp Act,1958.
k. The issue relating to the unstamped/ insufficiently stamped documents was raised before NCLT Benches in the following cases and a similar plea, as in this case, by the corporate debtor was rejected.
i. Srikanta Sarda vs. Transway Marketing Private Limited 2017 SCC Online NCLT 12964
ii. Bank of India vs. Gupta Infrastructure (India) Private Limited 2018 SCC Online NCLT 9916
l. The issue relating to impounding on account of non payment of stamp duty was raised before a coordinate bench of NCLT, Mumbai Bench in the case of Bennett Property Holdings Company Limited Vs. Brick Eagle Affordable Housing Advisory LLP MANU/NC/1083/2020,whereina similar contention as in this case, raised by the Corporate debtor was rejected and it was held:
“28. The next contention raised by the counsel appearing on behalf of the Corporate Debtor that the Stamp Duty is not duly paid on the Deed of Guarantee and hence, the same cannot be relied upon and also that the Deed of Guarantee was not executed in Maharashtra and should have been stamped within three months after it has been first received in this State for which the Corporate Debtor relied upon the recent judgment of the Hon'ble Supreme Court of India in the matter of Garware Walls Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd. was relied, wherein the Court reversed the judgment of the Bombay High Court and reiterated the principles laid down by it in the matter of SMS Tea v. Chandmari Tea Estate and held that "an arbitration clause is an instrument, which is not stamped as per law, cannot be given effect if and until the instrument is duly stamped i.e. full stamp duty in respect of such instrument as provided by law has been paid. If an unstamped instrument is brought before a person authorised to receive evidence or holding a public office, such person is required to impound the instrument." Here, in this present matter, it is pertinent to note that the Deed of Guarantee was executed at New Delhi and sufficient stamp duty of Rs. 400/- has been paid on it as is also reflected on the said document. Also, the Deed of Guarantee is silent on whom the obligation lies to pay the stamp duty. Therefore, according to Section 29 of The Indian Stamp Act, 1899 wherein it is mentioned that it is for the one executing the instrument to pay the stamp duty, and here, in this matter, it was the Corporate Debtor who was to pay the Stamp Duty because he had executed the said Deed of Guarantee which is in question before this Bench. Moreover, the judgment of the Hon'ble Supreme Court cannot be relied upon here in this present matter because the order was passed in arbitration proceeding and not while considering petition under IBC, 2016. It is also observed that the Corporate Debtor on one hand relies on the said Deed of Guarantee and on the other hand denies its evidentiary value and therefore, this contention raised has no credibility and therefore cannot be relied upon”.
m. It is to be noted that this is not a recovery proceeding but it is only a summary proceeding.
n. In view of the above discussion, the MA No. 180 of 2020 filed by the Corporate Debtor is dismissed.
# 38. The corporate debtor in the pleadings raised the following contentions and the same are dealt with as below:
Novation:
a. It is submitted that the Petitioner Nos. 2 and 3 and their associate firms, forms part of MJS Group and the said MJS Group is controlled by P2 and P3 along with their family members. It is stated that there is one more IIFL group. The Corporate Debtor side group is known as Satra Group. It is stated that there were many transactions between these groups interse. During Diwali 2017, these groups entered into settlement in respect of various transactions between them. Negotiations were held between MJS Group, IIFL group and Satra Group in respect of credit facilities received by Satra group. During the negotiation, MJS and Satra Group arrived at a novated contract/agreement for the various transactions entered into between them consequent to the deliberations and discussion, an unanimous agreement was finally arrived between Satra group, IIFL group and MJS Group on or around 31.1.2018 interalia to settle all the loan facilities availed by Satra group from IIFL group on full and final basis as well as settlement of liabilities to the MJS Group to the extent of Rs.200 crores. Copy of the minutes of meeting (MoM dated 31.1.2018) is annexed to the petition as Exhibit A and the same is extracted below: . . . ,
b. The Corporate Debtor submits that Section 62 of the Contract Act provides that if the parties to a contract agree to substitute a new contract for it, or to the rescind or alter it, the original contract need not be performed. It is submitted that the abovesaid MoM is a contract between the petitioner and the Corporate Debtor and accordingly, the parties have agreed to settle the dues in the manner decided in the MoM and hence, there is no liability as per the original contract.
c. Per contra, the petitioner submits that the debenture liability of Rs.43.33 crores is not included in the alleged settlement covered in the MoM as claimed by the Petitioner. The Petitioner further submits that the Corporate Debtor subsequent to the MoM requested for reduction of interest rate for debentures from 12% to 9%. When a settlement is arrived at, including these debentures, there is no occasion for the Corporate Debtor to request for reduction of interest rate. Even subsequent to the said MoM, this debenture liability is shown in the balance sheet of the Corporate Debtor for the year 2017-18 as well as for the year 2018-19 and hence the submission of the Petitioner that this debt is not covered by the MoM cannot be ignored. In view of the above finding, the contention of the Corporate Debtor that there is novation of contract and hence, there is no liability is rejected. Further, the reliance of the Corporate Debtor on the decision of the Hon’ble Superme Court in the case of Union of India vs. Kishorilal Gupta and Bros., AIR 1959 Supreme Court 1362 and the judgement of Hon’ble Madras High Court in the matter of The Indian Bank, Madras vs. S. Krishnaswamy and others (AIR 1990 Madras 115), is of no avail to the Corporate Debtor. Further it is noticed that the IIFL Group independently filed an insolvency petition before this Tribunal against the Corporate Debtor for realization of their debt in Company Petition No.175/2019 and that claim was independently settled by the Corporate Debtor, (despite the MoM) by an order of this tribunal dated 13.9.2019. This shows that even another party to this MoM have not acted upon this alleged settlement.
d. The Petitioner further submits that the alleged settlement in any event is incapable of being acted upon because the shares of Satra Properties Developers Pvt Ltd which were contemplated to be transferred to the Petitioners in the alleged settlement were ultimately sold to Mid-city Bhoomi Developers Pvt Ltd and the same has not been controverted by the Corporate Debtor. The Corporate Debtor further submitted that when the Petitioner 2 herein had filed a commercial suit no.859 of 2019 against the Corporate Debtor on the file of Hon’ble Bombay High Court, seeking interalia, transfer of 51% shares in the subsidiary of the corporate Debtor, the Corporate Debtor had opposed the reliefs sought by the Petitioner on the basis of MoM dated 31.1.2018 but the Corporate Debtor ultimately settled the suit and
transferred the shares to Petitioner 2. The consent terms filed therein has been brought on record, which negates the false stand taken by the Corporate Debtor.
# 39. In view of the above stated position, the Corporate Debtor claim of novation of contract is rejected.
# 39. Debt and Default.
It is not the case of the Corporate Debtor that they have not received funds from the Petitioner by issuing debentures and the debentures were shown in the balance sheet of the Corporate Debtor till date. The request of the Corporate Debtor for reduction of interest rate is a clear proof that the Corporate Debtor had not even paid the interest and the debentures were not redeemed even after the extension of time granted by the petitioners for redemption of debentures. All these things clearly proves the debt and default. The petitioners have complied with the provisions of Section 7 of the Code. Hence the petition deserves admission and accordingly the petition is admitted and the Corporate debtor is put under CIRP.
# 40. Project Insolvency:
The Ld. Sr. Counsel appearing for the Corporate Debtor submitted that in case the petition is admitted, all the projects of the Corporate Debtor shall not be put under CIRP. Only the Jaipur project shall be put into CIRP. For this argument the judgement of Hon’ble NCLAT in the case of “Flat Buyers Association vs. M/s. Umang Real Tech Pvt Ltd through IRP and Others” (MANU/NL/0077/2020), is relied on, wherein it was held as below:
“21. In Corporate Insolvency Resolution Process against a real estate, if allottees (Financial Creditors) or Financial Institutions/Banks (Other Financial Creditors) or Operational Creditors of one project initiated Corporate Insolvency Resolution Process against the Corporate Debtor (real estate company), it is confined to the particular project, it cannot affect any other project(s) of the same real estate company (Corporate Debtor) in other places where separate plan(s) are approved by different authorities, land and its owner may be different and mainly the allottees (financial creditors), financial institutions (financial creditors, operational creditors are different for such separate project. Therefore, all the asset of the company (Corporate Debtor) are not to be maximized. The asset of the company (Corporate Debtor - real estate) of that particular project is to be maximized for balancing the creditors such as allottees, financial institutions and operational creditors of that particular project. Corporate Insolvency Resolution Process should be project basis, as per approved plan by the Competent Authority. Any other allottees (financial creditors) or financial institutions/banks (other financial creditors) or operational creditors of other project cannot file a claim before the Interim Resolution Professional of other project and such claim cannot be entertained.
So, we hold that Corporate Insolvency Resolution Process against a real estate company (Corporate Debtor) is limited to a project as per approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans approved. For example - in this case the Winter Hill - 77 Gurgaon Project of the 'Corporate Debtor' has been place of Corporate Insolvency Resolution Process. If the same real estate company (Corporate Debtor herein) has any other project in another town such as Delhi or Kerala or Mumbai, they cannot be clubbed together nor the asset of the Corporate Debtor (Company) for such other projects can be maximized”.
# 41. I am unable to accept the submissions of the Ld. Sr. Counsel for the reason that the amount raised by the Corporate Debtor by issue of these debentures were not exclusively invested in the Jodhpur project alone but only the property of the jodhpur project was given as security by creation of mortgage. The record shows that the money raised by these debentures were utilized for general purpose and other projects also. Hence the submission of the Ld. Sr. Counsel is rejected.
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Coram:
Hon’ble Smt. Suchitra Kanuparthi, Member (Judicial)
Hon’ble Shri. V. Nallasenapathy, Member (Technical)
# 42. After the conclusion of arguments on 19.2.2020, this application and Petition was reserved for orders. Today, the orders were pronounced. The lead judgement has been delivered by Smt. Suchitra Kanuparthi, Member (Judicial) and the dissenting judgement in MA 180/2020 is delivered by Mr. V. Nallasenapathy, Member (Technical). However, both the members have admitted the company petition and initiated CIRP against the Corporate Debtor. The members are divided on the issue - whether the Debenture Subscription Agreement and Debenture Trust Deed are required to be impounded and sent for payment of requisite stamp duty.
# 43. The question of law framed is as below - 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.
# 44. The Registry is directed to immediately place the record before the Hon’ble President for constituting appropriate bench/3rd Member for his opinion, so that the order in MA is rendered in accordance with the opinion of majority.
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Third member judgement;
NCLT Mumbai-3 (10.02.2022) in Vistra ITCL (India) Limited Vs. Satra Properties (India) Limited [M.A. 180/2020 in C.P. 1632/I&B/MB/2019] held that;
In this scenario it is appropriate to mention here that a Section 7 application under the IBC can be filed in a simple form prescribed in the Code even without any pleadings.
Similarly, the ‘debt’ and ‘default’ can be proved through the records of ‘debt’ and ‘default’ maintained by the “information utility” even without filing any documents by the party.
When once the Adjudicating Authority is satisfied with these two legal requirements and if the application is complete in accordance with the code, the Adjudicating Authority has no option except to admit the Company Petition without going into any other trivial technical issues raised by the Corporate Debtor as held by Hon’ble Supreme Court in various rulings.
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.
It is irrelevant and uncalled for in a Section 7 Application more so when the ‘debt’ and ‘default’ are proved otherwise without looking into those documents.
Link to the Synopsis of the Judgement
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