2020 (8) TMI 910 - Tri - Insolvency and Bankruptcy

Tribunal Admits Petition for Corporate Insolvency, Orders Document Impounding for Stamp Duty Payment

The Tribunal admitted the petition, initiated Corporate Insolvency Resolution Process against the Corporate Debtor, and ordered the impounding of the ... Maintainability of application - initiation of CIRP - Stamping of documents - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - 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? - impounding of documents under Sec 33 & 34 of Maharashtra Stamp act 1958, in a summary proceedings under IBC - novation of contract - recovery of outstanding sums due to be redeemed under the Debenture Subscription Agreement and Debenture Trust Deed - HELD THAT:- 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 - 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. The Hon'ble Mumbai High Court in Antifriction Bearing Corporation Ltd. Vs, State Of Maharashtra [1998 (9) TMI 472 - HIGH COURT OF BOMBAY], 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 - 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. There are 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 - thus, 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. Thus, 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 - the 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 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. As per V. Nallasenapathy, Member (T) - 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. The question of law is framed as 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 - 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. Issues Involved:1. Enforceability of Debenture Subscription Agreement and Debenture Trust Deed under Maharashtra Stamp Act.2. Impounding of documents under Sections 33 and 34 of Maharashtra Stamp Act.3. Alleged novation of contract.4. Petitioners' entitlement to recover outstanding sums under the Debenture Subscription Agreement and Debenture Trust Deed.Detailed Analysis:A. Enforceability of Debenture Subscription Agreement and Debenture Trust Deed:The Tribunal examined whether the Debenture Subscription Agreement and Debenture Trust Deed, executed and registered in Delhi, are enforceable in Maharashtra despite being insufficiently stamped as per the Maharashtra Stamp Act. The Tribunal determined that these documents are subject to the payment of the difference in stamp duty when brought into Maharashtra for enforcement. The relevant sections of the Maharashtra Stamp Act, including Section 19, mandate the payment of additional stamp duty for documents executed outside the state but enforced within it.B. Impounding of Documents:The Tribunal emphasized the obligation under Section 33 of the Maharashtra Stamp Act to impound documents that are insufficiently stamped. The Tribunal referenced the Supreme Court's decisions in SMS Tea Estate Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd. and Garware Wall Ropes Ltd. v. Coastal Marine Construction and Engineering Ltd., which held that documents not duly stamped cannot be acted upon. Consequently, the Tribunal ordered the impounding of the Debenture Trust Deed and Debenture Subscription Agreement for payment of requisite stamp duty.C. Alleged Novation of Contract:The Corporate Debtor claimed that a larger settlement agreement, reached in January 2018, novated the original contract, thereby discharging its liability. However, the Tribunal found that the alleged settlement was revoked by the Petitioners and was never acted upon. The Tribunal concluded that there was no novation of contract, and the original liability under the Debenture Trust Deed and Debenture Subscription Agreement remained enforceable.D. Petitioners' Entitlement to Recover Outstanding Sums:The Tribunal found that the Corporate Debtor defaulted in redeeming the outstanding debentures as per the Debenture Subscription Agreement and Debenture Trust Deed. The Tribunal noted that the Corporate Debtor admitted its liability and sought extensions for redemption, which demonstrated the existence of debt and default. The Tribunal concluded that the Petitioners are entitled to recover the outstanding sums amounting to Rs. 65,24,33,104/-.Separate Judgments:While both members of the Tribunal agreed on admitting the petition and initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, there was a dissent on whether the Debenture Subscription Agreement and Debenture Trust Deed should be impounded. Member (Judicial) ordered the impounding and payment of requisite stamp duty, while Member (Technical) disagreed, stating that the documents were ancillary and sufficient evidence existed to adjudicate the petition without impounding.Conclusion:The Tribunal admitted the petition, initiated CIRP against the Corporate Debtor, and ordered the impounding of the Debenture Trust Deed and Debenture Subscription Agreement for payment of requisite stamp duty. The case was referred to the Hon'ble President for constituting an appropriate bench to resolve the dissenting issue on impounding.