2023 (2) TMI 950 - AT - Insolvency and Bankruptcy

Tribunal upholds Adjudicating Authority decisions, rejects stamp duty challenges, dismisses RP substitution application.

State of Rajasthan Versus Arunava Sikdar, Resolution Professional, Jaipur Metals & Electricals Limited, Alchemist Asset Reconstruction Company Limited, Asset Reconstruction Company (India) Limited And State of Rajasthan Versus Arunava Sikdar

The Tribunal dismissed all appeals, upholding the Adjudicating Authority's decisions. The challenges on insufficient stamp duty grounds were rejected as ... Sufficient stamp duty or not - whether the claim is being barred by time or not - Financial Creditors can take benefit of limitation as per the provisions of Section 4(1)(b) read with 4(2) of the 1961 Act or not - seeking substitution of RP - HELD THAT:- The proceedings under the Rajasthan Stamp Act are separate and independent proceedings to the proceedings under the IBC initiated by the Financial Creditors under Section 7 of the IBC. The admission of claim by the RP, took place much before the proceedings initiated under the Stamp Act and which were based on other relevant materials as noted above cannot be faulted on the ground that Stamp Authorities have declared deficiencies in several documents relied by Financial Creditors - the submission of learned Counsel for the Appellant cannot be agreed upon, that on the ground of orders passed by Stamp Duty Authorities, the admission of claims by RP of the Financial Creditors need to be rejected. The second ground of attack made by learned Counsel for the Appellant that claim of the Financial Creditors is barred by time - HELD THAT:- Corporate Debtor was declared NPA on 30.09.1997 and the Application under Section 7 was filed on 11.01.2018. The limitation for filing an Application under Section 7 is three years under Article 137 of the Limitation Act. The learned Counsel for the parties have raised submission in regard to Rajasthan Relief Undertakings (Special Provisions) Act, 1961. Whether the Financial Creditors can take benefit of limitation as per the provisions of Section 4(1)(b) read with 4(2) of the 1961 Act, or the said benefit is not available to the Financial Creditor? - HELD THAT:- The Corporate Debtor was notified as relief undertaking from 03.10.1998 to 07.12.2016. The IBC came into force from 01.12.2016. The present Application has been filed on 11.01.2018. The period of limitation of three years for filing an Application under Section 7 commenced from the date Corporate Debtor was declared as Non-Performing Asset, i.e. 30.09.1997 - the period of limitation for filing an Application commenced on 30.09.1997, which is much before the enforcement of IBC. It is well settled that IBC does not give any fresh period of limitation for filing any Application and no fresh lease of life can be given to the State or dead claim by the enforcement of IBC. But when the Applicant has still balance period of limitation for filing an Application under Section 7 on the principle of computation of limitation as per provisions of 1961 Act, the said benefit cannot be denied. The period of limitation commenced on 30.09.1997 and Corporate Debtor was declared a relief undertaking on 03.10.1998 and continued till 07.12.2016. The period, which could be counted for filing Section 7 Application from 30.09.1997 was one year and 2 days. The period of limitation, which cannot be computed and was arrested by virtue of Section 4, sub-section (2), which again recommenced with effect from 08.12.2016, when the Corporate Debtor was de-notified from relief undertaking from 07.12.2016, so from 07.12.2016 to 11.01.2018 the period of one year and 34 days have elapsed. Thus, the Application under Section 7 was filed within a period of two years and 36 days from the date of commencement of the limitation, which is well within three years - thus, the admission of the claim of Alchemist cannot be said to be barred by time and Adjudicating Authority has rightly rejected. Seeking substitution of RP - HELD THAT:- The Committee of Creditors, till date has not passed any Resolution for change of RP. There being no Resolution of the Committee of Creditors for replacing the RP, the Adjudicating Authority did not commit any error in rejecting the application. There are no error in the order of the Adjudicating Authority in rejecting the application - appeal dismissed. Issues Involved:1. Insufficient Stamp Duty Challenge under the Rajasthan Stamp Act.2. Claims being barred by limitation.3. Substitution of the Resolution Professional (RP).Issue-wise Analysis:1. Insufficient Stamp Duty Challenge under the Rajasthan Stamp Act:The State of Rajasthan filed IA No.327/JPR/2019, challenging the admissibility of documents relied upon by Alchemist Asset Reconstruction Company Ltd. (Alchemist) and Asset Reconstruction Company (India) Ltd. (ARCIL) on the grounds of insufficient stamp duty under the Rajasthan Stamp Act, 1998. The Appellant argued that the RP verified claims based on inadmissible documents as per Section 39 of the Rajasthan Stamp Act, which states that 'Instruments not duly stamped are inadmissible in evidence.' The Adjudicating Authority, however, held that the existence of debt could be proved by different documents irrespective of stamp duty issues. The Authority noted that the financial statements of the Corporate Debtor for the year ending on 31.03.2013 clearly acknowledged the debt towards Alchemist, which was sufficient. The RP considered various other documents, and the proceedings under the Stamp Act were deemed separate and independent from the IBC proceedings. Thus, the challenge on insufficient stamp duty grounds was rejected.2. Claims being barred by limitation:The Corporate Debtor was declared NPA on 30.09.1997, and the Application under Section 7 of the IBC was filed on 11.01.2018. The Appellant argued that the claims were time-barred, as the limitation period under Article 137 of the Limitation Act is three years. However, the Corporate Debtor was notified as a relief undertaking from 03.10.1998 to 07.12.2016 under the Rajasthan Relief Undertakings Act, 1961. Section 4(1)(b) and 4(2) of the 1961 Act provided for the exclusion of the period during which any legal proceeding could not be commenced. The Adjudicating Authority held that the period from 30.09.1997 to 02.10.1998 (one year and two days) and from 07.12.2016 to 11.01.2018 (one year and 34 days) were within the three-year limitation period. Thus, the claims were not barred by limitation, and the challenge was rejected.3. Substitution of the Resolution Professional (RP):The State of Rajasthan, holding only 4% vote share in the Committee of Creditors (CoC), filed IA No.301/JPR/2019 for substituting the RP, alleging collusion between the RP and the Financial Creditors. The Adjudicating Authority noted that under Section 27(2) of the IBC, the RP could be replaced only by a vote of 66% of the CoC. There was no resolution from the CoC for replacing the RP. The Appellant's reliance on the judgment in 'Srigopal Choudary, Resolution Professional of Shree Ram Urban Infrastructure Ltd. Vs. SREI Equipment Finance Ltd.' was found to be misplaced as the facts were different. The Adjudicating Authority dismissed the application, stating that the Appellant had failed to provide substantial proof of the allegations. The Tribunal upheld this decision, noting that the CoC had not passed any resolution for changing the RP.Conclusion:The Tribunal dismissed all the appeals, affirming the Adjudicating Authority's orders rejecting IA Nos.327/JPR/2019, 328/JPR/2019, and 301/JPR/2019. The claims of Alchemist and ARCIL were upheld, and the substitution of the RP was denied due to the lack of a CoC resolution. The proceedings under the Rajasthan Stamp Act were deemed separate from the IBC proceedings, and the claims were found to be within the limitation period.