NCLAT Delhi: Non-Stamping Of Agreement Doesn't Render CIRP As Non-Maintainable When Other Material To Prove Default Of Debt Exists

Background Facts:

An inter-corporate loan of Rs. 7 crores was given by the Rupa Infotech & Infrastructure Pvt. Ltd. ('Respondent No. 2') at 12% interest per annum to Shankeshwar Properties Pvt. Ltd. ('Corporate Debtor'). However, the Corporate Debtor had undertaken to repay Rs. 7 crores on demand after a period of 90 days and had made payment of interest until 31.03.2016 and the last payment of Rs. 1 crore was made on 04.07.2017.

Respondent No. 2 filed a CIRP petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ('IBC') against the Corporate Debtor. On 03.02.2023, the NCLT Mumbai had admitted the CIRP against the Corporate Debtor. The NCLT had noted that the date of default is 23.12.2015 as per the National E Governance Services Limited ('NeSL') Report. Further the total outstanding debt is Rs. 4.8 crores as per the issued Demand Notices on 11.04.2019 and 19.06.2019.

The present appeal has been filed by Mr. Hiren Meghji Bharani ('Appellant') who is the Suspended Director of Corporate Debtor against the impugned order of NCLT Mumbai dated 03.02.2023 admitting the CIRP.

Contentions of the Appellant:

The Appellant argued that the Inter-corporate deposit of Rs.7 Crores can be evidenced through an unstamped document “confirmation and undertaking” dated 24.09.2015 @ interest of 1% per month. It contended that the said document being an inter corporate deposit agreement, is mandatorily required to be stamped. Thus, leading to a dispute in the existence of default as the unstamped document cannot be relied upon as evidence under Section 34 and Article 5(h)(A)(iv) of the Maharashtra Stamp Act. Further, presently, no other evidence exists to provide for the existence of default.

NCLAT Verdict:

The NCLAT New Delhi dismissed the appeal and held that the Non-stamping of document does not render the CIRP application filed to be non-maintainable when there exists other material on record to prove existence of default in the payment of debt.

The Appellate Tribunal observed the recent Supreme Court's decision In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899 has clearly pointed that Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act and such agreements are not rendered void or void ab initio or unenforceable. Moreover, since Non-stamping or inadequate stamping is a curable defect, the unstamped “confirmation and undertaking” doesn't make the whole process illegal if this document is not even relied upon as an evidence.

Therefore, the plea of the Appellant that an unstamped agreement/instrument in question cannot be admitted into evidence under the provisions of the Maharashtra Stamp Act is not correct as the same cannot render the CIRP non-maintainable, when there exists other material on record to prove existence of default in payment of debt.

It highlighted that the Financial Creditor had made an investment while providing the Inter-corporate loan as no dispute exists as to the nature of Rs. 7 crores payable as has been admitted in the audited financial statements by the Corporate Debtor, being shown as unsecured loan. Further, the Corporate Debtor had also admitted that it has serviced the interest in accordance with the terms of the confirmation and undertaking till June 2017. Moreover, the NeSL Report also reflects the Inter-corporate deposit as a loan wherein the Date of Default is reflected as 23.12.2015 and the total outstanding is of Rs.4,80,80,000/-.

In conclusion, NCLAT Delhi pointed out that since NCLT Mumbai has correctly concluded that there is no dispute to the debt and default and demand notice and has rightfully allowed the Section 7 CIRP petition against the Corporate Debtor.

Case Title: Hiren Meghji Bharani vs. Shankheshwar Properties Pvt. Ltd. through its Resolution Professional and Anr.

Case No.: Company Appeal (AT) (Insolvency) No.446 of 2023

Counsel for the Appellant: Ms. Anushree Mahindra, Advocate

Counsel for the Respondent : Mr. Aksh Bhalla, Advocate for R-1, Mr. Varun Singh, Mr. Gaurav Nair, Mr. Ishwar Ahuja and Ms. Bhairavi SN, Advocates for R-2

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