Insufficiently Stamped Agreements Not a Bar to Application for CIRP u/s 7 of IBC: NCLT [Read Order]
The tribunal reaffirmed that agreements that are not suitably stamped or unstamped do not exclude a Section 7 application.
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The National Company Law Tribunal (NCLT), Bengaluru Bench, ruled that insufficiently stamped agreement is not a bar to admission of petition filed under Section 7 of the IBC, 2016, read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate...
The National Company Law Tribunal (NCLT), Bengaluru Bench, ruled that insufficiently stamped agreement is not a bar to admission of petition filed under Section 7 of the IBC, 2016, read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.
In order to grow its firm, the corporate debtor turned to the financial creditor Embassy Services Private Limited for assistance. On October 25, 2016, they inked a credit deal for a total of Rs. 1 Cr. On October 20, 2016, a demand promissory note was also signed. The six-month repayment period specified in the agreement was later extended to December 31, 2020. The corporate debtor received a legal notification from the financial creditor requesting payment of the unpaid balance. The financial creditor filed the application because the corporate debtor was unable to make the payment.
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The respondent argued that the limitation prohibits the current application and that the instrument on which the petition is filed does not have the required stamp duties paid. According to the Karnataka Stamp Act of 1957, the respondent argued that the loan agreement dated October 25, 2016, was not adequately stamped because it was signed on stamp paper. Additionally, it was pointed out that the witnesses' signatures were missing from the stamp paper, making the document's attestation insufficient.
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The tribunal reaffirmed that agreements that are not suitably stamped or unstamped do not exclude a Section 7 application. The panel further noted that as long as the debt is due, the application is unaffected by the fact that it is challenged.
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The tribunal consisting of Shri. Sunil Kumar Aggarwal, Member (Judicial), and Shri. Radhakrishna Sreepada, Member (Technical) observed that the respondent's argument that the petition is precluded by the limitation is unsupportable because the parties mutually extended the payback date.
The tribunal discovered that the corporate debtor's financial sheet acknowledged the loan amount. Taking into account the problem of inadequately stamped and improperly attested debt. The tribunal cited the NCLT Mumbai Bench decision in the case of Axis Trustee Services Limited vs Reliance Infrastructure Consulting & Engineers Pvt. Ltd., the bench held that it is a well settled law that insufficiently stamped/ unstamped agreements do not present a bar to a Section 7 application.
To Read the full text of the Order CLICK HERE
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