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2019 (8) TMI 1714 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - Where Corporate Debtor has obtained a loan having time value of money or on interest enjoyed it on the basis of subject MOU it is both a legal and equitable obligation of a Corporate Debtor and simultaneously legal and equitable right of the Financial Creditor to initiate CIR process under IBC 2016 in case of default by the Corporate Debtor in repayment thereof - the admitted facts need not be proved and when it is so that is when proof of document is not required then there is no need to revisit the validity of document bypassing the admission already made by the opposite party. The Corporate Debtor has admitted the fact of loan rate of interest payable by the Corporate Debtor thereon and also default committed by the Corporate Debtor in repayment of impugned loan in its audited financial statements hence there is no need to look into the aspect of nature of MOU or its enforcement due to insufficiency of stamp duty. There are no merit that person authorized to file this petition was not having requisite authority as the Board resolution authorizing the person mentions that such person can file a petition before NCLT being an adjudicating authority for matters arising under IBC 2016 - petition admitted.
Issues Involved:
1. Maintainability of the petition due to insufficient stamp duty on the Memorandum of Understanding (MoU). 2. Whether the Corporate Debtor is a financial service provider and thus exempt from Insolvency and Bankruptcy Code (IBC) proceedings. 3. Authority of the person filing the petition under Section 7 of IBC. 4. Admissibility of the petition under Section 7 of IBC. Issue-wise Detailed Analysis: 1. Maintainability of the petition due to insufficient stamp duty on the MoU: The Corporate Debtor contended that the MoU was a "Bond" under Section 2(5) of the Indian Stamp Act, 1899, requiring stamp duty as per Article 15 of Schedule I. The Financial Creditor argued that the MoU did not meet the conditions of Section 2(5)(a) and 2(5)(b) of the Indian Stamp Act and was not a bond. The Tribunal concluded that the insufficiency of stamp duty is a curable defect, and the Corporate Debtor, having purchased the stamp paper, cannot benefit from its own wrong. The Tribunal also noted that the IBC's purpose is to prove the existence of debt and default, not to revisit the validity of documents due to insufficiency of stamp duty. Thus, this preliminary objection was rejected. 2. Whether the Corporate Debtor is a financial service provider and thus exempt from IBC proceedings: The Corporate Debtor claimed it was a financial service provider, thus exempt from IBC proceedings. The Tribunal referred to Section 3(17) of the IBC, which defines a financial service provider as one authorized or registered by a financial creditor regulator. The Corporate Debtor had only applied for registration with the RBI and did not possess such authorization or registration at the time of accepting the loan or filing the petition. Therefore, this plea was also rejected. 3. Authority of the person filing the petition under Section 7 of IBC: The Corporate Debtor argued that the person filing the petition lacked specific authorization. The Tribunal found that the Board resolution authorized the person to file a petition before the NCLT for matters arising under IBC 2016. Hence, this contention was dismissed. 4. Admissibility of the petition under Section 7 of IBC: The Tribunal noted that the Financial Creditor is a registered NBFC with the RBI, authorized to carry on business as an NBFC. The loan amount, interest rate, and default by the Corporate Debtor were undisputed. The Tribunal emphasized that the IBC's purpose is to detect early signs of insolvency and protect stakeholders' interests. The Financial Creditor provided sufficient evidence of debt and default, including financial statements and other relevant documents. The Tribunal concluded that the petition met the requirements of Section 7 and relevant regulations of the IBC, 2016. Order: The petition filed by the Financial Creditor under Section 7 of the IBC, 2016, was admitted. A moratorium was declared, and public announcement ordered in accordance with Sections 13 and 15 of the IBC, 2016. The Tribunal appointed Mr. Soumendra Poddar as the Interim Resolution Professional (IRP) and directed the Financial Creditor to pay Rs. 5 lakh as advance fees to the IRP. The IRP was instructed to conduct the Corporate Insolvency Resolution Process (CIRP) in a time-bound manner. The matter was listed for progress report filing on 01/10/2019. The Registry was directed to communicate the order to the concerned parties.
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