2022 (2) TMI 1271 - Tri - Insolvency and Bankruptcy

CIRP proceedings - relevancy of stamp duties - Whether the pleas of deficit stamp duty, non-payment of stamp duty can be raised by a Corporate Debtor in a Section 7 application more so when the 'debt' and 'default' are proved even without relying on those documents? - appropriate stage and forum for raising such grievances - HELD THAT - Section 7 application under the IBC can be filed in a simple form prescribed in the Code even without any pleadings. Similarly, the 'debt' and 'default' can be proved through the records of 'debt' and 'default' maintained by the information utility even without filing any documents by the party. When once the Adjudicating Authority is satisfied with these two legal requirements and if the application is complete in accordance with the code, the Adjudicating Authority has no option except to admit the Company Petition without going into any other trivial technical issues raised by the Corporate Debtor as held by Hon'ble Supreme Court in various rulings. The above plea of Stamp Duty is not available to the Corporate Debtor in the present case when once the debt and default are proved without looking into the above documents and accordingly the first issue is answered in negative. It is also pertinent to mention here that as per the terms and conditions of the NCD Subscription Agreement it is the Petitioner/Corporate Debtor that shall bear all documentation charges (including stamp duty) legal and valuation charges. Therefore, the Petitioner shall not be permitted to take advantage of his own wrong. When and before whom the issue of stamp duty has to be raised? - HELD THAT - It is very clear from the plain reading of the provisions of Maharashtra Stamp Act and Indian Stamp Act, that a duty is cast upon the authority before whom the document is sought to be used as evidence by the party for the purpose of enforcing the contractual rights and obligations. The proper course of action that needs to be adopted is to dismiss the above Misc. Application without getting into the issue of stamp duty as it is irrelevant and uncalled for in a Section 7 Application more so when the 'debt' and 'default' are proved otherwise without looking into those documents - Application dismissed.

Summary

Issues Involved:
1. Difference of opinion between the Judicial Member and the Technical Member on impounding and payment of deficit stamp duty on two documents.
2. Whether a Corporate Debtor can raise pleas of deficit stamp duty in a Section 7 application.
3. When and before whom the issue of stamp duty should be raised.

Issue 1: Difference of Opinion on Stamp Duty:
The Tribunal referred the matter to a third Member due to a disagreement between the Judicial Member and the Technical Member regarding the impounding and payment of deficit stamp duty on the Debenture Trust Deed and Redeemable Non-Convertible Debenture Subscription Agreement. The Judicial Member partially allowed the application, directing impoundment and payment of stamp duty, while the Technical Member deferred the decision, seeking a majority opinion.

Issue 2: Corporate Debtor's Pleas on Stamp Duty:
The Corporate Debtor contended that the two documents in question cannot be relied upon until the deficit stamp duty is paid as per the Maharashtra Stamp Act. Both Members ordered initiation of Corporate Insolvency Resolution Process (CIRP) against the Debtor, agreeing that 'debt' and 'default' were established without relying on the disputed documents. However, the Judicial Member allowed impounding and payment of stamp duty, while the Technical Member did not express an opinion on this issue.

Issue 3: Timing and Authority to Raise Stamp Duty Issue:
The third Member analyzed relevant laws and previous judgments, concluding that the issue of stamp duty need not be addressed in a Section 7 application when 'debt' and 'default' are proven independently of the disputed documents. The Member emphasized that the Corporate Debtor could raise the stamp duty issue before the authority relying on the documents as evidence for enforcing their rights. The Member dismissed the application without delving into the stamp duty matter, deeming it irrelevant in the current context.

In conclusion, the Tribunal dismissed the Misc. Application, emphasizing that the stamp duty issue is not pertinent in a Section 7 application when 'debt' and 'default' are established independently. The Corporate Debtor can address the stamp duty matter before the appropriate authority relying on the disputed documents as evidence. The judgment clarifies the timing and relevance of raising stamp duty concerns in insolvency proceedings, aligning with established legal principles and precedents.