2022 (3) TMI 1425 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Seeking resolution of an unresolved Financial Debt - Corporate Debtor failed to make repayment of its dues - Financial Creditors - letter of guarantee executed by the Corporate Debtor is insufficiently stamped or not - letter of guarantee fall under the definition of guarantee as defined under Section 126 of the Indian Stamp Act, or not - existence of debt and dispute or not. Sufficient stamping or not - HELD THAT - Similar issue fell for consideration before the Division Bench of the Hon'ble Bombay High Court headed by Hon'ble Chief Justice, Manjula Chellur, and Hon'ble Justice M.S. Sonak, J. in Classic Diamonds Vs. ICICI Bank 2016 (11) TMI 1703 - BOMBAY HIGH COURT while dealing with a winding up petition has held that If that stamp duty is not paid, according to the appellant, the document cannot be admitted in evidence, and cannot be acted upon. We fail to understand this stand of the appellant in the present Appeal, since we are not concerned with the insufficiency of stamp duty payable on documents of corporate guarantee, but we are concerned with the issue whether the appellant Company deserves to be wound up or not - thus, the issue of stamp duty raised by the Corporate Debtor is not legally sustainable and is liable to be rejected. Validity of the letter of guarantee - HELD THAT - The contention of the Corporate Debtor to the effect that there was no consent of the principal borrower to the letter of guarantee executed by Corporate Debtor has no force of law. It is also appropriate to mention here that the Financial Creditor had issued a recall notice dated 30.07.2018 to the principal borrower as well as the Corporate Debtor and another personal guarantor Mr. Rishi Agarwal which was duly received by them. The Corporate Debtor having received the said notice did not raise any objection nor sent any reply disputing the liability and therefore the Corporate Debtor is stopped from raising all the above pleas in this Company Petition. Value of pledged shares and other securities - HELD THAT - It is not the case of the Corporate Debtor that the pledged shares have been sold by the Financial Creditor. The pledged shares are claimed to have been transferred in the name of Financial Creditor and the Financial Creditor is exercising certain voting rights under the transferred shares. It is settled proposition of law that the proceedings before the NCLAT are in the nature of resolution and not for recovery. It is not the case of the Corporate Debtor that the amount due and payable to the Financial Creditor is less than the threshold limit for admitting the Section 7 Application. This Bench is of the considered opinion that none of the above please raised by the Corporate Debtor pass the test of legal scrutiny and are liable to be rejected - the existence of debt and default in this case are proved beyond doubt and the above Company Petition being filed on 18.06.2019 is well within period of limitation from the date of sanction of the loan as well as the recall notice invoking the guarantee. The present Company Petition satisfies all the necessary legal requirements for admission - Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Insufficient stamping of the letter of guarantee.
2. Validity of the letter of guarantee under Section 126 of the Indian Stamp Act.
3. Claim of the entire amount without deducting the value of securities.

Detailed Analysis:

1. Insufficient Stamping of the Letter of Guarantee:
The Corporate Debtor argued that the letter of guarantee was insufficiently stamped and thus could not be acted upon. The Tribunal referred to a similar case decided by the Division Bench of the Hon'ble Bombay High Court (Classic Diamonds Vs. ICICI Bank), which stated that the insufficiency of stamp duty does not impact the decision to wind up a company. The Tribunal concluded that the issue of stamp duty raised by the Corporate Debtor is not legally sustainable and is liable to be rejected.

2. Validity of the Letter of Guarantee:
The Corporate Debtor contended that the letter of guarantee did not meet the requirements of Section 126 of the Indian Stamp Act as it was not signed by all three parties involved (Surety, Principal Debtor, and Creditor). The Tribunal noted that the sanction letter issued by the Financial Creditor, which included the Corporate Debtor as the Corporate Guarantor, was duly signed by both the principal borrower and the Financial Creditor. Furthermore, the Corporate Debtor did not raise any objections upon receiving the recall notice. Thus, the Tribunal found the contention regarding the validity of the letter of guarantee to be without merit.

3. Claim of the Entire Amount Without Deducting the Value of Securities:
The Corporate Debtor argued that the Financial Creditor was claiming the entire amount without accounting for the value of pledged shares and other securities. The Tribunal clarified that the proceedings before the NCLAT are for resolution and not for recovery. It was noted that the pledged shares had not been sold by the Financial Creditor and that the amount due exceeded the threshold limit for admitting the Section 7 Application. Consequently, the Tribunal dismissed this plea as well.

Findings and Order:
The Tribunal found that the existence of "debt" and "default" was proven beyond doubt. The Company Petition filed by the Financial Creditor met all necessary legal requirements for admission. Accordingly, the Tribunal ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, appointed an Interim Resolution Professional (IRP), and outlined the steps to be taken during the CIRP, including the prohibition of suits and continuation of essential services.

Conclusion:
The Tribunal admitted the Company Petition, initiating CIRP against the Corporate Debtor, and directed the Registry to communicate the order to all relevant parties.