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2019 (9) TMI 798 - Tri - Insolvency and BankruptcyWhether the claim of the Applicants based on an unregistered sale agreement dated 02.08.2016 and claim acknowledgement letter dated 02.08.2016 is admissible as evidence in the absence of entry in the Books of Account of the Corporate Debtor? HELD THAT - It becomes clear that an unregistered document pertaining to immovable property, which is compulsorily required to be registered under Section 17 of the Registration Act, may be received in evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877), or as evidence of any collateral transaction not required to be effected by registered instrument. In the case on hand the sale agreement dated 02.08.2016 is written on the non-judicial stamp paper of ₹ 100/- which as per Article 5 (j) of Schedule I of the Indian Stamp Act, 1899 is held to be sufficiently stamped and even if the same is unregistered, it is admissible in evidence for collateral purpose i.e. for proving the payment of ₹ 15,00,00,000 (15 Crores) by the Applicant/Financial Creditor to the Corporate Debtor. This fact is also corroborated by the 'claim acknowledgement letter' dated 02.08.2016. Moreover, this authority has also noted that a communication dated 22.07.2016 was sent by the Managing Director to Indian overseas Bank, which goes to state that the Managing Director has identified an investor, who is willing to pay bank dues and immediately thereafter on 02.08.2016 the sale agreement was executed between the Applicant/Financial creditor and the Corporate Debtor represented by the Managing Director and Director. The signatures of the above mentioned Directors and the seal of the Corporate Debtor on the sale agreement and claim acknowledgement letter are genuine, whereas the recitals in the said documents are disputed. However, the said suspended Directors or the Resolution Professional(s) of the Corporate Debtor have failed to substantiate their reasoning with any documentary evidence on the basis of which the claim of the Applicant/Financial Creditor was rejected. The exercise under taken by the Resolution Professionals to reject the claim of the Applicants/Financial Creditors is without any basis. Moreover, the Resolution Professional(s) has no adjudicatory power for deciding the issue pertaining to the claim made. The Resolution Professional is directed to treat the Applicants at par with other unsecured financial creditors and make the appropriate provision for payment to which they are entitled, in consultation with the CoC and the Resolution Applicant, and file the supplementary affidavit to that effect before this authority, or to withdraw the Resolution Plan and constitute the CoC afresh to get the Resolution Plan(s) approved with suitable modifications, as may be required.
Issues Involved:
1. Admissibility of the claim based on an unregistered sale agreement and claim acknowledgment letter. 2. Validity of the rejection of the claim by the Resolution Professional (RP). 3. Authority of the RP in adjudicating claims. 4. Compliance with the Companies Act and Registration Act. 5. Impact of the Resolution Plan on the claim. Detailed Analysis: 1. Admissibility of the Claim Based on an Unregistered Sale Agreement and Claim Acknowledgment Letter: The primary issue was whether the claim based on an unregistered sale agreement dated 02.08.2016 and a claim acknowledgment letter dated 02.08.2016 is admissible as evidence in the absence of entry in the Books of Account of the Corporate Debtor. The Tribunal noted that the sale agreement, although unregistered, was written on a non-judicial stamp paper of ?100, which is sufficiently stamped as per Article 5(j) of Schedule I of the Indian Stamp Act, 1899. The Tribunal referred to Section 49 of the Registration Act, 1908, which allows unregistered documents to be received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by registered instrument. The Tribunal cited the judgment of the Hon'ble High Court of Madras in N.Muthukumar v. M.Karupapiah, which held that an unregistered sale deed could be admitted in evidence for collateral purposes. Therefore, the Tribunal concluded that the sale agreement and the claim acknowledgment letter are admissible in evidence for proving the payment of ?15,00,00,000 by the Applicant to the Corporate Debtor. 2. Validity of the Rejection of the Claim by the Resolution Professional (RP): The RP rejected the claim on the grounds that the payments were made in cash, the financial statements did not reflect the borrowings, there was no duly signed loan agreement, and the claim was not supported by a Board Resolution. The Tribunal found that the RP and the suspended Directors failed to substantiate their reasoning with any documentary evidence. The Tribunal noted that the signatures of the Managing Director and Director on the sale agreement and claim acknowledgment letter were genuine. The Tribunal also observed that the RP's rejection was based on the failure of the Directors to maintain proper records, which cannot be a valid ground to reject the claim. The Tribunal concluded that the rejection of the claim by the RP was without any basis. 3. Authority of the RP in Adjudicating Claims: The Tribunal emphasized that the RP has no adjudicatory power for deciding the issue pertaining to the claim made. The Tribunal relied on the judgment of the Hon'ble Supreme Court in Swiss Ribbons (P.) Ltd. v. Union of India & Ors., which held that the RP has to vet and verify claims and determine the amount of each claim, but does not have adjudicatory power. The Tribunal concluded that the RP's rejection of the claim was beyond his authority. 4. Compliance with the Companies Act and Registration Act: The RP's counsel argued that the sale agreement was void under Section 180 of the Companies Act, 2013, as the Board of Directors had no power to enter into the sale of the whole undertaking without authorization through a special resolution. The Tribunal, however, found that the sale agreement and the claim acknowledgment letter were signed by the Managing Director and Director with the seal of the Corporate Debtor, indicating their authority to represent the Corporate Debtor. The Tribunal also noted that the failure to maintain proper records and the lack of a Board Resolution cannot invalidate the claim. 5. Impact of the Resolution Plan on the Claim: The Tribunal noted that during the pendency of the application, the Resolution Plan was approved by the CoC and filed before the Tribunal. The Tribunal directed the RP to treat the Applicants at par with other unsecured financial creditors and make appropriate provisions for payment in consultation with the CoC and the Resolution Applicant. Alternatively, the RP was directed to withdraw the Resolution Plan and constitute the CoC afresh to get the Resolution Plan approved with suitable modifications. Conclusion: The Tribunal held that the Applicants are entitled to their claim of ?15,00,00,000 as financial debt. The letters dated 17.09.2018 and 27.04.2019 issued by the RP rejecting the claim were declared null and void and set aside. The claim of the Applicants/Financial Creditors to the tune of ?15,00,00,000 was admitted. The RP was directed to treat the Applicants at par with other unsecured financial creditors or to withdraw the Resolution Plan and constitute the CoC afresh. The application MA/518/2018 was disposed of with no order as to costs.
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