2023 (8) TMI 1292 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Operational Creditors - Tripartite Settlement or not - Power of Attorney executed in China and after the execution, was received in India - applicability of Indian Stamp Act - HELD THAT - The Power of Attorney Document , was not executed in the Stamp Papers of the Law of the Land (India), but the said Stamp Paper, was purchased in India , and prefaced, with the document. Viewed in that perspective, this Tribunal , unhesitatingly, comes to a clear cut conclusion that the Power of Attorney Document , projected before the Adjudicating Authority / Tribunal , by the Appellant / Petitioner / Operational Creditor , is an invalid and unenforceable one, keeping in view of Non-compliance of the necessary ingredients of the Indian Stamp Act, 1899. It is to be remembered that an insufficiently stamped Original Document or an Unstamped Document , can be impounded , and on behalf of the Appellant / Petitioner , before the Adjudicating Authority / Tribunal , a photocopy of the Instrument / Document , was projected and hence this Tribunal , safely and securely holds that the Non-compliance of the ingredients of the Indian Stamp Act, 1899 , the Kerala Stamp Act, 1959 , result in these documents not to be enforceable in Law . One cannot brush aside, a primordial fact that in the instant case, the main CP (IB) / 45 / KOB / 2022, before the Adjudicating Authority / Tribunal (filed by the Appellant / Petitioner ) is founded upon the Non Payment , as per the Settlement Agreement dated 16.07.2020. Although, in the Settlement Agreement , the Respondent / Corporate Debtor, was described as Confirming Party , the Respondent / Corporate Debtor, had specifically guaranteed to pay the Appellant / Petitioner / Operational Creditor , if the Second Party commits Default on the Loan Obligation and Instalment . The real Date of Default , fell during the Suspended Period , to initiate the CIRP Proceedings , against the concerned, under the I B Code, 2016 . Taking note of the facts and circumstances of the instant case, in an integral manner, comes to an inevitable , irresistible and inescapable conclusion that the impugned order passed by the Adjudicating Authority ( National Company Law Tribunal , Kochi Bench), in dismissing the Section 9 Petition , preferred by the Appellant / Petitioner / Operational Creditor , does not suffer from any material irregularity or patent illegality in the eye of Law - Appeal dismissed.

Summary

Issues Involved:
1. Validity of the Default Date.
2. Characterization of Debt Post-Settlement Agreement.
3. Authority and Binding Nature of the Settlement Agreement.
4. Compliance with Indian Stamp Act and Kerala Stamp Act.
5. Applicability of Section 10A of IBC, 2016.

Summary:

1. Validity of the Default Date:
The Tribunal noted that the default date mentioned in the petition was incorrect. The default by Al Badar Sarl on the first installment of the settlement agreement fell on 01.08.2020, within the suspended period (25.03.2020 to 24.03.2021) for initiating Corporate Insolvency Resolution Process (CIRP) under Section 10A of IBC, 2016. Therefore, no petition under Sections 7, 9, and 10 of IBC could be filed for defaults within this period.

2. Characterization of Debt Post-Settlement Agreement:
The Tribunal held that the debt arising from the settlement agreement lost its character as "operational debt." The default on payment of installments under the settlement agreement does not come under the definition of operational debt as per Section 5(21) of IBC, 2016.

3. Authority and Binding Nature of the Settlement Agreement:
The Respondent denied executing the settlement agreement as a confirming party and claimed no knowledge of the agreement at the time it was entered. The Tribunal found that the power of attorney document presented was invalid and unenforceable due to non-compliance with the Indian Stamp Act, 1899.

4. Compliance with Indian Stamp Act and Kerala Stamp Act:
The Tribunal observed that the settlement agreement and sales contracts were on unstamped paper. Under Section 34 of the Kerala Stamp Act, 1959, an unstamped instrument cannot be enforced unless stamp duty and penalty are paid. The documents presented were photocopies and not properly stamped, rendering them unenforceable in law.

5. Applicability of Section 10A of IBC, 2016:
The Tribunal emphasized that the real date of default fell within the suspended period for initiating CIRP under Section 10A of IBC, 2016. The petition was filed to evade the provisions of Section 10A, thus making the default date incorrect.

Conclusion:
The Tribunal concluded that the impugned order dated 03.05.2023, dismissing the Section 9 petition, did not suffer from any material irregularity or patent illegality. Consequently, the appeal was dismissed with no costs.