9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (7) TMI 271 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - financial creditors - existence of debt and default or not - Stamping of Promissory Note. Existence of debt and dispute or not - HELD THAT - The primary requirement for admitting an application under Section 7 of the IBC is the existence of a debt and default. The Appellant has presented several documentary evidence like Loan Agreement dated 01.10.2018, Unsecured Demand Promissory Note dated 01.10.2018, Independent Audit report by N.R. Panchal Co and also record of information utility authenticated by NeSL on 22.08.2023 - argument of the Respondent-CD that the loan amount of Rs.70,00,000/- was for general Corporate purposes and was in nature of business loan and not a financial loan as explained under Section 5(8) of the Code is not borne out from the facts and the loan agreement itself and cannot be accepted - the evidences presented by the Appellant, including the balance sheet and the 'Record of Default', unequivocally establishes the debt and default. Stamping of Promissory Note - HELD THAT - It is evident that, the debt and default are clearly established by the material on record in the form of the Loan Agreement, the Audit Report and also Record of Default (Form D) from the Information Utility (NeSL) taken together, as was examined in earlier part of the Appraisal. This Appellate Tribunal finds that the Adjudicating Authority erred in dismissing the application under Section 7 of the IBC. The existence of debt and default has been clearly established, and the procedural requirements have been met by the Appellant. The issue of stamping does not outweigh the substantive evidence of debt and default - impugned order set aside - appeal allowed.
Issues Involved:
1. Existence of Debt and Default 2. Compliance with Procedural Requirements 3. Misinterpretation of the Indian Stamp Act, 1899 4. Relevance to the Determination of Debt and Default 5. Procedural Errors and Due Process Violations Detailed Analysis: 1. Existence of Debt and Default: The primary requirement for admitting an application under Section 7 of the IBC is the existence of a debt and default. The Appellant presented several documentary pieces of evidence, including a Loan Agreement dated 01.10.2018, an Unsecured Demand Promissory Note dated 01.10.2018, an Independent Audit report by N.R. Panchal & Co., and a record of information utility authenticated by NeSL on 22.08.2023. The Loan Agreement, which is a registered document, clearly mentions the principal amount of Rs. 70 Lakhs and the interest rate of 15%. The loan was reflected in the respondent's balance sheet under 'Non-Current Liabilities', and the 'Record of Default' from NeSL was undisputed. Despite repeated demands, the respondent failed to repay the loan, leading to the appellant filing an application under Section 7 of the IBC. 2. Compliance with Procedural Requirements: The appellant complied with all procedural requirements, including filing the information of default with the information utility, as directed by the Adjudicating Authority. The authenticated records were submitted and should have been duly considered. The appellant's application under Section 7 of the IBC was dismissed despite the submission of additional documents, including the 'Record of Default' authenticated by NeSL. 3. Misinterpretation of the Indian Stamp Act, 1899: The Adjudicating Authority incorrectly ruled that the Promissory Note was insufficiently stamped under Schedule 1 Article 49(b) of the Indian Stamp Act, 1899. The appellant clarified in the additional affidavit that the Promissory Note, being payable on demand, was sufficiently stamped as per Clause 49(iii) of the Stamp Act. The Adjudicating Authority's focus on the stamping issue of the unsecured promissory note, while relevant, should not overshadow the clear evidence of debt and default. The Hon’ble Apex Court in a recent judgment clarified that non-stamping or inadequate stamping is a curable defect and should not render agreements void or unenforceable. 4. Relevance to the Determination of Debt and Default: The primary focus under Section 7 of the IBC should be the establishment of debt and default. Even if the stamping of the Promissory Note was in question, it should not have overshadowed the clear evidence of debt and default presented by the appellant. The precedence set by the Hon’ble Apex Court suggests that minor procedural lapses should not impede substantive justice under the IBC. 5. Procedural Errors and Due Process Violations: The Adjudicating Authority failed to adequately consider the additional affidavit and the 'Record of Default' from NeSL. This oversight constitutes a significant procedural error and a violation of the appellant's due process rights. The dismissal of the appellant's application without proper consideration of all evidence and compliance with procedural requirements resulted in a miscarriage of justice, adversely affecting the appellant's right to seek redress under the IBC. Conclusion: For the reasons stated above, this Appellate Tribunal finds that the Adjudicating Authority erred in dismissing the application under Section 7 of the IBC. The existence of debt and default has been clearly established, and the procedural requirements have been met by the Appellant. The issue of stamping does not outweigh the substantive evidence of debt and default. Order: The appeal is allowed. The Impugned Order dated 29.02.2024 passed by the Adjudicating Authority is set aside. The application filed by the Appellant under Section 7 of the IBC deserves to be admitted. The matter should be taken up within 10 days by the Adjudicating Authority for initiating the CIRP as per the IBC provisions and to pass consequential orders. Each party shall bear its own costs.
|
