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2023 (12) TMI 1076 - AT - Insolvency and BankruptcyMaintainability of section 7 application - initiation of CIRP - inter corporate deposit of Rs.7 Crores is captured in an unstamped document with the title of confirmation and undertaking @ interest of 1% per month - Financial Creditor/R2 had made an investment of a sum of rupees seven crores in the project developed by the CD/ R1 or it is a loan? Reliance upon unstamped document in deciding CIRP - HELD THAT - Adjudicating Authority has come to a conclusion that there is a financial debt, there is a default basis other documents and no reliance whatsoever nature has been placed on the confirmation and undertaking dated 29.09.2015. Since Adjudicating Authority has not relied upon that and have come to a conclusion that there is a debt and default and demand notice which is not disputed and accordingly concluded that sufficient reasons exists for Section 7 CIRP proceedings. The plea of the Appellant, to claim that the unstamped agreement/instrument in question cannot be admitted into evidence under the provisions of the Maharashtra Stamp Act, as a defense, cannot render the corporate insolvency resolution process ( CIRP ) non-maintainable, when there exists other material on record to prove existence of default in payment of debt - there are no fault in the orders of the Adjudicating Authority. Financial Creditor made an investment or gave a loan - HELD THAT - There is a contradiction to the nature of amount payable to the Financial Creditor which is admitted in the audited financial statements placed by the Corporate Debtor, being shown as unsecured loan, and which has also been noted by the Adjudicating Authority. Furthermore, R1 himself has admitted that it has serviced the interest in accordance with the terms of the confirmation and undertaking till June 2017. National E Governance Services Limited (NeSL) Report dated 24.06.2020, also reflects this as a loan wherein the Date of Default is reflected as 23.12.2015 and the total outstanding is of Rs.4,80,80,000/- - Adjudicating authority has rightly come to the conclusion that it is a loan and allowed Section 7 proceedings under IBC. Adjudicating Authority has come to a conclusion that there is a financial debt and there is a default on the basis of other documents, and no reliance whatsoever nature has been placed on the confirmation and undertaking dated 29.09.2015. Since Adjudicating Authority has not relied upon the confirmation and undertaking and has come to a conclusion that there is a debt and default and demand notice, which is not disputed and accordingly concluded that sufficient reasons exists for CIRP proceedings under Section 7 of IBC, 2016 - non-stamping of document does not render the corporate insolvency resolution process (CIRP) application filed to be non-maintainable when there exists other material on record to prove existence of default in the payment of debt. There are no error in the order of the Adjudicating Authority admitting Section 7 proceedings of the IBC against the CD/ M/s Shankheshwar Properties Pvt. Ltd. (R-1) - there is no merit in this appeal - appeal dismissed.
Issues Involved:
1. Reliance upon unstamped document in deciding CIRP. 2. Whether the Financial Creditor made an investment or gave a loan. Summary: Reliance upon unstamped document in deciding CIRP: The Appellant argued that the Adjudicating Authority (AA) incorrectly relied upon an unstamped document titled "confirmation and undertaking" to decide for Corporate Insolvency Resolution Process (CIRP). The Appellant cited the case of Satra Properties (India) Limited vs. Vistra ITCL India Limited, asserting it was per incuriam as it did not consider the binding judgment of the Hon'ble Apex Court in Essar Steel India Limited Committee of Creditors vs. Satish Kumar Gupta & Ors. The Appellant claimed that under Section 34 and Article 5(h)(A)(iv) of the Maharashtra Stamp Act, the unstamped document could not be relied upon as evidence. However, the Tribunal noted that the Satra Properties judgment had comprehensively examined similar issues and still stands. The Tribunal also referenced the case of Mr. Aashish Kadam & Anr. Vs. Nagpur Nagarik Sahakari Bank Ltd. & Anr., which did not support the Appellant's case. Furthermore, the Tribunal heavily relied on the Apex Court's latest judgment in Curative Petition (C) No. 44 of 2023, which clarified that unstamped or inadequately stamped agreements are inadmissible in evidence but are not rendered void or unenforceable, and non-stamping is a curable defect. The Tribunal concluded that the AA had not relied upon the unstamped "confirmation and undertaking" to establish the existence of debt and default. Instead, the AA based its decision on other documents, including the audited financial statements of the Corporate Debtor, demand notices, and the National E Governance Services Limited (NeSL) report. Therefore, the plea of the Appellant regarding the unstamped document was not accepted, and the AA's decision was upheld. Whether the Financial Creditor made an investment or gave a loan: The Appellant argued that the Financial Creditor (FC) had "invested" Rs. 7 crores in the project developed by the Corporate Debtor (CD) and that this investment was structured as a loan in the books of the CD. However, this argument was contradicted by the nature of the amount payable to the FC, which was shown as an unsecured loan in the audited financial statements of the CD. The CD had also serviced the interest according to the terms of the confirmation and undertaking until June 2017, and the NeSL report reflected this as a loan with a date of default of 23.12.2015 and an outstanding amount of Rs. 4.8 crores. The AA concluded that the amount was indeed a loan and allowed Section 7 proceedings under the Insolvency and Bankruptcy Code (IBC). The Tribunal found no error in the AA's order and dismissed the appeal, affirming the AA's decision to admit the CIRP application. Conclusions: The Tribunal upheld the AA's decision, concluding that there was a financial debt and default based on other documents, without relying on the unstamped "confirmation and undertaking." The plea regarding the unstamped document did not render the CIRP application non-maintainable, as other material on record proved the existence of default in payment of debt. The appeal was dismissed, and the AA's order admitting Section 7 proceedings under the IBC was affirmed.
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