2024 (10) TMI 725 - AT - IBC

Admission of Assignment Agreement - appellant contends that the Assignment Agreement dated 29.03.2022 was not duly stamped and a document which was not properly stamped under the Maharashtra Stamp Act, 1958 could not have been admitted - HELD THAT - There is no dispute between the parties that the Assignment Agreement dated 29.03.2022 is a registered document. Counsel for the Respondent has relied on the provision of SARFAESI Act, 2002 which empowers the assignee to continue prosecute and enforce all applications, appeals and legal proceedings which were pending on the date of assignment. Section 7 application filed by L T Finance Ltd. was pending on the date of assignment. Hence, Phoenix Arc Pvt. Ltd. has jurisdiction to prosecute the application. By virtue of Section 5(2) of the SARFAESI Act, Phoenix Arc Pvt. Ltd. is fully entitled to prosecute the application which was filed by L T Finance Ltd. . Present is a case where Assignment Agreement is a registered document. In the facts of the present case where Assignment Agreement is registered and has been filed in the proceedings under Section 7, by virtue of Section 5(2) of the SARFAESI Act, Phoenix Arc Pvt. Ltd. is entitled to prosecute and deeming clause as contained in Section 5(2) fully protects and entitled the Phoenix Arc Pvt. Ltd. to prosecute Section 7 application. There are no error in the order of the Adjudicating Authority allowing application. The Adjudicating Authority did not commit any error in rejecting the application of the Corporate Debtor praying for impounding of the document - there are no error in the order passed by the Adjudicating Authority deciding both the applications - appeal dismissed.

Issues Involved:

1. Validity of the Assignment Agreement under the Maharashtra Stamp Act, 1958.
2. Applicability of the SARFAESI Act, 2002 provisions regarding the substitution of parties.
3. Admissibility of unstamped or inadequately stamped documents in legal proceedings.

Issue-wise Detailed Analysis:

1. Validity of the Assignment Agreement under the Maharashtra Stamp Act, 1958:

The Corporate Debtor challenged the order permitting the substitution of 'Phoenix Arc Pvt. Ltd.' on the grounds that the Assignment Agreement dated 29.03.2022 was not duly stamped as per the Maharashtra Stamp Act, 1958. It was contended that the document, being inadequately stamped, should have been impounded, and the Adjudicating Authority erred in admitting it. The appellant argued that under Section 35 of the Stamp Act, a document not adequately stamped cannot be received in evidence. Furthermore, they highlighted that the exemption from stamp duty under Section 5(1A) of the SARFAESI Act, 2002, is not applicable in Maharashtra, as the Government Order granting such exemption was withdrawn on 26.08.2005.

2. Applicability of the SARFAESI Act, 2002 provisions regarding the substitution of parties:

The Respondent argued that the Assignment Agreement, being a registered document, is presumed to be adequately stamped. The Adjudicating Authority rightly allowed the substitution application filed by 'Phoenix Arc Pvt. Ltd.' as per the provisions of the SARFAESI Act, 2002. Section 5 of the SARFAESI Act empowers the assignee to continue to prosecute and enforce all applications and legal proceedings pending on the date of assignment. The Tribunal noted that Section 5(2) contains a deeming clause, which deems the assignee as the lender, allowing them to continue legal proceedings. The Tribunal referred to its previous decision in "Pawan Kumar Manguturam Bairagra vs. Encore Asset Reconstruction Company Ltd." which upheld the rights of an assignee under Section 5(2) of the SARFAESI Act.

3. Admissibility of unstamped or inadequately stamped documents in legal proceedings:

The Tribunal considered the larger bench judgment of the Hon'ble Supreme Court, which concluded that agreements not stamped or inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. However, such defects are curable, and objections regarding stamping fall within the ambit of the arbitral tribunal. In this case, the Tribunal found that the Assignment Agreement was registered without any objection regarding stamp duty by the Registering Authority, which is responsible for ensuring adequate stamping. The Tribunal concluded that the Adjudicating Authority did not err in rejecting the Corporate Debtor's application for impounding the document, as the registered document was deemed valid for the proceedings under Section 7 of the Insolvency and Bankruptcy Code.

Conclusion:

The Tribunal upheld the Adjudicating Authority's decision to allow the substitution of 'Phoenix Arc Pvt. Ltd.' and dismissed the Corporate Debtor's appeal. It affirmed the applicability of the SARFAESI Act's provisions, particularly Section 5(2), which empowers an assignee to prosecute applications as a deemed lender. The Tribunal found no merit in the appeals, as the Assignment Agreement, being a registered document, was valid for the proceedings, and the issue of stamp duty was not a bar to its admissibility in this context.

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