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TMI Blog2019 (8) TMI 1714X X X X Extracts X X X X X X X X Extracts X X X X ..... also default committed by the Corporate Debtor in repayment of impugned loan in its audited financial statements, hence, there is no need to look into the aspect of nature of MOU or its enforcement due to insufficiency of stamp duty. There are no merit that person authorized to file this petition was not having requisite authority as the Board resolution authorizing the person mentions that such person can file a petition before NCLT, being an adjudicating authority, for matters arising under IBC 2016 - petition admitted. X X X X Extracts X X X X X X X X Extracts X X X X ..... uot;), who was registered, and he had no disciplinary proceedings pending against him. 4. The Ld. Senior Counsel for the Corporate Debtor initiated his arguments by drawing our attention to the provisions of Indian Stamp Act, 1899 and referred to Section 2(5) of the said Act. He contended that MOU was "Bond" within the meaning of the provision of said Section 2(5) and stamp duty was liable to be paid on such MOU as per Article 15 of Schedule I of that Act. The Ld. Senior Counsel further submitted that MOU dated 14.12.2016 created an obligation / liability on the part of Corporate Debtor and such MOU was not an instance of acknowledgement of existing liability, but such MOU was Bond within the meaning of provisions of Indian Stamp Act. The Ld. Senior Counsel further contended that irrespective of the nomenclature of an agreement / arrangement, if such agreement / arrangement came within the purview of provision under sub-section 2(5)(a) / 2(5)(b) of Indian Stamp Act, 1899, then, such agreement / arrangement would be treated as Bond and in case requisite stamp duty had not been paid, then, such document was not enforceable at law. He further contended that such document co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson who signed the requisite form did not specifically contain the provision authorising the said person to file / initiate proceedings under IBC 2016. To further buttress the point, the Ld. Senior Counsel drew our attention that this defect was tried to be corrected in the board resolution passed subsequent to filing of this petition. 7. The Ld. Senior Counsel for the Financial Creditor, in the Rejoinder, submitted that none of the conditions mentioned in clause 2(5)(a) and section 2(5)(b) of the Indian Stamp Act were satisfied, hence, MOU was not to be construed as Bond. He also contended that MOU in fact witnesses an existing obligation as on the date of MOU, hence, for this reason also, the said document could not be termed as Bond within the meaning of provisions of section 2(5)(a) / 2(5)(b) of the Indian Stamp Act, 1899. He thereafter contended that, in any case, for the purpose of invoking provisions of IBC 2016, existence of default in respect of a debt becoming due and payable duly supported by evidence of such default was sufficient. He again reiterated that from the perusal of Corporate Debtor's own admission in the annual financial statements with regard to such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered NBFC with RBI having requisite authorisation to carry on business as NBFC. In the course of its business, it has granted short term loan to the Corporate Debtor. Such short term loan was given on interest and payable after one year as per the terms and conditions agreed by and between the parties, through MOU dated 14.12.2016. The amount of loan and rate of interest is not in dispute. It is also not in dispute that the Corporate Debtor has failed to repay the loan along with interest accrued thereon. Hence, the Financial Creditor has filed an application for initiation of Insolvency Resolution Process under Section 7 of the IBC 2016. (ii). First preliminary objection raised by Corporate Debtor is that petition is not maintainable due to insufficient stamp duty being paid in relation to such MoU. To deal with this plea, firstly we would examine the scheme of IBC 2016 relating to initiation of CIRP by Financial Creditor. Section 4 of IBC 2016 provides the minimum threshold limit of Rupees One Lakh of default for initiating insolvency and liquidation of Corporate Debtors. As per section 6, when a Corporate Debtor commits a default, a Financial Creditor or Operational Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lationship test" which requires some pre-petition relationship such as contract, exposure, impact or privity, between debtor's pre-petition conduct and the claimant in order for the claimant to hold a section 3(6) claim. (iv) It is further apparent that the term 'claim' has been defined in widest possible manner so that lender's right to receive payment can be enforced in variety of situations or conversely, it contemplates that all obligations to the extent possible of the corporate debtor would be dealt within the insolvency and bankruptcy proceedings. For example, on occurrence of default, even if a claim is disputed, financial creditor can seek refuge under I&B Code to initiate CIRP process. Similarly, whether loan is secured or unsecured, in both these situations CIRP process can be initiated when a default occurs in repayment of loan. (v) has been defined also to include a right to payment whether or not such right is legal or equitable. We need to elaborate on these two aspects in detail. In the definition, has been mentioned as right to payment which may or may not be legal. On the face of it appears as if both legal and illegal claims can be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s evidence of the debt; (ii) a record evidencing that the amounts committed by the financial creditor to the corporate debtor under a facility has been drawn by the corporate debtor; (iii) financial statements showing that the debt has not been paid; or (iv) an order of a court or tribunal that has adjudicated upon the non-payment of a debt, if any. Form C has been prescribed in this regard which is reproduced as under :- FORM C SUBMISSION OF CLAIM BY FINANCIAL CREDITORS (Under Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016) [Date] From [Name and address of the financial creditor, including address of its registered ofT1ce and principal office] To The Interim Resolution Professional / Resolution Professional, [Name of the Insolvency Resolution Professional / Resolution Professional] [Address as set out in public announcement] Subject: Submission of claim and proof Of claim. Madam/Sir, [Name of the financial creditor], hereby submits this claim in respect of the corporate insolvency resolution process of [name of corporate debtor]. The details for the same are set out below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim]. 5. I am / I am not a related party of the corporate debtor, as defined under section 5 (24) of the Code. 6. I am eligible to join committee of creditors by virtue of proviso to section 21 (2) of the Code even though I am a related party of the corporate debtor. Date: Place: (Signature of the claimant) VERIFICATION I, [Name] the claimant hereinabove, do hereby verify that the contents of this proof of claim are true and correct to my knowledge and belief and no material fact has been concealed therefrom. Verified at ... on this day of 20 (Signature of claimant) [Note: In the case of company or limited liability partnership, the declaration and verification shall be made by the director/manager/secretary/designated partner and in the case of other entities, an officer authorised for the purpose by the entity.] (vii) Thus, it can be seen, CIR Process can be initiated on the basis of records available with an information utility or other relevant documents as mentioned hereinbefore which include financial statements showing that debt ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor wishes to pay the stamp duty not paid, then nobody can stop but, at this stage, the Corporate Debtor being a wrongdoer at one end cannot be allowed to take advantage of its own wrong. For this reason also, the claim of the Corporate Debtor regarding enforceability of MOU is liable to be rejected. (x) To strengthen our this view, we draw support from certain observations of NCLT Mumbai Bench in the case of Bank of India vs. Gupta Infrastructure (India) Pvt. Ltd., Order dated 01.02.2018 which is reproduced hereunder:- "3. On looking at the terms and conditions galore in the deed of guarantee, there could not be any speck of doubt about the binding nature of the guarantee deed upon these corporate debtors. For that matter, any agreement consciously and voluntarily executed between parties is sacrosanct, upon which whole society running from thousands of years, unless such trust and belief is not present, we can 't survive even for a single day, some are explicit, some are implicit, but fact of the matter is, every second of us is run on trust upon each other, wherever it is broken, there is a dispute, there is a pain to the doctrine of trust and belief, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or on interest, enjoyed it on the basis of subject MOU, it is both a legal and equitable obligation of a Corporate Debtor and, simultaneously, legal and equitable right of the Financial Creditor to initiate CIR process under IBC 2016 in case of default by the Corporate Debtor in repayment thereof. (xii) We are further of the view that admitted facts need not be proved and when it is so that is, when proof of document is not required, then, there is no need to revisit the validity of document bypassing the admission already made by the opposite party. The Corporate Debtor has admitted the fact of loan, rate of interest payable by the Corporate Debtor thereon and also default committed by the Corporate Debtor in repayment of impugned loan in its audited financial statements, hence, there is no need to look into the aspect of nature of MOU or its enforcement due to insufficiency of stamp duty. (xiii) We also reject the contention of the Corporate Debtor regarding applicability of provisions of Indian Stamp Act, 1899 while deciding the fate of proceedings under section IBC, 2016 for the reason that the same, in our considered view, are contrary or repugnant to the provisions of IBC, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. The public announcement referred to in clause (b) of sub- section (1) of Section 15 of Insolvency & Bankruptcy Code, 2016 shall be made immediately. iv) Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following: a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; b) Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; c) Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. v) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated, suspended, or interrupted during mo ..... 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