The NCLT Mumbai Bench constituting of H.V. Subba Rao in Vistra ITCL India Ltd. v. Satra Properties Ltd. held that insufficiency of stamp duty is not to be considered in application filed under Section 7, more so when “debt” and “default” are proved otherwise than by looking into these documents.
Case of the Applicant
The application referred to H.V. Subba Rao by the then Acting President for his opinion as a third person due to a difference of opinion between Smt. Suchitra Kanuparthi, Judicial Member and V. Nallasenpathy, Technical Member on the following question of law, in an application u/s 7 of the Insolvency and Bankruptcy Code, 2016.
Case of Corporate Debtor
The Corporate Debtor opposed this application on the ground that Secured Redeemable Non- Convertible Debenture Subscription Agreement and Debenture Subscription and Debenture Trust Deed cannot rely upon by the Financial Creditors till deficit stamp duty is paid on the abovementioned two instruments.
Both members allowed the application initiating the CIRP against the Corporate Debtor, holding that the debt and default stand proved against the corporate debtor even without relying on theDebenture Trust Deed and NCD Subscription Agreement. However, they differed on the issue of impounding and payment of deficit stamp duty on these documents.
The Judicial member however, partially allowed the application holding that the Debenture Trust Deed and sent for payment of requisite stamp duty in accordance with the Maharashtra Stamp Act.
The issue before the Bench was whether the pleas of deficit stamp duty, non- payment of stam duty can be raised by a Corporate Debtor in a Section 7 application more so when the “debt and default” are proved even without relying on those documents?
Observation of the Tribunal
The Tribunal relied on the decision of the Bombay High Court in this regard, when it was dealing with a winding up petition wherein the Court stated that it was not concerned with the insufficiency of stamp duty but rather on whether the company is unable to pay its debts.
In words of Tribunal, “I am of the opinion that the above plea of Stamp Duty is not available to the Corporate Debtor in the present case when once the debt and default are proved without looking in the above documents and accordingly the first issue is answered in negative”
The Tribunal dismissed the present application and held that getting into the stamp duty at this stage is of no relevance as in case of application under Section 7, more so when debt and default are proved otherwise without looking into those documents. However, liberty was given to the Corporate Debtor to raise the above issue before the appropriate authority before whom the Financial Creditor relies on the above documents as evidence for enforcing their rights under the above documents.
Case Details
Before: NCLT Mumbai
Case Title: Vistra ITCL India Ltd. v. Satra Properties India Ltd.
Coram: Hon’ble Mr. Justice H.V. Subba Rao
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