No debt due if assignment deed insufficiently stamped, rules NCLT, Read Order

13 Dec 2023

The NCLT, Mumbai Bench expounded that an instrument, which is not stamped or insufficiently stamped in accordance with the Stamps Act, is not an enforceable instrument, hence is a void contract in terms of provisions of Contract Act. Accordingly, such instrument cannot be taken in evidence by the Court.

In the present case, since the liability of the Corporate Debtor arose from the assignment deed, there was no debt due on account of the deed being insufficiently stamped.

Brief Facts:

The present petition has been filed under Section 7of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) by a financial creditor seeking Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

Brief Background:

The Financial Creditor had given a loan to one Modesto Logistics & Cargo Private Limited (Modesto). Since Modesto was unable to repay, it asked Corporate Debtor to take over the loan. Subsequently, a deed of assignment was executed between the three parties.

The Corporate Debtor failed to repay the outstanding dues and hence, the present petition.

Contentions of the Corporate Debtor:

It was argued that the assignment deed was insufficiently stamped and hence, CIRP based on that deed cannot be initiated. It was also argued that the board resolution annexed by Financial Creditor did not authorize the person to file the application.

Observations of the Tribunal:

It was observed that an instrument, which is not stamped or insufficiently stamped in accordance with the Stamps Act, is not an enforceable instrument, hence is a void contract in terms of provisions of Contract Act. Accordingly, such instrument cannot be taken in evidence by the Court.

In the present case, since the liability of the Corporate Debtor arose from the assignment deed, there was no debt due on account of the deed being insufficiently stamped.

It was noted that the affected party could approach the collector of stamps for deciding the quantum of stamp duty payable and after such payment has been made, could file appropriate application.

The decision of the Tribunal:

Based on aforementioned reasons, the present petition was dismissed.

Case Title: Vinsari Fruitech Limited v. Effort BPO Private Limited

Case No.: CP (IB) No. 330/MB/2023

Coram: Justice V.G. Bisht (Judicial Member), Prabhat Kumar (Technical Member)

Advocate for Financial Creditor: Adv. Mr. Agam Maloo

Advocate for Corporate Debtor: Adv. Mr. Yash