NCLT Mumbai rules that insufficiency of stamp on loan documents is not relevant for admissibility of Section 7 petition of Insolvency and Bankruptcy Code read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
National Company Law Tribunal, Mumbai Bench, comprising of Shri Kuldip Kumar Kareer (Judicial Member) and Smt. Anuradha Sanjay Bhatia (Technical Member) in the petition filed in the case of Kotak Mahindra Bank Ltd. Vs M/s Hybro Foods Private Limited passed an order on 3rd March 2023 ruling that insufficiency of stamp on loan documents is not relevant for admissibility of Section 7 petition of Insolvency and Bankruptcy code read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
Hybro Foods Private Limited (“Corporate Debtor”) availed a Credit Facility Loan from ReligareFinvest Limited (“Original Lender”) with a cash credit limit of Rs. 11,00,00,000 at a floating reference rate of 13% p.a. The Financial Creditor alleged that the Corporate Debtor defaulted on the repayments and issued a Demand Notice under Section 13(2) of SARFAESI Act, 2002 on 27.02.2020. Failing to reply to the demand notice, the financial creditors issued a letter dated 12.03.2020 recalling the facility till payment and realization. Hence, the present petition under Section 7 of IBC was filed.
As the Corporate Insolvency Resolution Process (“CIRP”) was initiated against the corporate debtor, it was submitted that the Assignment Deed is not duly stamped as per section 18 of the Maharashtra Stamp Act, 1958.
The Adjudicating Authority reiterated that the question of insufficiently stamped loan documents is not relevant while adjudicating upon the admissibility of a petition under Section 7 of IBC.
Reliance has been made on “SpiceJet Limited v/s Credit Suisse AG 2022” which held that it is not relevant if the document sought to be relied upon a sufficiently stamped or not.
Further, it was observed that Section 10A of IBC was introduced in order to protect defaulting borrowers by barring initiation of Corporate Insolvency Resolution Process applications for a limited duration of 1 year between 24.03.202 till 25.03.2021.
It was stated that the loan account of the Corporate Debtor was classified as NPA on 31.01.2020 and the Demand Notice under SARFAESI Act, 2002 was issued on 27.02.2020 with further recall notice dated 12.03.2020. Since both the classification as NPA and Demand Notice are much prior to the period under Section 10A, with a further recall notice dated 12.03.2020. Since both the classification as NPA and Demand Notice are much prior to the period under section 10A, the petition is not hit by Section 10A.
Moreover, Tribunal observed that the Assignment Agreement itself provided that the Financial Creditor has the right to institute a recovery proceeding in its own name.
