Insolvency Law: NCLAT Rules On The Stamp Duty Conundrum
Under-stamped documents can be admitted as relevant evidence in insolvency proceedings, the National Company Law Appellate Tribunal said, while reconciling differing views of tribunal benches on the issue.
Stamp duty is merely a curable technicality, an issue that could be raised before appropriate authorities, the appellate tribunal said.
The law of evidence provides that insufficiently stamped documents cannot be admitted as evidence in the court of law. However, NCLT being an insolvency court is obligated to look only to the fact that the debt is due, the NCLAT said while relying on Supreme Court rulings.
Vistra ITCL India Ltd., a financial creditor of Satra Properties (India) Ltd., had initiated insolvency against the company in August this year. It had relied on Redeemable Non-Convertible Debentures Subscription Agreement and the Debenture Trust Deed as evidence of debt.
The company opposed the insolvency application on grounds that both the documents were insufficiently stamped, and under the Maharashtra Stamps Act could not be admitted as evidence of debt and default.
The tribunal had dismissed this argument, and admitted the application saying the insufficiency of stamp duty is irrelevant in determining admissibility of an insolvency application. The judicial and technical member, however, had different views as to the necessity of stamp duty payment.
The appellate tribunal didn't opine on this aspect but concluded that an unstamped NCD subscription agreement is sufficient and relevant in evidencing debt.
"...the issue of debt being due and payable in the present case is not interdicted by any law but only a technical deficiency of insufficiency of their stamping has been raised which can be cured."
According to Piyush Mishra, partner at Luthra and Luthra, stamp duty being a curable defect doesn’t pose an impediment to a financial debt whose existence and default can be proved otherwise.
NCLT is not a civil court. It is tasked with the functions of IBC when it acts as an insolvency court. The question arises to the number of ancillary issues to which it can go into. NCLT wouldn't get into the question of stamp duty—a revenue question—as an insolvency court.Piyush Mishra, Partner, Luthra and Luthra
The appellate tribunal's order has reconciled the conflicting views that had emerged from Chandigarh and Mumbai benches on the issue of under-stamped documents as evidence of debt.