Rejecting a guilty plea filed by the developer of real estate developer Satra Properties (India), the National Company Law Appeals Tribunal (NCLAT) has upheld the decision of the Bombay court of the National Company Law Tribunal to admit the company in the corporate insolvency resolution process (CIRP).
Praful Nanji Satra, promoter of the listed company, had contested a guilty plea filed by VISTRA ITCL India in respect of the company’s default on non-convertible redeemable collateralized bonds (NCD) worth ₹56 crore.
Bondholders were required to be secured with the first equity mortgage charge of the corporate debtor’s leasehold rights in a commercial parcel in Jodhpur and a personal guarantee from Praful Nanji Satra. Under the financing agreement concluded in March 2014, all money to be received through the development of the Jodhpur parcel of land would be deposited in an escrow account.
These NCDs were due to be redeemed after one year of issuance, but the company was unable to repay the funds and therefore the redemption date for the debentures was revised to February 2015. Meanwhile, in November 2017, government authorities Maharashtra VAT froze the escrow account and the developer started depositing the money that was supposed to be deposited in the escrow account, into the current bank account of Satra Properties (India).
In October 2017, Satra Group, including Satra Properties (India), entered into negotiations with MJS Group and IIFL Group for the settlement of liabilities and the same was reached in January 2018.
The developer had objected to the insolvency application on the grounds that both documents were insufficiently sealed and, under the Maharashtra Stamp Act, could not be admitted as evidence of debt and default.
The firm’s resolution professional has received a claim of over Rs 718 crore so far, including the financial creditors’ claim worth over Rs 621 crore.
Nishit Dhruva, managing partner at law firm MDP & Partners, who appeared for Vistra ITCL (India), confirmed the development.
While rejecting this argument, the court upheld the application stating that insufficient stamp duty is irrelevant to determining the admissibility of an insolvency application. However, the judicial and technical members had different points of view regarding the need to pay the stamp duty.
According to the defendant, the insufficiency in the payment of the stamp duty is solely attributable to the company’s debtor and the company cannot use its own grievance by invoking the exception of insufficient stamping of the documents, which is basically its own fault.
“We note that the issue of debt due and payable in the present case is not prohibited by any law, but only a technical deficiency of insufficiency of its seal has been raised which can be remedied,” the appeals court said.
The appellate court, while dismissing the developer’s request, concluded that an unsealed NCD subscription agreement is sufficient and relevant to prove debt obligation.
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