Pranav B Prem

The National Company Law Tribunal (NCLT), Mumbai Bench-II, comprising Shri Ashish Kalia (Judicial Member) and Shri Sanjiv Dutt (Technical Member), has held that inadequate stamping of loan documents is a curable defect and does not bar the admission of a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC).

Also Read: NCLAT New Delhi: EPFO Cannot Claim Pre-CIRP Dues Based On Assessment Made During Moratorium

Background

The petition was filed by Pegasus Assets Reconstruction Pvt. Ltd. (Financial Creditor) under Section 7 of the IBC seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Dee Plone Polyester Pvt. Ltd. (Corporate Debtor). The Financial Creditor stated that Dombivli Nagari Sahakari Bank Ltd. had originally sanctioned financial facilities, including a term loan and cash credit facility, to the Corporate Debtor between 2014 and 2017. The debt was later assigned to Pegasus ARC through a registered Assignment Deed dated 31 December 2020. The Corporate Debtor defaulted in repayment, leading to classification of the account as Non-Performing Asset (NPA) on 31 March 2018.

According to the Financial Creditor, as of 16 October 2023, the total outstanding dues amounted to ₹37.35 crore, inclusive of principal, interest, and penal charges. It was further submitted that the debt had been acknowledged by the Corporate Debtor in its audited balance sheets up to FY 2020–21 and in an email dated 16 February 2024, thereby extending limitation under Section 18 of the Limitation Act.

Corporate Debtor’s Objections

The Corporate Debtor contested the maintainability of the application, alleging:

• Lack of valid authorization at the time of filing;

• Absence of a record of default from the Information Utility (NeSL) as mandated under Regulation 20(1A) of the IBBI (IU) Regulations, 2017;

• Non-registration and inadequate stamping of loan documents;

• Absence of a Section 65B certificate for electronic records; and

• Violation of Rule 4(3) of the IBC (Application to Adjudicating Authority) Rules, 2016, for failure to serve a copy of the application on the IBBI.

It was further contended that the petition was filed fraudulently and was hit by Section 65 of the IBC, as the Corporate Debtor was solvent and had sought restructuring rather than insolvency.

Tribunal’s Findings

The Bench first noted that the initial defect in authorization was rectified through the filing of valid Board Resolutions and therefore constituted a curable defect. Addressing the objection on stamping, the Tribunal relied on the Supreme Court’s decision in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. (Curative Petition (C) No. 44 of 2023), where it was held that non-stamping or inadequate stamping of documents is a curable defect and does not render the document void or unenforceable. The NCLT observed: “Inadequacy of any document in terms of the Stamp Act cannot be made a ground to non-suit the petitioner in an application under Section 7 of the Code. The proceedings under Section 7 are not akin to recovery proceedings but are summary in nature to determine the existence of debt and default.”

Regarding the absence of a Section 65B certificate, the Bench held that such a defect affects only the evidentiary value of the documents and not the maintainability of the petition. It noted that the Financial Creditor had subsequently filed an additional affidavit enclosing certified account statements, which were admissible under the Bankers’ Books Evidence Act. The Tribunal also found that omission to serve the petition upon the IBBI, as required by Rule 4(3), was procedural and had since been rectified. The Financial Creditor’s compliance with the direction to serve the petition on IBBI was duly noted. Further, based on the balance sheets up to FY 2020–21 and the email dated 16 February 2024, the Bench concluded that the Corporate Debtor had acknowledged its liability, thereby extending limitation.

Also Read: Written Contract Not Mandatory To Prove Financial Debt; Any Documentary Evidence Under Regulation 8(2) Suffices: NCLAT New Delhi

Holding that both financial debt and default were established and that the petition was filed within limitation, the NCLT admitted the application under Section 7 of the IBC. It declared a moratorium under Section 14 and appointed Mr. Anuj Bajpai as the Interim Resolution Professional (IRP). Accordingly, the petition filed by Pegasus Assets Reconstruction Pvt. Ltd. against Dee Plone Polyester Pvt. Ltd. was admitted, with the Tribunal emphasizing that technical or procedural lapses such as inadequate stamping or absence of a Section 65B certificate cannot defeat a valid claim under the Code.

Appearance

Financial Creditor: Adv. Rahul Gaikwad a/w Adv Nikita Abhyankar a/w Adv. Komal Singh i/b Gravitas legal

Corporate Debtor: Adv. Kunal Kanungo

Cause Title: Pegasus Assets Reconstruction Pvt. Ltd. v. Dee Plone Polyester Pvt. Ltd.

Case No: CP (IB) No. 141/MB/2024

Coram: Shri Ashish Kalia (Judicial Member), Shri Sanjiv Dutt (Technical Member)