Alchemist Asset And Reconstruction Company Limited vs Jaipur Metals & Electricals Limited

The Corporate Debtor was incorporated in 1943 and run by the Government of Rajasthan since 1977. Due to various externalities, the net worth of the Corporate Debtor kept on deteriorating and the Corporate Debtor was referred to proceedings under Sick Industrial Companies Act, 1985 on 03.10.1998, and finally also recommended into winding up. Consequently, Company Petition No. 19/2009 was filed at the Hon’ble High Court of Rajasthan. This was pending when Insolvency resolution process commenced in NCLT with the passing of admission order dated 13.04.2018.

The Corporate Debtor was declared a relief undertaking on 17.12.1977, under the Rajasthan Relief Undertakings (Special Provisions) Act, 1961, which entailed special provisions to enable certain industrial undertakings to attain revival and offer continued employment to their employees, by declaring them as Relief Undertakings, and for other matters connected therewith. Notably, as per Section 4(1)(b) of the said Act, no suit or other legal proceeding shall be instituted or commenced or if pending, shall be proceeded with, against any industrial undertaking during the period in which it remains a relief undertaking. As per Section 4(2) thereof, the period, during which any suit or legal proceeding cannot be instituted or commenced because of the provisions of clause (b) of sub-section (1), shall be excluded in computing the period of limitation prescribed by the Indian Limitation Act, 1908 (Central Act 9 of 1908), or any other law for the time being in force, for such suit or proceeding. Such status as / of Relief Undertaking admittedly continued till 07.12.2016.

The applicant State of Rajasthan took over control and management of affairs of JMEL in the year 1977 and later on acquired shares in terms of the Jaipur Metals & Electricals Limited (Acquisition of Shares) Act (‘JMEL Act’), 1986. The JMEL Act was enacted with the aim ‘to provide for the acquisition of certain shares of the Jaipur Metals & Electricals Limited with a view to secure the proper management of the affairs of the said company and continuity and development of the production of goods which are vital to the needs of public and for matters connected therewith or incidental thereto’.

The shareholding of the Corporate Debtor is as under:

On 30.09.2000, the factory of the Corporate Debtor was locked out. At the time of lockout, JMEL had 1559 workers and employees on its muster. In 2008, the Government of Rajasthan, through an Information Memorandum (‘IM’) sought bids for a revival plan of / for JMEL by sale of its shares but this attempt did not bear fruit.

The Corporate Debtor had taken loans from four different banks, viz. State Bank of Bikaner & Jaipur, State Bank of Indore, IDBI Bank, and Central Bank of India (‘CBI’) under various loan agreements. The said loans were assigned to AARCL and Asset Reconstruction Company India Limited (‘ARCIL’), as follows:

At the time of passing of admission order dated 13.04.2018 by the Adjudicating Authority, Company Petition No. 19/2009 for winding up of the Corporate Debtor was pending at the Hon’ble High Court.

In addition, SB Civil Writ Petition (‘CWP’) No. 19134/2017 was also pending. In this, a challenge had been made to the notice under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (‘SARFAESI’) Act, 2002 for symbolic possession issued by AARCL, who appears as the member with majority share in the Committee of Creditors (‘CoC’) of the Corporate Debtor / JMEL in its Corporate Insolvency Resolution Process (‘CIRP’).

The key dates in respect of various proceedings are as follows:

The course of CIRP of JMEL subsequent to the order of the Hon’ble Supreme Court dated 12.12.2018 has been as follows:

It is seen that while the State of Rajasthan submits that SB Civil Writ Petition No. 19134/2017 was disposed of with permission to raise objections before the NCLT, regarding valuation in terms of stamp duty on the Loan and Security Documents executed between the Corporate Debtor and various banks, it did not wait till such order of the Hon’ble High Court before filing trinity of IA Nos. 301/JPR/2019, 327/JPR/2019 and 328/JPR/2019.

Pursuant to ongoing investigation and receipt of information, the Deputy Inspector General (‘DIG’), Registration and Stamp (Tax Evasion) Rajasthan had issued show-cause notices to AARCL (Respondent No. 2) under the Rajasthan Stamp Act, 1998 regarding insufficient stamp duty of all the documents executed as Asset Credit agreement and other ancillary documents. The said notices were challenged by Respondent No. 2 in two writ petitions bearing S.B. CWP Nos. 7747/2021 & 7748/2021. The Hon’ble High Court had concluded that the Petitioner (AARCL) did not have locus standi to challenge the notice issued under Section 37 read with Sections 51 and 53 of the Rajasthan Stamp Act for insufficient duty on the documents executed by it. The Petitioners would be free to raise all objections available under the Act before the DIG, Registration and Stamp Act (Tax Evasion), Rajasthan, Jaipur Special Circle and Ex-officio Collector (Stamp), Jaipur, Rajasthan regarding insufficiency of stamp duty. The High Court also recognized that due to the moratorium envisaged under Section 14 of IBC, 2016 being applicable against the Corporate Debtor (JMEL), the notice to JMEL would be hit by Section 14 of the IBC, 2016.

Subsequent to the aforesaid order of the Hon’ble Single Judge of the High Court, dated 01.09.2021, the Court of DIG Rajasthan and Stamp (Tax Evasion) Rajasthan, Jaipur Special Circle passed various orders dated 17.09.2021, 18.11.2021 & 26.11.2021.

In the said orders the original loan and security documents of SBI, IBBI, SBBJ and CBI for grant of loan to JMEL have been held to be under-stamped. Consequently, Respondent No. 2 (AARCL) who had bought the loans from SBI and IDBI have been held to pay Rs. 630 crores approximately towards stamp duty and penalty. It is noted that various agencies of the State of Rajasthan refer to the said loans as having been bought by the concerned Asset Reconstruction Companies, rather than being assigned to them.

The order dated 01.09.2021 passed by the Hon’ble Single Judge was assailed before the Division bench of the Hon’ble High Court and the office of the DIG was restrained from recovering Stamp Duty in relation to show cause notices. It is stated that the said order had already been brought on record of the Adjudicating Authority vide additional affidavit bearing diary No. 2583/2021 of 02.12.2021.

The orders dated 17.09.2021 & 18.11.2021 had been challenged vide DB CWP No. 15033/2021 & 15067/2021. However no challenges have been made against two orders dated 26.11.2021.

While the recovery of demand had been stayed, the effect and operation of the said orders dated 17.09.2021 and 18.11.2021 has not been stayed. Hence, such documents need to be disregarded and the claim(s) deserve(s) to be rendered inadmissible.

It was submitted that the Applicant State of Rajasthan, through its representative as the Member of the CoC, objected to convening of any CoC meeting by the RP till such time the CoC is reconstituted by rejecting the claims of AARCL and ARCIL.

Given that the basis of claims of AARCL and ARCIL “forming more than the majority of the CoC of JMEL have been usurped”, it would be highly prejudicial to the Applicant State and other Stakeholders of JMEL to continue without reconstitution of the CoC of JMEL.

It was also alleged that the counsel of the Applicant State received an email from the counsel of AARCL with regard to rejoinder to be filed before the Hon’ble High Court in reply to the amendment application of AARCL in D.B. CWP No. 15033/2021 & 15067/2021 which was first sent to Dhir and Dhir Associates by the office to the counsel for the RP, which was indicative of collusion.

It was prayed that actions of the RP in admitting claims of AARCL, Respondent No. 2 and ARCIL Respondent No. 3 (as sought to be impleaded vide IA No. 34/JPR/2020), be rejected in view of shortfall of stamp duty and IA No. 47/JPR/2020 be allowed for stay over CIRP proceedings.

Pending adjudication of IA No. 87/JPR/2022, the RP may be restrained from convening meetings of the CoC.

The application is completely frivolous and filed with the sole intent to delay the CIRP of JMEL.

The applicant State of Rajasthan took over control and management of affairs of the Corporate Debtor (JMEL) way back in the year 1977 and later on in terms of the JMEL Act, 1986. Thus, Government officials/ IAS/ RAS officers are/ were appointed as the Chairman and Managing Director of the Corporate Debtor (JMEL).

The management of JMEL, for more than 4 decades, i.e. since 1977, vested with the Government of Rajasthan. It is strange that the Applicant State of Rajasthan is seeking recalling of the document executed by the Applicant State of Rajasthan itself in the year 1996 on the ground of non-payment/ shortfall of stamp duty by the applicant itself. The State is estopped from raising such contentions.

The factory premises were completely shut down in the year 2000 and lockout was declared. Even thereafter, the State of Rajasthan remains in control of management affairs and assets of JMEL despite the appointment of the RP by the Adjudicating Authority. Further, despite filing of application under Section 19(2) of IBC, 2016 no cooperation has been extended to the RP; and no possession or control of the CD has been handed over. The loan agreement dated 21.03.1996 for Rs. 1,50,00,000/- was entered into between IDBI and JMEL, an agency of the State of Rajasthan through its officers and was to be admittedly repaid by JMEL. State of Rajasthan cannot raise frivolous objections. In this case, the maxim nullus commodum capere potest de injuria sua propria (i.e. no man can take advantage on his own wrongs) is applicable.

If this stand of State of Rajasthan is to be accepted, it would imply that State is washing its hands clean from the misdeeds committed by its officers. The State of Rajasthan cannot raise such false pleas.

The subtle implication of the same is that certain officials who entered into the loan agreement dated 21.03.1996 cheated revenue department of the State of Rajasthan by availing loan facilities and not paying stamp duty on the same.

The Adjudicating Authority vide admission order dated 13.04.2018 duly took note of debt dated 21.03.1996 owed by JMEL to AARCL and also noted certificate of Registration of modification charge in favour of AARCL instead of IDBI.

The Hon’ble NCLAT in Company Appeal (AT) (Ins.) No. 485 of 2018 in the matter titled as Lalan Kumar Singh vs. Phoenix ARC Private Limited and Anr. held that the assignment deed cannot be challenged under Section 7 of IBC.

The Debt owed by JMEL to AARCL by virtue of loan agreement dated 21.03.1996 and assignment dated 11.10.2007 is clearly shown in last available balance sheet of JMEL submitted to the Registrar of Companies (‘RoC’) for the year 2013.

It is held in a catena of judgments that even under-stamped document or non-registration at the proper place does not make it invalid. In any case, the loan agreement deed between IDBI and JMEL was registered in Jaipur after payment of stamp duty.

Even a deficiently stamp document can be admitted in evidence on payment of stamp duty. The State of Rajasthan has been constantly trying to delay the CIRP process of JMEL.

While the State of Rajasthan has been orally deposing through the learned AAG that “the Government is making strenuous endeavors to settle the matter in all respects”, as recorded in order of 07.08.2019, nothing has happened. No measures have been taken for over 20 years since the CD has been lying closed.

As per the Government of Rajasthan CSR Portal, Mr. Panchu Ram Sharma is not enlisted as joint director and officer in charge industry. In any case, Mr. Panchu Ram Sharma has criminal proceedings in pending against him and has threatened the RP that he would file an appropriate application for substitution of the RP.

In reply on merits, the RP has reiterated that the State of Rajasthan has been interfering with the process of the entire CIRP proceedings; the same very Government of Rajasthan, cannot after 23 years, question validity/ authenticity of the loan and deed dated 21.03.1996 which was executed by their officers and is estopped in this regard; the RP had duly verified the loan agreement executed between CD/ JMEL and AARCL and subsequent assignment deed 11.10.2007 between IDBI and AARCL and accepted and verified the claim of AARCL on the basis of various documents submitted by AARCL after due diligence and also consideration of the documents which have been looked into by the Principal Bench in passing of the admission order dated 13.04.2018 for commencement of CIRP.

Pertinently, while deciding the relevant Application under Section 7, the Hon'ble Bench has duly taken cognizance of the documents and records filed by the Respondent No.2 (Petitioner therein); the said documents/ records find due mention in the order dated 13.04.2018, and the same is stated herein below:

Para 17 of aforesaid admission order deals with CERSAI (Central Registry of Securitization Reconstruction and Security Interest) certificate with respect to assets held by AARCL as security. Para 18 contains extracts of balance-sheet of JMEL for the financial year ending 31.03.2013, which shows total amount of Rs. 391,72,98,134/-payable to all financial creditors of JMEL, break-up whereof is given in Note 5 of the said balance-sheet which, as per Para 19, clearly illustrates admission of debt due, inter alia, to IDBI and SBBJ. The admission order records in Para 20 “that the applicant ‘financial creditor’ has placed on record voluminous and overwhelming evidence in support of the claim as well as to prove the default committed by the respondent company.”

Even if the loan agreement was short-stamped by the State of Rajasthan, it does not warrant and result in extinguishment of the right of the CD/JMEL and repayment of its own debt to AARCL who were assigned the debt by IDBI on 11.10.2007.

Government of Rajasthan had floated an IM in 2008 as it intended to sell its shareholding in JMEL as per the said IM. It clearly stated that debt was due and payable along with interest to IDBI and it was also admitted that the said debt had been assigned to the AARCL. It is rather strange for the State of Rajasthan to backtrack in this regard.

In the last balance sheet of the CD filed with the RoC for the order 2012-2013, the debt due and payable to AARCL was clearly shown.

IA No. 327/JPR/2019 is not maintainable as it pertains to insufficient stamp duty paid for the loan agreement between the CD/ JMEL and IDBI on 21.03.1996. AARCL was not a party to the loan or deed or remotely concerned therewith. IDBI sanctioned various loan facilities on 23.03.1995 & 21.03.1996 to the CD against execution of asset credit agreement dated 23.03.1995 for term loan of Rs. 474 lakhs, loan agreement dated 23.03.1995 for a work capital of loan of Rs. 200 lakhs and loan agreement 21.03.1996 for a loan amount of Rs. 150 lakhs. AARCL was assigned the right, title, interest and benefit of the dues of the CD by IDBI after the period of more than 10 years had lapsed since execution of the loan.

Issue of insufficient stamp duty was never raised during the period of assignment of deeds by IDBI to AARCL. However, it has cropped up belatedly after 23 years, on NCLT admission order of 13.04.2018.

The Hon’ble Supreme Court in the matter of Shyamal Kumar Roy Vs. Sushil Kumar Agarwal (AIR 2007 SC 637) observed that once an instrument has been admitted in evidence it shall not be called in question at any stage of the same suit or proceedings on the ground that the instrument has not been duly stamped.

The Applicant State is barred from raising the issue of insufficient stamp duty on account of estoppel.

The Applicant State had due information and knowledge concerning stamp duty at the outset. The said fact was suppressed and not raised at earlier stage. The Applicant cannot take advantage of its own wrongs by raising issues about which it had relevant knowledge. The frivolous application of the state is liable to be rejected.

Proviso to Section 3 of the Stamp Act mentions that no duty shall be chargeable qua an instrument executed by/ in favour of Government in cases where the Government is liable to pay the duty charges.

In the matter of Ishaq Mohammad etc. etc. Vs. Jaipur Metals & Electrical Ltd. cited in 1988 SCC Online Raj 132 it was held that M/s Jaipur Metals & Electricals Ltd. is an instrumentality or agency of Government and thus, an ‘authority’ and therefore ‘State’ within the enlarged meaning of the expression in Article 12 of the Constitution. The said judgement was also relied upon in the case of M/s Jaipur Metals & Electrical Ltd. Vs. Jagdish Prasad Gupta, being DB Civil Special Appeal (Writ) No. 118/1999, which also referred to the JMEL Act, 1986 to reiterate the same finding. In challenge at the Supreme Court in SLP (Civil) No 14940/2010 titled M/s Jaipur Metals & Electrical Ltd. Vs. Jagdish Prasad Gupta the Hon’ble Supreme Court observed as follows;

Section 3.8 of the General Conditions of the loan agreement dated 21.03.1996 requires the Corporate Debtor / JMEL to pay burden of any additional duty, which stands exempted by virtue of Clause-1 to the proviso of Section 3 of the Stamp Act.

No case has been made out for impounding of loan agreements and consequential documents which were taken due cognizance of by the Tribunal in the Section 7 admission order of 13.04.2018 and referred to in the said admission order in detail. The proposition enunciated in Shyamal Kumar Roy Vs. Sushil Kumar Agarwal (Supra) that once an instrument is admitted in evidence reopening of matter regarding sufficiency or otherwise of stamp duty is prohibited, is reiterated.

While the original prayer is for calling for and impounding the loan agreement dated 21.03.1996, during the argument stage, the State of Rajasthan has talked about an expanded list of documents without any correlation in respect thereof in the application.

The loan document is not compulsorily registerable under provision of Section 17 of the Indian Registration Act, 1908.

The claim of the Financial Creditor, within the parameters of Section 5(8) of IBC is clearly established on strength of the loan agreements itself besides other documents. The contention of the State Government for rejection of claim of AARCL is untenable, besides being a gross abuse of the process of law with malafide intent to delay CIRP of JMEL and to prejudice rights and contentions of AARCL.

The RP provided various documents including Form C of AARCL and ARCIL subsequent to the order of the Tribunal dated 23.09.2019 in IA No. 300/JPR/2019.

Initial objection in IA No. 327/JPR/2019 was with respect to loan agreement dated 21.03.1996 and was merely based on one loan document available with the applicant State. However, on review of Form C of AARCL and ARCIL, it seemed to the Applicant State that other documents that may be under-stamped have been ignored by the RP despite statutory obligation to not admit them. Complete set of Form C of AARCL and ARCIL was filed in sealed cover along with tabular analysis of alleged difference in stamp duty at execution.

The Hon’ble Rajasthan High Court, vide order dated 29.11.2019 in SB WP No. 19134/2017 had left it to the State Government to take up the issue of under-stamping with NCLT.

As the State Government was required to keep the documents confidential, as per NCLT order of 23.09.2019, they were submitted in sealed cover. Presumptively, the said documents were considered by the RP for purposes of admission of claims of AARCL & ARCIL.

While admittedly the documents were received from the RP, they need to be impounded, the claim of AARCL liable to be rejected due to under-stamping and need to be referred to the competent authority for necessary proceedings under the Rajasthan Stamp Duty Act 1998 and the extant Rajasthan stamp Law Adaptation Act, 1952.

Judgement of the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Ors., Civil Appeal Nos. 8766-67 of 2019, dated 15.11.2019 was referred to.

There is no specific denial of allegation of the State of Rajasthan that documents, classified as loan agreements, security agreements and assignment agreements being massively under-stamped. These documents form part of Form C of AARCL before the RP who has not examined the aspect of stamping which is to be mandatorily done by him. The respondents submitted a tabulation in support of their submission of massive under-stamping and evasion of stamp duty.

It is the proposition of the State of Rajasthan that the aforesaid documents are part of Form C submitted by AARCL and form the basis for admission of their claim. It has not been claimed by AARCL that the documents are sufficiently stamped.

JMEL and the State are not one and the same, as JMEL has a different corporate character. If, this was not true than there really would not be any claim between JMEL and the Applicant State; the fact is that a claim of the Applicant State has been admitted against CD/ JMEL, which is a separate juristic entity.

The obligation of the Tribunal to impound the claim documents is a statutory obligation and the context of the person bringing it to the notice of the Tribunal is immaterial. At the stage of impounding, it is not necessary to determine who is to pay the stamp duty.

Reliance of the RP on the judgement of the Supreme Court, Shyamal Kumar Roy Vs. Sushil Kumar Agarwal (Supra), is unfounded as the same pertains to a civil suit where a separate stage of trial is devoted for admission of evidence.

Respondents have not provided any authority or reference to statute in support of any limitation period, which will only come into play once documents are produced before the Tribunal. The submission that the documents have already been seen/ admitted by the Tribunal as part of the admission order is deflective. At admission proof of debt of Rs. One Lakh and default thereof has to be established, and thereafter the RP has to examine claims specifically in terms of Regulations 8 to 14 of Insolvency and Bankruptcy Board of India (Insolvency Resolution for Corporate Persons) Regulations (‘CIRP Regulations’), 2016, whereby the RP can receive evidence. In context, para 99 of the Judgement of the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Ors., Civil Appeal Nos. 8766-67 of 2019, dated 15.11.2019 (‘Essar Steel II Case’) is referred to for emphasising that insufficiency of stamp duty on documents forming basis of claim is a ground for rejection of claim. Reliance of the RP on paras 88-89 of the judgement of the Hon’ble Supreme Court in the case of Swiss Ribbons (P) Ltd. Vs. Union of India, (2019) 4 SCC 17 is misplaced that only held the powers of the IRP/ RP as being administrative and not quasi-judicial, which has nothing to do with receiving evidence and checking sufficiency of stamping.

The State was not a party to the admission proceedings and cannot be estopped from raising the issue of under-stamping The order dated 12.12.2018 of the Hon’ble Supreme court had merely affirmed the admission order of 13.04.2018 to the extent that the process of IBC would prevail over the parallel winding-up process going on before the Hon’ble High Court. No issue of stamping was raised.

The argument of the Respondents that JMEL being entity of the State Government is not obligated to pay stamp duty in terms of proviso 2 Section 3 of the Rajasthan Stamp Act, 1998 is not tenable, else nominal stamping of the documents would not have been done.

While admittedly relevant/ claim documents are part of the record of the Adjudicating Authority, since the admission stage of the Section 7 application and were also received by the Applicant State from the RP consequent to the order dated 23.09.2019, which were submitted in a sealed cover as part of rejoinder and separate IA No. 34/JPR/2020 in the instant application, the Adjudicating Authority and the RP are obligated to examine sufficiency of the Stamp duty.

Reliance in this regard was also placed on the judgement of NCLT, Chennai, in A. Senthil Kumar Vs. IRP, M/s Paragon Steels Private Limited, CA no. 38/2017 in CP No. 553/IB/CB/2017, dated 18.01.2018, wherein the Hon’ble Tribunal categorically held that the MoU sought to be relied upon by the Applicant for his claim may be accepted as a valid evidence of the financial debt only upon fulfilling the requirements under the Tamil Nadu Stamp Act.

The State of Rajasthan has further relied on Sita Ram Bhama Vs. Ramavtar Bhama, (2018) 15 SCC 130 to submit that unlike an unregistered document an unstamped cannot even be admitted for collateral purposes. Further, in terms of Avinash Kumar Chauhan Vs. Vijay Krishna Mishra, (2009) 2 SCC 532, there is an absolute bar on the admission of an unstamped document.

The instant application filed by the Applicant being in management control of the Corporate Debtor is frivolous and baseless and is only a delay tactic of the Applicant so as to delay CIRP of the Corporate Debtor and further to frustrate the rights of the Financial Creditor.

During the pendency of the present application, the Collector suo moto on a letter forwarded by the Director Revenue Intelligence of the Applicant Government of Rajasthan initiated proceedings against the Respondent and issued show cause notices dated 27.04.2021. The Collector vide orders dated 17.09.2021 and 26.11.2021 has allegedly adjudicated deficient stamp duty on various documents which were already considered and relied upon by this Hon’ble Tribunal vide order dated 13.04.2018.

As per Section 40 of the Rajasthan Stamp Act, 1988 an Instrument which has once been admitted in evidence, such admission shall not be called in question at any stage of the same suit or proceedings on the ground that the instrument has not been duly stamped.

In this case, the admission order dated 13.04.2018 at para 13 lists out the documents with respect to debt of IDBI assigned to Respondent No. 2 and at para 14 lists out the documents with respect to the debt of SBBJ (now SBI) assigned to Respondent No. 2. The Applicant has vide this application challenged the issue of under stamping of the same documents which have already been considered and relied upon by this Tribunal and thus, the Applicant has no right to question the issue with respect to such instruments being not duly stamped. The table below shows that the documents considered and relied upon by this Tribunal and the documents on which the Collector has allegedly demanded deficient stamp duty are the same.

The following judgments clearly show that once a document has been admitted in a suit or proceeding, the party cannot in the same proceedings question the instrument as not being duly stamped.

Shyamal Kumar Roy Vs. Sushil Kumar Agarwal, Supreme Court judgment dated 31.10.2006 passed in Civil Appeal No. 4609/2006

ii) Jupudi Kesava Rao Vs. Pulavarthi Venkata Subbarao and Ors. (1971)1SCC545

iii) Javer Chand & Ors. Vs. Pukhraj Surana, AIR 1961 SC 1655

iv) Jagdish Vs. Deep Shika Garg, AIR 2013 Raj 89

Section 32 of the Rajasthan Stamp Act is as follows:

Thus, the documents i.e. Mortgage Deed, Hypothecation Agreement, Memorandum of Entry are documents executed by the Corporate Debtor (CD) i.e. Jaipur Metal and Electricals Ltd. and thus, any deficient stamp duty is to be paid by the CD. However, as the CIRP process of the CD is going on and Section 14 Moratorium has been triggered, thus no proceedings or recovery can be done on these documents.

Further, as per the loan documents executed in the case of IDBI, Article II Clause (2.4A) (ii) of the Loan Agreement clearly state that any additional stamp duty or other duties, taxes or penalties with respect to these agreements would be paid by the CD. Similarly, Clause 12(b) of the Joint Mortgage Deed dated 07.04.1995 and also 11.04.1996 require any additional stamp duty or penalty to be paid by the CD.

While the Collector has in one case taken nature of land of the CD to be industrial in nature, in another case it has been assumed as commercial. Further, the Collector has also adjudicated deficient stamp duty on the Assignment Deed whereas as per the notification dated 08.03.2017 and 10/11.04.2018 of Govt. of Rajasthan, no stamp duty was payable on the assignment deed. Further, the Collector has adjudicated deficient stamp duty on the loan agreements whereas as per the Schedules of the Rajasthan Stamp Act, 1998, the loan agreement is not a compulsory registrable document.

In this case, the loan was taken by the CD way back in 1995-1996. The loan has been shown in the Balance Sheets of the CD upto 2013. No Balance Sheets have been filed by the CD thereafter. In the Balance Sheets of 2013, in Note 5 - Long Term Borrowings, the CD has clearly admitted that the IDBI loan had been acquired by M/s Dhir & Dhir Asset and Securitisation Company Ltd. (‘DDARS Co. Ltd.’, now AARCL) and therefore, wherever IDBI has been mentioned, it should be read as DDARS Company Ltd.

Further, the Govt. of Rajasthan in 2008 had floated an IM for sale of shares of the CD wherein, it is clearly mentioned / admitted that the loan of IDBI has been assigned to AARCL so it is goes beyond any doubt that the GOR was very well aware of the said assignment even in the year 2008 and now cannot say that they were not aware.

AARCL had filed an OA before the DRT for recovery of its debts in 2013 which is pending. It is most pertinent to know that the CD in its reply to Section 7 Petition has also admitted the debt of the Respondent herein. At para 4 of its Reply, the CD clearly admits that the IDBI loan has been assigned to the AARCL. In para 5 of the Reply, it admits that the loan of SBBJ has been assigned to AARCL.

There are various judgments of the Hon'ble NCLAT and NCLT dealing with issue with respect to under stamping of document and have held that in case, to analyse the debt if a particular document cannot be relied upon, then other documents should be seen to ascertain whether the debt / claim exists, as follows:

(2021)168SCL585; Ashique Ponnamparambath, Member of Suspended Board of Directors of the Corporate Debtor, Platino Classic Motors (India) Pvt. Ltd. Vs. The Federal Bank Limited

ii) (2019) SCC OnLine NCLT 5557l; Edelweiss Asset Reconstruction Co. Ltd. Vs. Sejal Glass Ltd.

iii) (2018) SCC OnLine NCLT 9916; Bank of India Vs. Gupta Infrastructure (India) Pvt. Ltd. AND Bank of India Vs. Gupta Infratec Pvt. Ltd.

iv) (2020) SCC OnLine NCLT 9320. Bennett Property Holdings Company Limited Vs. Brick Eagle Affordable Housing Advisory LLP.

Satra Properties (India) Limited Vs. Vistra ITCL India Limited & Ors.; M.A. No. 180/2020 in C.P. No. 1632/I&B)MB/2019.

Thus, in view of the above submissions and various admissions by the CD with respect to the debt of the Respondent No. 2 the claim of the Respondent No. 2 cannot be rejected on the basis of alleged order of the Collector requiring deficient stamp duty to be paid as the debt of the Respondent No. 2 can be proved by various documents such as the Information Memorandum issued by Govt. of Rajasthan, balance sheet of CD, admission of the CD in its reply, etc.

The Applicant i.e., Govt. of Rajasthan is resisting the handing over of the possession of the assets of the CD and are putting spokes in the running of the CIRP process. This application along with other applications filed by the Applicant are frivolous and delaying tactics. The application needs to be dismissed with heavy costs.

a. JMEL is an entity which has been under deep and pervasive control of the State with IAS/ RAS officers holding charge of the office of Chairman and Managing Director. While the State of Rajasthan may seek to distance itself from the corporate persona of JMEL, it has clearly been under its substantive control since 1977 and particularly after Jaipur Metals and Electrical Limited (Acquisition of Shares) Act, 1986. While the JWE Employees Cooperative Credit & Thrift Society Ltd. may hold around 59 percent of shares, they stand emasculated in terms of management control, which lay/ lies with the Government of Rajasthan. Irrespective of the force and extent of the pull of the strings of management of JMEL by the Government of Rajasthan, it is a fact that JMEL became a BIFR case and was subsequently admitted for CIRP under Section 7 of IBC.

b. The fact of loans taken by JMEL has not been denied by the State of Rajasthan at any time anywhere. It has been undeniably covered in an IM floated by the State of Rajasthan for seeking investment in JMEL. The position of loan is admitted in the balance sheets and various other documents.

c. The aforesaid documents are not denied per-se. Instead, the aspect of stamp duty is being amplified by the State of Rajasthan to go on repeatedly and in a blanket manner about short-stamping and inadmissibility of documents.

d. The aspect of loan has been adequately addressed in the admission order dated 13.04.2018, which states that voluminous evidence in support thereof was filed and considered, inter-alia in paras 13 to 20, in the said admission order.

e. At the stage of admission, the State of Rajasthan may have had a lackadaisical stance as a State, including concerned responsible officers. However, the process of law went ahead unimpeded.

f. The pendency of the winding up petition 19//2009 and SB CWP 19134/2017 against the symbolic possession under SARFAESI Act gave the State of Rajasthan some footing. However, the Supreme Court order dated 12.12.2018 possibly shook the ground on which the State government was standing.

g. Instead of cooperating for completion of CIRP, as per order of the Hon’ble Supreme Court and Hon’ble NCLAT, from the stage where it was interdicted by order of the Hon’ble High Court of Rajasthan, it is evidently clear from conduct of proceedings at the Adjudicating Authority that the State of Rajasthan sought to entangle the matter under manifold hats, in multi-pronged legal assault, at multiple fora.

h. Strangely, while in one avatar the State of Rajasthan appeared as the Applicant in the trinity of IA nos. 301/JPR/2019, 327/JPR/2019 and 328/JPR/2019 before this Adjudicating Authority, in other roles of its agencies, such as SDRI, it self-propelled itself as the judge and jury on the issue of stamp duty, which is the subject matter of the instant application and has been recurrently harped on by the State of Rajasthan as to be addressed by the Adjudicating Authority in terms of the order dated 29.11.2019 of the Hon’ble High Court of Rajasthan in SB CWP 19134/2017. While SDRI was itself before this Adjudicating Authority in contumacious action, which matter is not yet closed, it choose to merely inform the Adjudicating Authority that it was going ahead with its own proceedings. It is not understood how the State of Rajasthan can hold ground with shifting sands and changing stands.

It has been submitted by AARCL that various assignment documents were exempt from stamp duty as per Government of Rajasthan Notifications dated 08.03.2017 and 10/11.04.2018. The notification dated 08.03.2017 reads as follows:

j. Notification No. F.7(43) Jan/2017-18/4928 of 10/11.04.2018 prescribed duty rates on various instruments, including separation of debt assignment in respect of performing assets and debt assignment by Bank or Financial Institutions in favour of Asset Reconstruction Company, which was retained as a full stamp duty rebate as per notification dated 08.03.2017.

k. The pre-existing notification P2(22)Fin/Tax/03-5 under Rajasthan Stamp Law Adaptation Act, 1952, provided for a maximum stamp duty of Rs. 2,00,000/-, under Article 23 at the rate of 0.1%. It is thus clear that incidence of stamp duty, if any, was either zero or minimal with a ceiling. It is also clear that all / many documents need not be examined to establish debt. A certain minimum set of documents is enough to prove existence of debt, irrespective of whether each constituent document of the set needs stamping. Out of vast array of documents before the Adjudicating Authority, small sub-sets or sub-arrays are enough to establish / prove debt. Other documents need not be examined.

l. The judgment in the case of Satra Properties (India) Limited Vs. Vistra ITCL India Limited & Ors. (Supra) was delivered by a third member in a situation of difference of opinion between the Judicial Member and the Technical Member of Mumbai Bench. While both the members had concurred with each other that debt and default stood proved even without relying on a debenture trust deed and NCD subscription agreement in question, they differed on the issue of impounding and payment of deficit stamp duty on the aforesaid two documents. In reference to the third member, it was concluded that a Section 7 Application needs to establish debt and default and it can be proved through various means without getting into trivial technical issues. It was stated that the issue of stamp duty is irrelevant and uncalled for in a Section 7 application, more so when debt and default can be proved otherwise without looking into various documents. This judgment considered and referred to other judgments on the same issue. It follows that neither the Adjudicating Authority nor the RP is supposed to sit like a hunter to hunt for any short-stamped document, or sift through bundles thereof, for impounding, if debt is otherwise proved, in more ways than one.

m. On the one hand, while the State of Rajasthan in one of trio of the applications, i.e. IA 328/JPR/2019, is agitating issue of limitation of claim of AARCL and ARCIL, there is no word about timeliness of its claim for stamp duty. It seems that the troika of applications, as aforesaid, were filed to create legal hurdles and impediments in the CIRP of JMEL. There is no other plausible reason for the timing and sequence of the conduct of the State of Rajasthan in proceedings before the Adjudicating Authority.

n. The applicant seems to be inter-alia attempting to:

Establish a belated/ extensive claim of stamp duty, which at best could be classified as an operational debt, if/ when crystallized;

Diminish/ erode/ extinguish claim(s) of AARCL and ARCIL so that their relative position nullifies/ weakens in the CoC;

Blame the RP for admitting claims of AARCL and ARCIL on the aspect of all documents being under stamped and delayed without establishing which documents were seen by the RP and on what documents is the claim of the RP pivoted;

Stymie/ scuttle the process of CIRP of JMEL;

Reopening the admission order dated 13.04.2018 on account of under stamping and limitation, which option is not available as the admission order was unchallenged and subsequently the matter travelled to the Hon’ble Supreme Court, who understood the full chequered history of the case as is clear in the narrative of order of the Supreme court dated 12.12.2018, unlike the belief of the State of Rajasthan that it is limited to the aspect of continuance of winding up proceedings in the face of CIRP of JMEL.

o. Be that as it may, the Adjudicating Authority cannot but help notice the pace, pressure, persistence and peccadilloes of the State of Rajasthan in trying to push various applications, applications within applications, and trying to push, shove and ride rough-shod in the proceeding at the Adjudicating Authority.

p. During pendency of the extant application the Collector on the basis of letter forwarded by the SDRI, as stated hereinbefore, has initiated proceedings against the Respondent and issued show cause notices dated 27.04.2021 to AARCL. The Collector, as per orders dated 17.09.2021 and 26.11.2021, has allegedly adjudicated deficient stamp duty on various documents, some of which documents have earlier been already examined and considered by this Adjudicating Authority in the order dated 13.04.2018. The Collector had given a time of 30 days to the Respondents to pay the deficient stamp duty; or in the alternative, the documents would be impounded. AARCL had filed Writ Petition(s) No. CW 7747/2021 and 7748/2021 before the Single Bench of Hon’ble High Court of Rajasthan, Jaipur Bench, wherein the Hon’ble High Court did not grant any relief. However in Appeal(s), in DB CW No. 15033/2021 and 15067/2021, the Hon’ble High Court vide its order dated 20.12.2021 has stayed the recovery of stamp duty. The extract of the order is as hereunder:

q. The entire conspectus of the State of Rajasthan revolves around the fact that the RP could not have considered the bunch of loan documents with Form C as proof / evidence of claims of AARCL and ARCIL. Copies thereof, whether or not obtained from the RP during the proceedings, have been submitted to the Adjudicating Authority and the entire bunch of documents needs to be impounded. Despite the examination of many documents by the Adjudicating Authority at the admission stage, the State would like the RP to look through each one and ferret out under-stamped documents, irrespective of the fact whether it is relevant or basis for establishing the claim or not.

r. There is no submission about specific documents that were wrongly considered by the RP, as being short-stamped. It is a generic broad-brush sweep. The focus is that since a bouquet of documents were given to the RP, all of which seem to be massively under-stamped, they must all be impounded and sent for assessment of stamp duty. Repeated emphasis has been placed on the judgment of the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited vs Satish Kumar Gupta & Ors. (Supra) with reference to Para 99 which implies that the RP should not accept any document as the of basis of claim if it is short-stamped.

s. The emphasis of the State of Rajasthan needs to be contrasted with the judgment of the Hon’ble Supreme Court in the case of Swiss Ribbons (P) Ltd. Vs. Union of India, (Supra) wherein it is implied that the RP does not have any adjudicatory powers and his job is merely to collate various claims. In this case, there is no claim of the State before the RP or correspondence about dues of stamp duty. The only focus is to use issue of stamping to dilute position of AARCL and ARCIL. It is a spanner in the works strategy to introduce new parameters in the adjudicatory and resolution process.

t. The role of the RP in substantiation of claims is stated in Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations, 2016’). Regulation 8(2) of the said Regulation pertains to of the Financial Creditors, as follows:

u. Needless to say that the RP can verify claims in multiple ways. Also, admitted/ examined documents need not be re-examined by the RP. The State of Rajasthan has not enumerated/ established any specific documents relied upon by the RP as short-stamped for considering the claims of AARCL and ARCIL. The State is implying that any document, which the RP may stumble upon, even if not used as basis or for establishing a claim should be held by the RP and referred to the Collector for assessment of any alleged short-stamping. Also, the State of Rajasthan is subtly trying to sully the admission order of the Adjudicating Authority by implying that documents that were seen by the Adjudicating Authority and recorded in the admission order dated 13.04.2018, need to be seen again by the RP. It is an attempt to put a foot in the door and wedge open the Section 7 case once again. We are satisfied that there is adequate proof of debt and admission thereof by JMEL in it’s reply to the Section 7 petition / application. The admission order is not based on a single transaction / document. Amidst the pleadings and the admission order of the case too, there is adequate canvas for the RP to ascertain and verify debt underlying the claim(s). There is no reason to believe that documents admitted in the matter can be reopened, especially as the order has attained finality and was seen extensively by the Hon’ble Supreme Court. There is no infirmity in the actions of the RP. Stamping is a bogey. Impounding was not needed as the matter was and could be decided without reference to an extensive set of documents, quite irrespective of amount of stamping thereon. Also, the Adjudicating Authority had presciently seen with some fortuitous clairvoyance, earlier on 31.01.2020, when notice was issued to the respondents in IA No. 34/JPR/2019, limited to extent of documents other than those already on record of the case from the stage of admission of the Section 7 application before NCLT, Principal Bench, New Delhi.

On the one hand the State of Rajasthan distances itself from JMEL, but the other hand appears as SDRI of the State of Rajasthan before the Adjudicating Authority. As an entity distinct from JMEL, the only locus standi of the State could be as a claimant. Otherwise, it is a related/ same party. It is also not clear whether the State is indulging in a fishing & roving expedition and in what capacity. The State must honestly answer who was/ is in management & control of JMEL? Also, why has access to the premises not been given to the RP, which if given may have allowed the RP to actually examine records and ascertain why any documents appear as unstamped or short-stamped. This State claims that it was not a party to the admission order dated 13.04.2018. It is seemingly a very loose and fragile statement as it is evidently clear that JMEL was and has been under the control of the Government of Rajasthan since 1977, whatever may be its state of health. In an analogous way, the concerned Asset Reconstruction Companies were also not a party to the original loan agreements.

w. The State of Rajasthan refers to assignment agreements as loans being bought by the Asset Reconstruction companies and is perhaps looking at them through lens of conveyance. This may have the effect of displacing party to bear burden of stamp duty, quite incorrectly.

It is entirely within realm of possibility that at the time of execution of the loan agreements, any officer(s) of JMEL, wearing the hat of State Government may have believed in or got waiver of stamp duty. This is entirely plausible since concerned loan dispensing agencies were instrumentalities of the Central Government.

y. As per the website of IDBI Bank it germinated as a Development Finance Institution as follows:-

z. In a like manner, SBI was founded under the SBI Act and associates under the SBI (Subsidiary Banks) Act, which is an instrumentality of State though donning a corporate-like avatar. This is another factor for not delving into a very old matter that in any case is hit by laches.

This application has been filed by the Applicant praying.

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This application has become infructuous as the collector has already adjudicated deficient stamp duty with penalty on all the documents therefore, the prayer with respect to impounding the same does not arise. Further, w.r.t. the prayer to set aside the claim of the Respondent No. 2, the Respondent No. 2 herein relies on the Written Submission filed in IA No. 327 of 2019 for the same.

In light of the above this application should be dismissed as infructuous.

This application has been filed by the Applicant praying for rejections of actions by the Resolution Professional in admitting the claims of Alchemist and ARCIL and restrain the Resolution Professional from holding meeting of CoC till the adjudicating of I.A.No.327, 328 and 301.

The Applicant had challenged the order dated 17.05.2022 passed by this Hon’ble Tribunal before the Hon’ble NCLAT. In light of the order dated 25.02.2022 passed by Hon’ble NCLAT wherein the Hon’ble NCLAT has restrained the Resolution Professional from holding any meetings of the CoC till the above mentioned applications are decided by this Tribunal and further directed this Tribunal to decide the applications within 3 months. As this tribunal has reserved orders on all the above applications thus, I.A. 87 has become infructuous and should be dismissed.