NCLAT Says Timing Of Stamp Paper Purchase And Loan Agreement Execution Not Ground To Reject Insolvency Plea

Holding that the purchase of stamp paper and subsequent execution of a loan agreement cannot be any relevant consideration for rejecting a CIRP plea, the National Company Law Appellate Tribunal at Delhi has set aside the dismissal of an insolvency plea.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra observed, “The observation of the Adjudicating Authority that the stamp paper was purchased on 12.02.2025 and agreement was executed on 01.03.2025 can not be any relevant consideration for rejecting Section 7 application. Observations in Para 23 and 24, as noted above, can not be basis for rejection of the application.”

The appeal was filed by Akshay Kumar Rout, proprietor of Jagannath Traders, challenging the order of the New Delhi Bench, Court-III (Special Bench) of the National Company Law Tribunal, which had dismissed his application under Section 7 of the Insolvency and Bankruptcy Code seeking initiation of the Corporate Insolvency Resolution Process against Indo Laminates Pvt. Ltd.

Rout had advanced Rs. 1.05 crore to the company at an interest rate of 18 percent per annum. The disbursals were made between January and February, and the loan agreement was executed thereafter. The corporate debtor subsequently defaulted in repayment.

While rejecting the plea, the NCLT had observed that the stamp paper for the loan agreement was purchased prior to its execution and that the agreement covered disbursals already made. I

t held that this cast doubt on the bona fides of the financial creditor and suggested a deliberate attempt to retrospectively regularise the transaction. The tribunal also recorded that the respondent company was solvent, had a long-standing business relationship with the applicant, and had no prior record of financial delinquency.

Before the appellate tribunal, counsel for the appellant argued that once disbursement through banking channels was not disputed, the timing of documentation could not justify rejection of an insolvency application. It was further submitted that the company's solvency or absence of prior defaults could not be a ground to dismiss the plea.

The respondent did not dispute that Rs. 1.05 crore had been extended, though it submitted that it was not in a position to pay the entire claimed amount.

The NCLAT noted that disbursement was not disputed and that partial repayment was reflected in the bank statements placed on record. Holding that the NCLT's reasoning could not sustain dismissal of the application, it set aside the order and revived the insolvency plea for fresh consideration in accordance with law.