Financial Creditor Can Amend Date Of Default Even If Pleadings Are Closed: NCLT Mumbai

The National Company Law Tribunal, Mumbai, comprising Nilesh Sharma (Member-Judicial) and Sameer Kakar (Member-Technical), has allowed an application filed by the financial creditor, seeking amendment in the pleadings to correct the date of default. The issue before the tribunal was whether a financial creditor can amend its pleading to change the date of default in a Section 7 application if the pleadings have been declared complete. Background Axis Bank Limited filed an application under Section 7 of the IBC seeking initiation of the CIRP against Yashwant Dugdh Prakriya Limited. May 1, 2020, was mentioned as the date of default in the original petition, which was also the date on which the account was classified as NPA. Since the date falls within the protected period under Section 10A. Hence, the petitioner claimed that the date of default is in February 2020. Contention of the Parties The applicant argued that the amendment is not intended to introduce a new cause of action but merely to correct the date of default. They relied on the Hon'ble Supreme Court's ruling in the case of Dena Bank (now Bank of Baroda) v. C. Shivkumar Reddy and Anr., wherein it was held that there is no bar in law to the amendment of the pleadings in an application u/s 7. In the mentioned judgment, it was also laid down that the adjudicating authority has the discretion to allow such amendments if it is necessary for the determination of the dispute. Per contra, the respondent submitted that the pleadings had been closed by the earlier order of the tribunal and the applicant had filed the application to bypass the bar imposed by Section 10A by altering the date of default. It relied on the decision of NCLT Hyderabad in the case of M/S Sanghi Textiles Pvt. Ltd., wherein the tribunal didn't allow the amendment to the pleadings, which claimed to be under similar circumstances. Observations of the Adjudicating Authority The tribunal observed that the amendment sought by the Axis Bank is necessary for the adjudication of the petition, as it clarified that the NPA date is actually 90 days after the actual default. The bench noted that February 1, 2020, was the actual date of default, and the same was supported by the documents on record. The bench also observed that the decision of Sanghi Textiles will not apply to the present case, as the amendment sought in that case introduced a new cause of action. Relying on the decision of the Dena Bank, the bench observed that in the absence of any express bar or timeline under the code, it has the discretion to allow the amendments to protect the interest of justice. It was noted that the amendment sought in the present case is not for introducing a separate cause of action, but it is only for the objective of bringing the correct date of default on record so that the main petition could be decided clearly. Lastly, by exercising its inherent power given under Section 60(5)(a) of the Code read with Rule 11 of the NCLT, the tribunal allowed the amendment with certain conditions. Case Title: Axis Bank Limited vs. Yashwant Dugdh Prakriya Limited Case Number: IA(I.B.C.)/ 1382 (MB) 2023 in CP(IB)/707 (MB)/2022 For Financial Creditor: Adv. Mr. Nausher Kohli a/w Apurva Sanglikar i/b Nidhi Partners For Corporate Debtor: Adv. Mr. Viraj Parikh i/b Adv. Mr. Agam H Maloo. Bench: Nilesh Sharma (Member-Judicial) and Sameer Kakar (Member-Technical) Judgment Date: 05/06/2025 Click Here To Read/Download The Order

Financial Creditor Can Amend Date Of Default Even If Pleadings Are Closed: NCLT Mumbai

Mohd.Rehan Ali

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