Neither Registry Nor NCLT Can Dismiss S.7 Petition Without Giving An Opportunity To Cure Defects In Supporting Affidavit: NCLAT New Delhi

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Member-Judicial) and Naresh Salecha (Member-Technical), has held that neither the registry nor the NCLT can dismiss a section 7 application without giving an opportunity to the party to cure the defects in the supporting affidavit. The financial creditor, HDFC Bank, filed an application u/s 7 of the IBC to initiate CIRP of the corporate debtor for an outstanding debt of Rs. 5.85 Cr. The registry raised certain defects in the filings of the applicant and granted seven days' time to cure the defect, as prescribed under rule 28(2) of the NCLT Rules, 2016. The applicant failed to cure the defect, and the registry refused to entertain the application. The applicant (appellant herein) challenged the order of the registry by way of an appeal, as provided under Rule 63 of the NCLT Rules, 2016. The tribunal allowed the appeal and restored the petition. The respondent objected to the maintainability of the section 7 application, arguing that the supporting affidavit was sworn on 17.07.2024, while the petition was signed and verified later on 26.07.2024. Considering the objection of the respondent, the adjudicating authority dismissed the petition of the Contention of the Parties The appellant submitted that the adjudicating has erred in rejecting the petition without issuing a notice to the appellant to cure the defects. It highlighted that the notice to cure defects is the mandate of the proviso to section 7(5)(b) of the IBC. It submitted that as per the ruling of the Dena Bank vs. C. Shivakumar Reddy & Anr., (2021) 10 SCC 330, it is the obligation of the adjudicating authority to give notice to the applicant to cure the defects before rejecting it. Also, relying upon the ruling of Surendra Trading Company vs. Juggilal Kamlapat Jute Mills Company Ltd. & Ors., (2017) 16 SCC 143, it submitted the 7-day period prescribed under the proviso can be extended. Per contra, the respondent submitted that the registry had already granted the opportunity to cure the defects, but the appellant didn't comply with that. Therefore, a second chance should not be given. It also submitted that Rule 26(2) of the NCLT Rules, 2016, prescribes for any petition or appeal to be signed and verified by the party as provided in these rules. The respondent also highlighted that the affidavit was not in accordance with either Order XIX Rule 3 of the CPC or Rule 126 of the NCLT Rules, 2016. Relying on the ruling of Shri Mool Chand Wahi vs. National Paints Pvt. Ltd. (1983 SCC Online P&H 651), the respondent submitted that the defect in the petition because of the wrong affidavit cannot be cured. Observations of the NCLAT The NCLAT observed that there is no dispute with regard to the fact that the affidavit was sworn before the verification of the petition, but the said defect is curable. Relying on the proviso to section 7(5)(b) of the code and the rulings of Dena Bank (supra), the tribunal observed that it is the obligation of the adjudicating authority to serve notice to rectify the defects. The tribunal also observed that the judgments relied upon by the respondent are not applicable to the present facts, as the present issue revolves around the proviso to section 7(5)(b) and the observations made in Dena Bank (supra). Further, the bench observed that a similar provision is there in the NCLT Rules for a defect notice by the registry; the applicant is given 7-day time to rectify the defect. The provision is there to ensure that a meritorious case is not dismissed on the technical grounds. Lastly, considering the merit of the appeal, the tribunal allowed it and set aside the impugned order. Case Name: HDFC Bank v. Livein Aqua Solutions Pvt. Ltd. Case No.: Comp. App. (AT) (Ins) No. 1534 of 2024 & I.A. No. 5559, 5560 of 2024 Bench: Justice Rakesh Kumar Jain (Member-Judicial) and Naresh Salecha (Member-Technical) For Appellant: Mr. Bheem Sain Jain, Prerna M., Adv. For Respondent: Mr. Prasenjit Keswani, Sr. Adv. with Pallavi Pratap, Yashvi Aswani, Adv. Order Date: 27.08.2025 Click Here To Read/Download The Order

Neither Registry Nor NCLT Can Dismiss S.7 Petition Without Giving An Opportunity To Cure Defects In Supporting Affidavit: NCLAT New Delhi

Mohd.Rehan Ali

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