IBC | Section 7 Application Can't Be Rejected For Curable Defects In Affidavit : Supreme Court

The Supreme Court on Monday (November 24) observed that procedural defects in a Section 7 insolvency application under IBC, such as a defective affidavit, are curable and cannot be used as a basis for summary dismissal. “Mere filing of a 'defective' affidavit in support of an application would, however, not render the very application non est and liable to be rejected on that ground as it is neither an incurable nor a fundamental defect.”, observed a bench of Justices Sanjay Kumar and Alok Aradhe while restoring the secured creditor's Section 7 IBC application, which the NCLT had rejected solely on the ground of a mismatch between the verification date and the date of swearing of the supporting affidavit. The application under Section 7 had been verified on 26 July 2023, but the supporting affidavit was sworn nine days earlier, creating a mismatch that the NCLT treated as fatal. The NCLT's scrutiny section conveyed the defects/objections in the filing of petitions/applications, including the application of the respondent-bank, but as the same were not removed/rectified. When the respondent failed to remove the defects, the registry refused to register the case, prompting the Respondent to file an appeal before the NCLAT. The NCLAT set aside the NCLT's decision and directed it to hear the Respondent's application on merits without a direction to cure the defect. Aggrieved by the NCLAT's decision, the Appellant-corporate debtor moved to the Supreme Court. Partly affirming the NCLAT's decision, a judgment authored by Justice Sanjay Kumar observed that the NCLT cannot summarily reject insolvency pleas for mistakes that can be rectified, adding that “procedure, a handmaiden to justice, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use.” “Further, we are not persuaded to accept the argument of the learned senior counsel for the company that the defective affidavit filed in support of the respondent-bank's application under Section 7 of the IBC was sufficient to hold the application itself liable to be rejected on the ground of being non est.”, the court said rejecting the Appellant's argument. The Court was not convinced by the NCLAT's decision to direct the NCLT to hear the Respondent's case on merits, without directing the Respondent to cure the defect. “However, the NCLAT ought to have asked the respondent-bank to cure the defective affidavit at least at that stage instead of ignoring the same and directing the NCLT to proceed to hear the company petition on merits and in accordance with law. To that extent, the NCLAT was in error.”, the court observed. Accordingly, the appeal was disposed of directing the respondent bank to cure the defects in, including the defective affidavit, within seven days from today, and the National Company Law Tribunal, Ahmedabad Bench, shall thereupon take up the matter for hearing in accordance with law and due procedure. Cause Title: Livein Aqua Solutions Private Limited versus HDFC Bank LimitedCitation : 2025 LiveLaw (SC) 1135Click here to download judgmentAppearance: For Appellant(s) Mr. Gaurav Agarwal, Sr. Adv. Mr. Prasanjet Keswani, Sr. Adv. Mr. Amjid Maqbool, Adv. Ms. Yashvi Aswani, Adv. Ms. Pallavi Pratap, AOR For Respondent(s) Mr. Gopal Jain, Sr. Adv. Mr. Bheem Sain Jain, Adv. Mr. Ayush Singhal, Adv. Mr. Nagarkatti Kartik Uday, AOR

IBC | Section 7 Application Can't Be Rejected For Curable Defects In Affidavit : Supreme Court

Yash Mittal

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