Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-011766 – 2025 |
| Diary Number | 51018/2025 |
| Judge Name | HON’BLE MR. JUSTICE SANJAY KUMAR |
| Bench |
HON’BLE MR. JUSTICE SANJAY KUMAR HON’BLE MR. JUSTICE ALOK ARADHE |
| Precedent Value | Binding on all tribunals and subordinate courts |
| Overrules / Affirms |
Affirms the ratio in Dena Bank v. C. Shivakumar Reddy and authority on curable procedural defects Overrules the NCLAT’s omission to require cure of defects |
| Type of Law | Procedural aspects of the Insolvency and Bankruptcy Code, 2016 |
| Questions of Law |
|
| Ratio Decidendi |
The Supreme Court held that:
|
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court | The respondent‐bank filed a Section 7 IBC petition for ₹5.5 crore loan classified as NPA, verified on 26.07.2023 but supported by an affidavit dated 17.07.2023. Registry notices under NCLT Rules flagged defects, the petition was eventually rejected on 18.06.2024 for failure to cure, the NCLAT restored it without directing a cure, and the Supreme Court stayed further proceedings and remanded with a cure‐period direction. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | National Company Law Tribunal benches; NCLAT; all subordinate courts |
| Persuasive For | High Courts; any quasi‐judicial tribunals interpreting IBC procedures |
| Overrules | NCLAT’s order that restored the petition without requiring cure of defects |
| Follows | Dena Bank v. C. Shivakumar Reddy & Anr. (2021) 10 SCC 330 |
| Distinguishes | Registry compliance under NCLT Rules vs. statutory notice under proviso to Section 7(5)(b) IBC |
What’s New / What Lawyers Should Note
- The Supreme Court affirms that a procedural defect in a supporting affidavit for a Section 7 IBC petition is curable and does not render the entire petition non est.
- Registry‐issued consolidated defect notices under NCLT Rules do not satisfy the statutory notice requirement under the proviso to Section 7(5)(b) IBC.
- Before rejecting under Section 7(5)(b), the NCLT must issue a personalised notice to the applicant to cure defects within seven days.
- On remand, tribunals must insist on cure of defective affidavits and other omissions before proceeding to merits.
Summary of Legal Reasoning
- Section 7(5)(b) IBC and its proviso prescribe that an incomplete application can be rejected only after giving the applicant a seven‐day notice to rectify defects.
- NCLT Rules 28–34 govern filing, scrutiny, and verification of petitions but cannot override the statutory notice mandate.
- Notices posted on the NCLT website and notice boards under Rule 28 are insufficient to satisfy the proviso’s requirement of notice “to the applicant.”
- Precedents (Dena Bank; Vidyawati; Uday Shankar Triyar) establish that procedural defects which are curable must be allowed to be cured.
- The NCLAT erred in restoring the petition on merits without directing cure; Supreme Court directs a fresh seven‐day cure period and remand for merit hearing.
Arguments by the Parties
Appellant (Company):
- The Section 7 petition was non est for non-compliance with Rule 10(1) of NCLT Rules.
- A defectively dated affidavit renders the entire application incurably defective and liable to be rejected at the threshold.
Respondent (Bank):
- Conceded the affidavit was defective but urged it was a curable defect; a better affidavit could be filed.
- Registry notices under NCLT Rules were sufficient to alert it to cure defects.
Factual Background
A corporate debtor availed a ₹5.5 crore loan from the financial creditor, classified as an NPA on 04.08.2019. The bank filed a Section 7 IBC petition verified on 26.07.2023 but supported by an affidavit deposed on 17.07.2023. The NCLT registry flagged defects, issued consolidated notices, and ultimately refused registration for failure to cure. The NCLAT restored the petition without cure; the Supreme Court stayed proceedings and remanded with directions to cure defects.
Statutory Analysis
- Section 7(5)(b) IBC: empowers rejection of incomplete petitions but mandates a seven‐day notice to the applicant under the proviso.
- Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, Rule 4(1): prescribes Form 1 for Section 7 petitions—no affidavit requirement.
- NCLT Rules 2016:
- Rule 28—scrutiny and return of defective pleadings;
- Rule 34(4)—requires verification by affidavit;
- Rule 38(5)—service on authorized representatives.
- The Court held that statutory notice under Section 7(5)(b) IBC cannot be supplanted by NCLT Rule notices.
Alert Indicators
- ✔ Precedent Followed – Affirms Dena Bank v. C. Shivakumar Reddy (2021) 10 SCC 330
- 🚨 Breaking Precedent – NCLAT’s decision restoring without cure is overruled