The Supreme Court has held that an application filed under Section 7 of the IBC, 2016, cannot be rejected merely because it is accompanied by a defective affidavit, unless the mandatory notice contemplated under the proviso to Section 7(5)(b) is issued to rectify the defect. The Court held that a ‘defective’ affidavit would 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.

The case arose from an NCLT order rejecting HDFC Bank’s Section 7 application on the ground that the supporting affidavit had been sworn on a date earlier than the date on which the application itself was verified, which the NCLT treated as a fatal procedural defect. The NCLAT, however, set aside the rejection, holding that such defects are curable and that the NCLT ought to have granted an opportunity to rectify the affidavit rather than dismiss the application outright. This has prompted the present appeal.

The Bench of Justice Sanjay Kumar and Justice Alok Aradhe held that the National Company Law Tribunal (NCLT), Ahmedabad, erred in rejecting HDFC Bank’s Section 7 application on the basis of procedural defects, after issuing only a consolidated registry notice applicable to several matters, without issuing the specific statutory notice required under the IBC. The Court concluded that registry notices under the NCLT Rules cannot substitute the mandatory requirement of issuing a notice under Section 7(5)(b).

The Court reaffirmed its earlier rulings in Dena Bank v. Shivakumar Reddy, (2021) 10 SCC 330, holding that a defective affidavit is a curable defect and does not render the underlying application non est. It emphasised that procedural rules cannot be interpreted in a manner that defeats substantive rights, reiterating principles from Vidyawati Gupta and Uday Shankar Triyar.

While upholding the NCLAT’s finding that the NCLT failed to comply with the mandate of Section 7(5)(b), the Supreme Court found fault with the Appellate Tribunal for remanding the petition without first requiring the bank to cure the defective affidavit. The Court, therefore, directed HDFC Bank to cure all defects, including the affidavit, within seven days, after which the NCLT must hear the matter on the merits.

Appearances

Petitioner- Mr. Gaurav Agarwal, Sr. Adv. Mr. Prasanjet Keswani, Sr. Adv. Mr. Amjid Maqbool, Adv. Ms. Yashvi Aswani, Adv. Ms. Pallavi Pratap, AOR

Respondent- Mr. Gopal Jain, Sr. Adv. Mr. Bheem Sain Jain, Adv. Mr. Ayush Singhal, Adv. Mr. Nagarkatti Kartik Uday, AOR