Mere defective affidavit with IBC application not render application non est – SC

Mere filing a defective affidavit with IBC application not render the application non est and liable to be rejected

In a recent judgment, Hon’ble Supreme Court had held that mere filing of a ‘defective’ affidavit in support of IBC application would, however, not render the very application non est and liable to be rejected

ABCAUS Case Law Citation:
4880 (2025) (11) abcaus.in SC

In the instant case, the appellant company (the corporate debtor) had challenged the order passed by the NCLAT holding that IBC application filed with a defective affidavit would not be non est on that ground as the defect can be cured.

In this case the question for consideration was whether an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 supported by an affidavit deposed prior to date of application would be liable to be rejected at the threshold on that ground?

The respondent bank had filed an application under Section 7 of the IBC against the appellant company. Along with Application in Form 1 the bank had annexed a predated affidavit. On being apprised of defect by the registry of National Company Law Tribunal, the bank failed to refile the application after removing the defects, leading to the Joint Registrar of the NCLT refusing to register the application.

However, the NCLAT held that when an application is filed with a defective affidavit it would not be non est on that ground as the defect can be cured. However, NCLAT restored the company petition straightaway and remanded the matter to the NCLT for decision on merits, without requiring the defective affidavit to be cured.

The Hon’ble Supreme Court observed that the respondent-bank had filed an application under Section 7 of the IBC. This application was filed in Form 1 appended to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, in consonance with Rule 4(1) which requires a financial creditor, either by itself or jointly, to make the application for initiating the corporate insolvency resolution process against a corporate debtor under Section 7 of the IBC in Form 1, accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The Hon’ble Supreme Court further noted that neither Rule 4(1) of IBC nor Form 1 requires the said application to be supported by an affidavit. It is Rule 34(4) of the National Company Law Tribunal Rules, 2016 (NCLT Rules), that prescribes that every petition or application made before the National Company Law Tribunal shall be verified by an affidavit in Form NCLT6.

The Hon’ble Supreme Court noted that Rule 28(4) states that if the party fails to take steps for the removal of the defect within the time fixed for the same, the Registrar may, for reasons to be recorded in writing, decline to register the pleading or document.

The Hon’ble Supreme Court further observed that Section 7(5)(b) of the IBC also provides that if an application for initiation of corporate insolvency resolution process by a financial creditor made under Section 7(2) thereof is found to be incomplete, the NCLT may, by order, reject such application. However, the proviso thereto states that the National Company Law Tribunal shall, before rejecting the application under Section 7(5)(b), give a notice to the applicant to rectify the defect in his application within seven days of the receipt of such notice.

The Hon’ble Supreme Court noted that admittedly, no notice was given to the respondent-bank under the proviso to Section 7(5)(b) of the IBC except a consolidated notice issued by the Joint Registrar of the NCLT in relation to 26 petitions/applications, to remove the defects. Similarly, the order rejecting the application was also in relation to 42 defective petitions/applications.

The Hon’ble Supreme Court opined that issuance of a notice to an authorized representative of the respondent-bank was not enough to satisfy the mandate of the proviso to Section 7(5)(b) of the IBC. The IBC, being the substantive legislation relating to the application filed by the respondent-bank under Section 7 thereof, the notice to cure the defects therein necessarily had to be given under the said provision and compliance with the Rules, independently framed for the National Company Law Tribunal, was not sufficient.

The Hon’ble Supreme Court opined that 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.

The Hon’ble Supreme Court observed that it was held by the Court that non-compliance with any procedural requirement relating to an application for relief should not entail automatic dismissal or rejection, unless the relevant statute or rule so mandates, and procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. It was further pointed out that procedure, a handmaiden to justice, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use.

The Hon’ble Supreme Court held that even though the Registry of the NCLT issued process under Rule 28 of the NCLT Rules, the same was insufficient as there was no communication of a notice under the proviso to Section 7(5)(b) of the IBC at any time. Therefore, there was no error having been committed by the NCLAT. 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 restoring the matter to NCLT to proceed to hear petition on merits. To that extent, the NCLAT was in error.

Accordingly, the respondent bank was directed to cure the defects including the defective affidavit.

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