The Supreme Court has held that the filing of a defective affidavit in support of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), does not render the application non est (non-existent in law). The Court ruled that such procedural defects are curable and cannot be a ground to reject the application at the threshold, especially without providing the mandatory notice to the applicant as required under the proviso to Section 7(5)(b) of the IBC.
The core legal issue addressed by the Supreme Court bench comprising Justice Sanjay Kumar and Justice Alok Aradhe was whether an application under Section 7 of the IBC, verified on a later date than the supporting affidavit, is liable to be rejected at the threshold. The Court concluded that such a defect is procedural and curable. Furthermore, the Court held that the National Company Law Tribunal (NCLT) cannot reject an application for such defects without issuing a specific notice to the applicant to rectify them within seven days, as mandated by the proviso to Section 7(5)(b) of the IBC. General notices issued by the Registry under NCLT Rules are insufficient to satisfy this statutory requirement.
Background of the Case
The appeal arose from a loan facility of ₹5.5 crores availed by the appellant, Livein Aqua Solutions Private Limited (the company), from HDFC Bank (the respondent). The account was classified as a Non-Performing Asset (NPA) on August 4, 2019. Consequently, HDFC Bank filed an application under Section 7 of the IBC before the NCLT, Ahmedabad Bench, to initiate the Corporate Insolvency Resolution Process (CIRP).
The application was verified on July 26, 2023, but was supported by an affidavit deposed to on July 17, 2023. The NCLT scrutiny section identified this and other defects. The Joint Registrar of the NCLT issued a consolidated notice on October 10, 2023, listing 26 petitions (including the respondent’s), calling for the removal of defects within seven days. As the defects were not rectified, the Registrar refused to register the application on October 18, 2023.
Although the NCLT later allowed an appeal against the Registrar’s order and granted further time, the defects remained uncured. Consequently, on June 18, 2024, the NCLT rejected the Section 7 application. HDFC Bank appealed to the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi. By an order dated August 27, 2025, the NCLAT allowed the appeal, restored the petition, and remanded the matter to be decided on merits. Aggrieved by this restoration, the company approached the Supreme Court under Section 62 of the IBC.
Arguments of the Parties
Appellant (Livein Aqua Solutions Pvt. Ltd.): The company contended that the application filed by HDFC Bank was non est (legally non-existent) because it was not in keeping with Rule 10(1) of the NCLT Rules, 2016. They argued that since the verification date was subsequent to the affidavit date, the application was fundamentally defective and liable to be rejected at the threshold.
Respondent (HDFC Bank Ltd.): In its appeal before the NCLAT, the bank conceded that its application was defective but argued that the defect was curable by filing a better affidavit. They maintained that a procedural irregularity should not lead to the dismissal of the application.
Court’s Analysis
The Bench examined the interplay between the NCLT Rules, 2016, and the substantive provisions of the IBC.
1. On the Nature of the Defect: The Court observed that while Rule 34(4) of the NCLT Rules requires every application to be verified by an affidavit in Form No. NCLT.6, neither Rule 4(1) nor Form 1 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, explicitly requires such an affidavit.
The Court stated:
“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.”
Referencing Uday Shankar Triyar vs. Ram Kalewar Prasad Singh and another (2006), the Court reiterated that procedural defects which are curable should not be allowed to defeat substantive rights or cause injustice unless the statute mandates automatic dismissal. The Court also cited Vidyawati Gupta and others vs. Bhakti Hari Nayak and others (2006), observing that “rules of procedure are made to further the cause of justice, and not to prove a hindrance thereto.”
2. On the Requirement of Notice under IBC Section 7(5)(b): The Court placed significant emphasis on the proviso to Section 7(5)(b) of the IBC, which states that before rejecting an application for being incomplete, the Adjudicating Authority shall give a notice to the applicant to rectify the defect within seven days.
The Court found that the consolidated notice issued by the NCLT Registry under Rule 28 of the NCLT Rules did not satisfy this statutory requirement. The Court noted that the notice was general in nature and not specifically issued under the IBC provision to the applicant.
The Judgment observed:
“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.”
Relying on Dena Bank (now Bank of Baroda) vs. C. Shivakumar Reddy and another (2021), the Court noted that there is no penalty prescribed for the inability to cure defects within seven days, and the Adjudicating Authority may accept a cured application even after the expiry of that period in the interest of justice.
3. Assessment of NCLAT’s Order: The Court agreed with the NCLAT that the rejection of the application was unsustainable due to the lack of proper notice. However, the Supreme Court found the NCLAT in error for restoring the petition for a hearing on merits without first requiring the bank to cure the defective affidavit.
The Court remarked:
“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.”
Decision
The Supreme Court disposed of the appeal with the following directions:
- Curing of Defects: The respondent-bank (HDFC Bank) is directed to cure the defects in C.P.(IB)/97(AHM)2024, including the defective affidavit, within seven days from the date of the judgment.
- Hearing on Merits: Upon such rectification, the National Company Law Tribunal, Ahmedabad Bench, shall take up the matter for hearing in accordance with law and due procedure.
- Costs: Parties shall bear their respective costs.
Case Details:
Case Title: Livein Aqua Solutions Private Limited v. HDFC Bank Limited
Case No: Civil Appeal No. 11766 of 2025 (2025 INSC 1349)
Coram: Justice Sanjay Kumar and Justice Alok Aradhe
