Livein Aqua Solutions Private Limited Vs HDFC Bank Limited (Supreme Court of India)
Defective Affidavit in Section 7 Petition is Curable; NCLT Must Issue Mandatory Notice u/s 7(5)(b) IBC
In this appeal arising from rejection of a Section 7 IBC application, the Supreme Court examined whether an application verified on 26.07.2023 but supported by an affidavit dated 17.07.2023 could be dismissed at the threshold on the ground of being defective. The NCLT, Ahmedabad had rejected HDFC Bank’s Form-1 Section 7 petition on the ground that the defects notified by Registry were not cured within time. The NCLAT restored the petition, holding that a defective affidavit is a curable defect and that mandatory notice under the proviso to Section 7(5)(b) was never served on the bank.
The Supreme Court noted that Form-1 under Rule 4(1) of the IBC Application Rules does not mandate an affidavit; the requirement flows only from Rule 34(4) of NCLT Rules which prescribes verification through Form NCLT-6. It examined the scrutiny mechanism under Rules 28 & 34 of NCLT Rules and clarified that NCLT Registry’s consolidated notice dated 10.10.2023 and Registrar’s mass rejection order dated 18.10.2023 could not be treated as compliance with the statutory proviso to Section 7(5)(b). The statute requires a specific notice to the applicant, giving seven days to cure defects, and such service must comply with Rule 38(5). Uploading bulk defect lists on the website or notice board does not satisfy the statutory mandate. Following the ratio in Dena Bank v. C. Shivakumar Reddy (2021) 10 SCC 330, the Court held that the NCLT must strictly issue notice under Section 7(5)(b) before rejecting any application as incomplete.
The argument of the company that the application was “non est” due to a defective affidavit was rejected. The Court observed that even the company itself had only treated it as “defective” in its pleadings and that such defects are neither fundamental nor incurable. Citing Vidyawati Gupta v. Bhakti Hari Nayak (2006) 2 SCC 777 and Uday Shankar Triyar v. Ram Kalewar Prasad Singh (2006) 1 SCC 75, the Court reiterated that procedural rules are handmaids of justice and curable defects should not defeat substantive rights.
While affirming the NCLAT’s finding that rejection without statutory notice was unsustainable, the Court held that NCLAT erred in restoring the petition without directing the bank to file a proper affidavit. The Supreme Court therefore disposed of the appeal with a direction permitting the respondent-bank to cure all defects in C.P.(IB)/97(AHM)2024 within seven days, after which NCLT shall proceed on merits.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
