Defective Affidavit Not Fatal to Section 7 IBC Petition; NCLAT Allows Appeal, Mandates Opportunity to Cure Defect
- REEDLAW
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REEDLAW Legal News Network reports:Â In a significant judgment delivered today, the National Company Law Appellate Tribunal (NCLAT), New Delhi, ruled that a defective affidavit filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) does not render the petition invalid. The Tribunal clarified that the Adjudicating Authority must grant an opportunity to rectify the defect before proceeding to reject the petition.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha (Technical Member), while adjudicating a Company Appeal along with connected Interlocutory Applications, held that a defective affidavit under Section 7 of the IBC does not invalidate the petition. The Tribunal emphasised that the Adjudicating Authority is obligated to provide the applicant with an opportunity to cure such procedural defects before dismissing the petition, thereby upholding the principle of fairness and natural justice.
The appeal was filed by the Financial Creditor, challenging the order dated 18.06.2024 passed by the NCLT, Ahmedabad Bench, which had dismissed its petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, on the ground of being defective. The application was originally filed on 01.08.2023, supported by an affidavit dated 17.07.2024, while the verification of the petition was dated 26.07.2024. The NCLT dismissed the application on the basis that the affidavit was sworn prior to the signing and notarization of the petition, rendering it defective.
It was argued by the Appellant that the dismissal of the petition without granting an opportunity to rectify the defect was contrary to the proviso to Section 7(5)(b) of the IBC, which mandates that the Adjudicating Authority should provide notice and time for rectification before rejecting an application. The Appellant relied on several precedents, including Surendra Trading Company v. Juggilal Kamlapat Jute Mills Company Limited and Others, REEDLAW 2017 SC 09644 and Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy and Another, REEDLAW 2021 SC 08512, to emphasise that such defects are curable and the law discourages rejection on technical grounds without affording an opportunity for correction.
The Respondent contended that the opportunity to rectify defects had already been granted earlier by the Registry under Rule 28 of the NCLT Rules, 2016, and was not availed by the Appellant, making the petition non est. It was further argued that the affidavit did not comply with Rule 126 of the NCLT Rules, 2016, read with Order XIX Rule 3 CPC, which governs the form and content of affidavits.
The Tribunal observed that although the affidavit preceded the verification of the petition, such a defect was not fatal and could have been cured by allowing the Appellant to file a proper affidavit. It held that the NCLT erred in dismissing the petition without giving notice under Section 7(5)(b) to rectify the defect. The Tribunal also noted that hyper-technical objections should not defeat the objective of the Code, which seeks resolution rather than dismissal on procedural grounds.
Accordingly, the appeal was allowed, and the impugned order dated 18.06.2024 was set aside. CP (IB) No. 97 of 2024 was restored to its original number and remanded to the Adjudicating Authority for a decision on merits in accordance with law. The parties were directed to appear before the NCLT on 15th September 2025, with no order as to costs.
Mr. Bheem Sain Jain, Prerna M., Advocate, represented the Appellant.
Mr. Prasenjit Keswani, Sr. Adv. with Pallavi Pratap, Yashvi Aswani, Advocate, appeared for the respondent.
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