Defective Affidavit Not Ground to Reject Section 7 IBC Petition Without Mandatory Notice: Supreme Court
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REEDLAW Legal News Network reports: In a pivotal ruling, the Supreme Court clarified on 24 November 2025 that a filing irregularity or mismatch in the supporting affidavit accompanying a financial creditor’s application under Section 7 of the Insolvency and Bankruptcy Code does not justify outright rejection of the petition. The Court emphasised that such defects are curable and must first be brought to the applicant’s notice under the mandatory proviso to Section 7(5)(b) before the application can be considered non-maintainable.
The Supreme Court Bench of Justice Sanjay Kumar and Justice Alok Aradhe, while adjudicating a civil appeal arising from proceedings under the Insolvency and Bankruptcy Code, held that a Section 7 application cannot be dismissed merely because the supporting affidavit contained defects or discrepancies. The Bench underscored that these deficiencies were curable in nature and that the Adjudicating Authority was bound to issue a mandatory notice under the proviso to Section 7(5)(b) to enable rectification before considering any rejection of the filing.
The appeal concerned a narrow procedural issue, namely whether an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, verified on a later date but supported by an affidavit sworn earlier, could be rejected at the threshold solely on that ground. The Adjudicating Authority had taken the view that the mismatch between the verification date and the affidavit date rendered the application fundamentally defective and accordingly dismissed the Section 7 petition filed by the Respondent-Financial Creditor.
The Financial Creditor carried the matter in appeal, and the NCLAT restored the petition, holding that such a defect was curable and could not invalidate the application itself. The Company, acting as the Appellant, thereafter approached the Supreme Court under Section 62 of the IBC. As the dispute was confined to the consequences of the procedural irregularity, the merits of the underlying financial default were not examined.
The record showed that the Corporate Debtor had availed a loan facility, which later became a non-performing asset, prompting the Financial Creditor to initiate proceedings under Section 7 of the IBC in Form 1. While Form 1 did not require the application to be supported by an affidavit, the NCLT Rules mandated verification through an affidavit in Form NCLT-6. The application was listed among several matters flagged as defective during scrutiny under Rule 28 of the NCLT Rules. Despite notices issued by the Registry calling upon all parties to rectify defects, the Financial Creditor did not refile the corrected application, leading the Registrar to decline registration.
The Financial Creditor’s internal appeal under Rule 63 was allowed, granting it another opportunity to cure defects. However, the application under Section 7 was nevertheless dismissed later by the NCLT as the defects remained unattended. When the matter reached the NCLAT, the Financial Creditor conceded the existence of defects but argued that they were curable. The Appellant argued that the application was non est in terms of Rule 10(1) of the NCLT Rules. The NCLAT rejected the Appellant’s contention, holding that a defective affidavit did not render the entire application void, and that the NCLT had wrongly rejected the petition without following the mandatory proviso to Section 7(5)(b) of the IBC.
The Supreme Court held that although the Registry had invoked Rule 28 of the NCLT Rules, no notice as contemplated under the proviso to Section 7(5)(b) of the IBC had ever been issued to the Financial Creditor. The Court emphasised that the statutory requirement of issuing notice to the applicant itself to rectify defects within seven days was substantive and mandatory, and could not be substituted by a general notice uploaded on the website or issued through the Registrar under procedural rules. The Court reaffirmed that defects in an affidavit were curable and could not render a Section 7 application non est, especially when procedural requirements were meant to further, not frustrate, the cause of justice.
While upholding the NCLAT’s conclusion that the rejection of the Section 7 application was unsustainable, the Court held that the NCLAT erred in remanding the matter for merits without first directing the Financial Creditor to cure the defective affidavit. The appeal was disposed of by directing the Financial Creditor to rectify all defects within seven days, after which the NCLT was to consider the application afresh in accordance with law. Parties were left to bear their own costs.
Mr. Gaurav Agarwal, Mr Prasanjet Keswani, Senior Advocates, Mr. Amjid Maqbool, Ms. Yashvi Aswani, Advocates and Ms. Pallavi Pratap, AOR, represented the Appellant.
Mr. Gopal Jain, Sr. Adv. Mr. Bheem Sain Jain, Mr. Ayush Singhal, Advocates and Mr. Nagarkatti Kartik Uday, AOR, appeared for the Respondent.
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