Legal provisions involved: Section 7 of Insolvency and Bankruptcy Code, 2016
Judgment by: The Supreme Court
Bench: Justice Sanjay Kumar and Justice Alok Aradhe
Facts
Livein Aqua Solutions defaulted on a ₹5.5 crore loan, leading HDFC Bank to file a Section 7 IBC case before the NCLT. The NCLT rejected the case due to a technical defect in the affidavit. HDFC appealed, and NCLT set aside the rejection. The corporate debtor then took the matter to the Apex Court.
Key legal provisions
Issues raised
Whether NCLT can reject a Section 7 case only because of a small technical error, without first giving a proper notice to the Bank to fix it?
Arguments of the case
Livein Aqua Solutions said the defect showed the filing was not valid. HDFC Bank argued that this was only a technical issue, and the law requires NCLT to give a specific notice to correct the defect before throwing out the case.
Judgement
The Apex Court held that minor procedural errors do not invalidate a Section 7 IBC case and NCLT must issue a specific notice to correct them within seven days. The Bench stated 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.” HDFC Bank was allowed to fix the affidavit, and NCLT was directed to hear the case on its merits. The court emphasized that technical issues should not block genuine insolvency claims.
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