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Dismissal of Section 9 IBC application on technical defect: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has held that the dismissal of an application under Section 9 Insolvency & Bankruptcy Code as being non-maintainable for a technical defect such as incomplete Form 5 is not warranted (Silvassa Cement Products Pvt. Ltd v Noor India Buildcon).

The order was passed by a three-member Bench of Justice Bansi Lal Bhat, Acting Chairperson; Kanthi Narahari, Member (Technical) and Dr. Alok Srivastava, Member (Technical).

The appellant had filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiation of corporate insolvency resolution process against the corporate debtor.

The National Company Law Tribunal, Ahmedabad/Adjudicating Authority rejected the application for being non-maintainable on account of the existence of defects.

The defect, as pointed out by the Adjudicating Authority, related to the omission in appending of signatures on the application in the prescribed format in Form 5 on application by operational creditor and the same being notarized.

The order was assailed before the NCLAT, inter-alia, on the ground that the Adjudicating Authority violated the mandate of law in not providing an opportunity to the appellant for rectifying the defect or removing the shortcomings in terms of the proviso to Section 9(5) IBC.

The NCLAT noted that there was a board resolution passed by the appellant authorising its manager to file legal proceedings including proceedings under IBC on its behalf.

Once the filing of the application under Section 9 was backed by the Board Resolution and Adjudicating Authority had noticed that two Advocates viz. Mr. Niraj Shah and Mr. Dhruv K. Dave had signed the petition, albeit without recording date, there was hardly any justification on this score for holding that the application was non-maintainable,” the NCLAT stated.

The NCLAT further said that in case of any shortcomings regarding the filing of Vakalatnama or making endorsement in regard to date in the prescribed format, the appellant could be provided an opportunity in terms of mandate of proviso under Section 9(5) IBC.

The NCLAT thus concluded that the Adjudicating Authority failed to provide an opportunity to rectify the defect.

“The Adjudicating Authority who was required to pass the order of admission or rejection of the application being satisfied about the completion of the application and proof of debt and default as mandated under Section 9(5) has failed to provide opportunity of rectifying the defect as noticed and allowing the applicant to bring it in conformity with the requirements of law. Dismissal of application as being non-maintainable for such technical defect is not warranted,” the order said.

The order of the Adjudicating Authority was accordingly set aside.

The matter was remitted to the Adjudicating Authority to allow the appellant an opportunity of rectifying the defect, if any, in the application and thereafter pass order of admission or rejection regarding initiation of corporate insolvency resolution process on merit.



Via Bar & Bench
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