With the Insolvency & Bankruptcy Code taking a major role in the business sector dispute, it is imperative to learn about its clauses and garner more awareness for its better applicability which is going to speed up the recovery process.
In this article we will briefly discuss about how to rectify defects if any in the application for initiation of Corporate Insolvency Resolution Process along with case laws.
Defect in application can be removed but if misleading statement, application to be rejected
If application is incomplete, seven days’ time is to be granted to complete application- Innoventive Industries v. ICICI Bank (2017) 142 SCL 11 = 82 taxmann.com 190 (NCLT).
The time limit of seven days/fifteen days is not mandatory (as applicant does not gain anything by delaying the process) – Surendra Trading Co. v. Juggilal Kamlapat Jute Mills(2017) 144 SCL 198 = 55 taxmann.com 372 (SC) – quoted with approval in Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. (2017) 88 taxmann.com 180(SC)
Earlier, in J.K Jute Mills Co. Ltd. v. Surendra trading Co.(2017) 142 SCL 188 = 81 taxmann.com 307 (NCLT) (quoted and followed in Balageria Central Coop. Bank v. S R Green Housing Projects (2017) 143 SCL 515 =84 taxmann.com 307 (NCLT), it was held that provision of removing defect in seven days, application shall be rejected.
Now these decisions stand overruled.
Defects can be removed but misleading statement cannot be removed
Defect in application can be removed. If an application is incomplete, it can be completed, but if any misleading statement is made, no time can be granted for recalling misleading statement and application has to be rejected- Starlong Enterprise v. ICICI Bank(2017) 142 SCL 1 = 82 taxmann.com 189 (NCLAT) – quoted and followed in Tirupati Infra Projects v. Bank of India (2017) 143 SCL 5 = 85 taxmann.com 93 (NCLAT).
Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process. While the corporate applicant has to be vigilant during filing of application. Any defect still has the scope to be rectified but any misleading statement would lead to rejection of the application. Corporate applicant should be sincere in filing the application and avoid defects.
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Disclaimer – the above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.