2017 (11) TMI 1729 - AT - Insolvency and Bankruptcy

Corporate insolvency procedure - defects have not been removed within 7 days which is mandatory - Held that - As relying on case of M/s Surendra Trading Company Vs M/s Juggilal Kamlapat Jute Mills Company Ltd 2017 (9) TMI 1566 - SUPREME COURT OF INDIA wherein held that subsection (5) of Section 7 or proviso to sub-section (5) of Section 9 or proviso to sub-section (4) of Section 10 relating to removing of defects within 7 days is not mandatory. Thus we have no other option but to set aside the impugned order dated 19th July, 2017. It is accordingly set aside. The case is remitted back to the Adjudicating Authority, who after notice to the parties will consider the case. If there is any defect, the appellant be allowed time to remove the defects. The appeal is allowed with the aforesaid observations.

Summary

Issues:
1. Rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to defects not being removed within 7 days.
2. Interpretation of the mandatory nature of removing defects within 7 days as per previous Appellate Tribunal decision.
3. Reference to the decision of the Hon'ble Supreme Court in M/s Surendra Trading Company Vs M/s Juggilal Kamlapat Jute Mills Company Ltd and Others regarding the mandatory nature of removing defects within 7 days.
4. Setting aside of the impugned order and remittance of the case back to the Adjudicating Authority.

Analysis:
The appeal before the National Company Law Appellate Tribunal was filed by M/s SAK Industries Pvt Ltd, the operational creditor, against the rejection of their application under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. The rejection was based on the grounds that the defects in the application were not rectified within the stipulated 7 days, as mandated by a previous decision of the Appellate Tribunal in the case of Smart Timing Steel Ltd Vs National Steel and Agro Industries Ltd. Despite notice being issued, the Respondents did not appear or contest the appeal.

During the proceedings, the appellant's counsel highlighted a significant judgment of the Hon'ble Supreme Court in the case of M/s Surendra Trading Company Vs M/s Juggilal Kamlapat Jute Mills Company Ltd and Others. The Supreme Court, in its judgment dated 19th September, 2017, clarified that the requirement of removing defects within 7 days as per subsection (5) of Section 7, proviso to sub-section (5) of Section 9, or proviso to sub-section (4) of Section 10 of the Insolvency and Bankruptcy Code is not mandatory. This decision effectively overruled the previous stance taken by the Appellate Tribunal on the mandatory nature of rectifying defects within the specified timeframe.

Consequently, in light of the Supreme Court's ruling, the National Company Law Appellate Tribunal set aside the order dated 19th July, 2017, which rejected the appellant's application. The case was remitted back to the Adjudicating Authority for reconsideration. The Adjudicating Authority was directed to provide an opportunity to the parties, allowing the appellant time to rectify any defects if found. The appeal was allowed with these observations, and no costs were awarded considering the circumstances of the case.