Summary
The appellate tribunal treated the seven-day period to cure defects in an insolvency application as mandatory and directed rejection. The Court held that this pre-adjudication procedural period is directory. A delayed refiling nevertheless requires a written sufficient-cause application, and the adjudicating authority may reject it if the explanation is inadequate.
Issues
- Whether the seven-day defect-curing periods under Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code are mandatory.
- What safeguard governs acceptance of defects cured after seven days.
Provisions considered
- Provisos to Sections 7(5), 9(5) and 10(4), Insolvency and Bankruptcy Code, 2016Seven days for rectification is directory; delayed refiling requires a written explanation establishing sufficient cause to the adjudicating authority’s satisfaction. (¶ 23–26)
Held
- Scrutiny and defect removal precede adjudication on admission. The insolvency-resolution period begins on admission, not during initial scrutiny or rectification; it did not justify treating seven days as an inflexible bar. (¶ 20–23)
- The procedural principles supporting the directory nature of the adjudicating authority’s fourteen-day decision period also support treating the seven-day rectification period as directory. Automatic rejection would either deny merits adjudication unjustly or merely require a fresh complete application without useful purpose. (¶¶ 14, 17, 20–24)
- Directory does not mean unlimited time. On refiling beyond seven days, the applicant must submit a written application explaining sufficient cause. Only if satisfied should the authority entertain the insolvency application on merits; otherwise it retains the right to dismiss. The judgment did not establish the debt or direct automatic admission of insolvency. (¶ 25–26)
Result
Appeals allowed; NCLAT judgment set aside insofar as it treated the seven-day rectification periods under Sections 7, 9 and 10 as mandatory and required rejection on default. No costs.