1. Application under Section 7, IBC — Delay in filing rejoinder affidavit — Condonation of delay with restriction on relying on factual assertions in rejoinder. (Para 2 )
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2025 Supreme(SC) 1318
SUPREME COURT OF INDIA
J.B. PARDIWALA AND R. MAHADEVAN, JJ.
State Bank Of India Assistant Manager – Appellant
Versus
India Power Corporation Limited – Respondent
Civil Appeal No. 8178 of 2023
Decided on : 14-02-2025
Advocates:
Advocate Appeared:
For the Appellant :Mr. Tushar Mehta, Solicitor General Ms. Surabhi Khattar, Advocate, Mr. Madhav Kanoria, Advocate, Ms. Neha Shivhare, Advocate, Mr. Sriharsh Raj, Advocate, Mr. Sumit Attri, Advocate
For the Respondent:Mr. Anirban Bhattacharya, Advocate, Mr. Rajeev Chowdhary, Advocate, Ms. Priyanka Bhatt, Advocate
Advocate Appeared:
For the Appellant :Mr. Tushar Mehta, Solicitor General Ms. Surabhi Khattar, Advocate, Mr. Madhav Kanoria, Advocate, Ms. Neha Shivhare, Advocate, Mr. Sriharsh Raj, Advocate, Mr. Sumit Attri, Advocate
For the Respondent:Mr. Anirban Bhattacharya, Advocate, Mr. Rajeev Chowdhary, Advocate, Ms. Priyanka Bhatt, Advocate
The Supreme Court held that if a rejoinder is permitted to be filed in a Section 7 IBC application, the adjudicating authority cannot refuse to consider the factual assertions therein. Technical or pedantic views should not be taken to exclude evidence once the filing of the document is allowed.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 62 - Statutory appeal against NCLAT decision - NCLT's denial to permit reliance on rejoinder affidavit found erroneous - Mandate to allow additional documents in absence of express prohibition - Subsequent rejection of Section 7 application by NCLT set aside, ordered for fresh consideration. (Paras 1, 8, 11, 16)
(B) Rejoinder Affidavits - Delay condoned, yet reliance denied by NCLT - Technical adherence to procedural rule criticized. (Paras 8, 9)
Facts of the case:
The State Bank of India challenged the NCLAT's dismissal of its appeal against NCLT's order, which denied consideration of facts in its delayed rejoinder affidavit in an insolvency application. Notably, the Bank's application under Section 7 was dismissed by NCLT due to procedural restrictions on what could be taken into account.
Findings of Court:
The Court concluded that both NCLT and NCLAT erred by not allowing the Bank to present its full case when its rejoinder was accepted; the importance of re-evaluating the Section 7 application was underscored.
Issues: The main issues revolved around procedural fairness concerning the consideration of facts in a rejoinder affidavit and the implications of allowing additional documents in insolvency proceedings.
Ratio Decidendi: The Court held that technical rules should not preclude substantive rights, emphasizing the permissibility of additional documents in the absence of express rules preventing them.
Result: Appeal allowed; NCLAT's order set aside.
Legal Category Hierarchy
Table of Contents
2. Whether the adjudicating authority can condone delay in filing a rejoinder while prohibiting the applicant from relying on the factual assertions contained therein. (Para 2 , 5 , 7 )
3. Condoning delay in filing a rejoinder while prohibiting reliance on its factual assertions is a pedantic and technical approach that constitutes an egregious error. (Para 8 , 9 )
4. In Section 7 IBC applications, there is no legal bar to filing additional documents or pleadings until a final order is passed, subject to judicial discretion. (Para 7 )
5. Appeal allowed — Impugned order set aside — Matter remanded to NCLT for fresh consideration of the Section 7 application. (Para 11 , 12 , 13 , 14 , 16 )
6. Can additional documents or pleadings be filed in a Section 7 IBC application after the initial filing?
Yes, there is no express provision prohibiting or setting a timeline for filing additional documents or amending pleadings in a Section 7 IBC application until a final order is passed, although the adjudicating authority may decline such requests in cases of inordinate delay. (Para 7 )
7. Is it legally permissible for an adjudicating authority to condone a delay in filing a rejoinder but prohibit the party from relying on the facts stated therein?
No, such an approach is considered overly technical and pedantic. Once a delay in filing a rejoinder is condoned, the party should be permitted to rely on the assertions made within that rejoinder. (Para 8 , 9 )
ORDER :
1. This Statutory Appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (for short, 'IBC') is at the instance of the appellant - State Bank of India seeking to challenge the order passed by the National Company Law Appellate Tribunal (NCLAT), Chennai dated 04.10.2023 by which the Appellate Tribunal dismissed the appeal filed by the State Bank of India and thereby affirmed the order passed by the National Company Law Tribunal (NCLT), Hyderabad.
2. The facts giving rise to this appeal may be summarized as under:-
(i) In February, 2020, the Bank filed an application under Section 7 of the IBC before the NCLT.
(ii) In November, 2021, the respondent - herein India Power Corporation Limited (IPCL) filed its counter affidavit before the NCLT.
(iii) On 13.06.2022, the State Bank of India filed its rejoinder affidavit. However, in filing the rejoinder affidavit, there was a delay as according to the Bank, there was one money suit filed by the respondent - herein.
(iv) In such circumstances, the Bank had to file IA No.1547/2022 praying that the delay in filing the rejoinder affidavit may be condoned.
(v) The NCLT, Hyderabad vide order dated 30.01.2023 condoned the delay with a direction that any factual assertions pleaded in the rejoinder shall not be taken into consideration while deciding the Section 7 application.
(vi) The order passed by the NCLT came to be challenged before the National Company Law Appellate Tribunal.
(vii) The Appellate Tribunal dismissed the appeal filed by the Bank vide order dated 04.10.2023.
3. In such circumstances, the Bank is here before this Court by way of this appeal.
4. We heard Mr. Tushar Mehta, the learned Solicitor General of India appearing for the State Bank of India and Mr. Anirban Bhattacharya, the learned counsel appearing for the respondent -IPCL.
5. We are informed that since the Bank was not permitted to put forward its case as stated in the rejoinder affidavit, the NCLT vide order dated 30.11.2023 rejected the Section 7 application filed by the Bank excepting what was stated by the Corporation in their reply.
6. Rule 42 of the National Company Law Tribunal Rules, 2016 reads thus:-
"42. Filing of Rejoinder.- Where the respondent states such additional facts as may be necessary for the just decision of the case, the Bench may allow the petitioner to file a rejoinder to the reply filed by the respondent, with an advance copy to be served upon the respondent."
7. The learned Solicitor General of India invited the attention of this Court to a decision in Dena Bank vs. C. Shivakumar Reddy and Another (2021) 10 SCC 330, wherein this Court has taken the view that in the absence of any express provision which prohibits or sets a time-line for filing of additional documents, there is no bar to the filing of documents over and above those documents initially filed with Section 7 petition. The Court further clarified that it is permissible to file any document until a final order either admitting or dismissing the Section 7 application is passed. The relevant part of the said decision of this Court reads thus:-
"71. Since a financial creditor is required to apply under Section 7 IBC, in statutory Form 1, the financial creditor can only fill in particulars as specified in the various columns of the Form. There is no scope for elaborate pleadings. An application to the adjudicating authority (NCLT) under Section 7 IBC in the prescribed form, cannot therefore, be compared with the plaint in a suit. Such application cannot be judged by the same standards, as a plaint in a suit, or any other pleadings in a court of law.
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142. There is no bar in law to the amendment of pleadings in an application under Section 7 IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 IBC in Form 1. In the absence of any express provision which either prohibits or sets a time-limit for filing of additional documents, it cannot be said that the adjudicat
