Supreme Court Rules Defective Affidavit Does Not Render Section 7 IBC Application Non Est; NCLT Must Give Proper Notice Under Proviso to Section 7(5)(b)

Case Name: Livein Aqua Solutions Pvt. Ltd. v. HDFC Bank Ltd.
Citation: 2025 INSC 1349
Date of Judgment/Order: 24 November 2025
Bench: Sanjay Kumar, J.; Alok Aradhe, J.

Held: The Supreme Court held that a Section 7 IBC application supported by a defective affidavit cannot be treated as non est, as such a defect is curable and not fundamental. The Court ruled that the NCLT’s consolidated notice under Rule 28 of the NCLT Rules did not satisfy the mandatory requirement of issuing specific notice to the applicant under the proviso to Section 7(5)(b) of the IBC to rectify defects within seven days. Consequently, the rejection of HDFC Bank’s application by the NCLT was illegal. However, the Court found the NCLAT erred by restoring the company petition without directing rectification of the defective affidavit. The Supreme Court therefore directed the bank to cure the defects within seven days, after which the NCLT must hear the matter on merits.

Summary: The dispute arose when HDFC Bank filed a Section 7 IBC application against Livein Aqua Solutions supported by an affidavit dated 17.07.2023, even though the petition was verified on 26.07.2023. The NCLT Registry flagged defects, and a general consolidated notice was issued calling upon multiple applicants to rectify their filings. When the bank failed to refile within time, the NCLT rejected the application on 18.10.2023. The bank succeeded in its Rule 63 appeal before the NCLT, prompting the company to approach the NCLAT, which dismissed the appeal as infructuous because the underlying Section 7 petition had already been rejected. Thereafter, the bank challenged the rejection before the NCLAT, which restored the petition, relying on Dena Bank v. C. Shivakumar Reddy to hold that defective affidavits are curable. Before the Supreme Court, the company argued that the petition was non est for violation of Rule 10(1) of the NCLT Rules. The Court rejected this contention, observing that the company had itself treated the defect as curable before the NCLT. It held that procedural rules cannot supersede Section 7(5)(b)’s substantive mandate of individual notice to rectify defects and reiterated that defective affidavits do not invalidate Section 7 filings as long as defects can be cured.

Decision: The Supreme Court disposed of the appeal by affirming that the NCLT failed to comply with the mandatory proviso to Section 7(5)(b) and that the NCLAT was correct in holding so. However, the Court modified the NCLAT’s order by directing HDFC Bank to cure all defects in C.P. (IB) 97(AHM)2024—including the defective affidavit—within seven days from the date of the judgment. Upon such compliance, the NCLT, Ahmedabad Bench, must proceed to hear the matter on merits in accordance with law. Parties were directed to bear their own costs.