In a recent Judgment, the Supreme Court of India held that, provision of removing the defects within seven days is directory and not mandatory in nature.
The two judge bench comprising of Justice A.K Sikri and Justice Ashok Bhushan observed that, the time limit of seven days prescribed in proviso to sub-section (5) of Section 9 of the Insolvency and Bankruptcy Code, 2016 is not mandatory in nature for removing the defects contained in the application filed by the ‘operational creditor’ for initiating corporate insolvency resolution against a corporate debtor.
While allowing the appeal, the Court also warned that, “We are also conscious of the fact that sometimes applicants or their counsel may show laxity by not removing the objections within the time given and make take it for granted that they would be given unlimited time for such a purpose. There may also be cases where such applications are frivolous in nature which would be filed for some oblique motives and the applicants may want those applications to remain pending and, therefore, would not remove the defects. In order to take care of such cases, a balanced approach is needed. Thus, while interpreting the provisions to be directory in nature, at the same time, it can be laid down that if the objections are not removed within seven days, the applicant while refilling the application after removing the objections, file an application in writing showing sufficient case as to why the applicant could not remove the objections within seven days”.
“When such an application comes up for admission/order before the adjudicating authority, it would be for the adjudicating authority to decide as to whether sufficient cause is shown in not removing the defects beyond the period of seven days. Once the adjudicating authority is satisfied that such a case is shown, only then it would entertain the application on merits, otherwise it will have right to dismiss the application” the Court also observed.
Read the full text of the Judgment below.
