Tribunal allows appeal, rejects order on Section 9 application defects, remits case for reconsideration

The National Company Law Appellate Tribunal set aside the order rejecting M/s SAK Industries Pvt Ltd's application under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to defects not rectified within 7 days. The Tribunal referenced a Supreme Court judgment stating the mandatory nature of rectifying defects within 7 days is not applicable. The case was remitted back to the Adjudicating Authority for reconsideration, allowing the appellant to rectify any defects if found, with no costs awarded.

---

---

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.

---