2026 (3) TMI 852 - AT - IBC

Amendment of Form No.1 permitted where clarificatory and within limitation, with opportunity to reply to avoid prejudice.

Amendments to Form No.1 and filing of additional documents are permissible until a final order admitting or rejecting an application is passed; ... Amendment of pleadings - Validity of order to amend the Form No.1 in order to change the date of default with a further liberty to the Respondent (Appellant herein) to file a Reply vis-à-vis the amended Form-1, within a period of seven days from the date of receipt of the amended Form-1 - limitation period - rectification of defects - prejudice to opposite party - opportunity to be heard - Discretion to allow amendment before final order. Amendment of Form-1 under Section 7 - HELD THAT:- The Tribunal upheld the Adjudicating Authority's exercise of discretion in permitting the applicant to file an amended Form No.1 changing the date of default, noting that amendments or additional documents may be filed any time before a final order admitting or rejecting an application under Section 7 is passed. The court applied the principles in Dena Bank v. C. Shivakumar Reddy [2021 (8) TMI 315 - SUPREME COURT] and the guidance on amendment in Life Insurance Corporation of India v. Sanjeev Builders [2022 (9) TMI 1564 - SUPREME COURT], observing that amendments should be allowed where they assist in determining the real controversy, do not introduce a time barred claim, do not change the nature of the proceeding, and do not cause injustice by divesting the other side of a valuable right. The Adjudicating Authority had afforded the respondent an opportunity to file a reply to the amended Form No.1 and the amended date of default (as pleaded) fell within limitation; therefore, no prejudice or loss of a valuable accrued right to the respondent was shown. The Tribunal emphasised that the Adjudicating Authority must assess the ingredients of Section 7 on the pleadings and documents before deciding admission or rejection, and that discretion to permit amendment must be exercised on sound principles. The Adjudicating Authority correctly granted liberty to file the amended Form No.1 and provided consequential opportunity to the respondent; the amendment did not warrant interference. Final Conclusion: The appeal is dismissed; the Adjudicating Authority's liberty to permit amendment of Form No.1 and to receive a reply is upheld and it is directed to proceed to decide the Section 7 application on merits. Issues: Whether the Adjudicating Authority erred in granting liberty to the applicant to amend Form No.1 to alter the date of default and whether such amendment causes prejudice or takes away any valuable right of the opposite party.Analysis: The proceedings under the Insolvency and Bankruptcy Code, 2016 require a different and pragmatic approach to pleadings in Form No.1; amendments and filing of additional documents are permissible until a final order admitting or rejecting an application under Section 7 is passed. The proviso to Section 7(5)(b) obliges the Adjudicating Authority to allow rectification of defects within seven days before rejecting an application. Principles governing amendment under civil procedure law require allowance of amendments that facilitate adjudication of the real controversy provided they do not introduce time-barred claims, change the nature of the case, are mala fide, or cause injustice by divesting a valid defence. The admitted and amended dates of default in the present case (05.04.2024 and 10.04.2024) both fall within the period of limitation and the Adjudicating Authority granted an opportunity to file a reply to the amended Form No.1, thereby preserving the appellant's ability to contest the claim.Conclusion: The amendment permitted by the Adjudicating Authority to rectify the date of default was permissible and did not cause prejudice or divest any valuable right of the opposite party; the appeal challenging that liberty is dismissed.Ratio Decidendi: Under Section 7 of the Insolvency and Bankruptcy Code, 2016, amendments to Form No.1 and filing of additional documents are permissible until the final order admitting or rejecting the application is passed, and the Adjudicating Authority may allow such amendments provided they do not introduce a time-barred claim, change the nature of the cause of action, or cause prejudice to the opposite party; where amendment is consequential or clarificatory and the opposite party is given an opportunity to reply, refusal to allow the amendment is not warranted.