NCLT Mumbai Rules, Financial Creditor Can Amend Date Of Default Even If Pleadings Are Closed
Pranav B Prem
The National Company Law Tribunal (NCLT), Mumbai Bench, comprising Shri Nilesh Sharma (Judicial Member) and Shri Sameer Kakar (Technical Member), allowed an application filed by Axis Bank Limited, permitting the amendment of pleadings in a Section 7 petition to correct the date of default. The Tribunal held that such an amendment can be permitted even when the pleadings are declared complete, provided it is necessary to resolve the real dispute and does not introduce a new cause of action.
Background
Axis Bank Limited had filed a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Yashwant Dugdh Prakriya Limited. In the original petition, the date of default was stated to be May 1, 2020, which was the date on which the account was classified as a Non-Performing Asset (NPA). However, since this date fell within the exclusion period under Section 10A of the IBC, the Bank sought to amend the petition to reflect the actual date of default as February 1, 2020.
To effectuate this change, the financial creditor filed an interlocutory application seeking amendment of the relevant portion in Form-1 and inclusion of a Form-1A submission acknowledgment, in compliance with an IBBI Circular dated March 4, 2023.
Contentions of the Parties
The applicant argued that the amendment was not aimed at introducing a new cause of action but only intended to bring the correct date of default on record. It relied on the Supreme Court’s ruling in Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy [(Civil Appeal no. 1650 of 2020)], where it was held that there is no bar in law to amending pleadings or filing additional documents in a Section 7 application. The counsel emphasized that the amendment was necessary for the effective adjudication of the main petition and was supported by documents such as bank statements and CRILC reports already on record.
The respondent opposed the application, contending that the pleadings had already been closed as recorded in the Tribunal's order dated January 13, 2023. It argued that the petitioner was attempting to escape the bar of Section 10A by revising the date of default and was effectively trying to recall earlier admissions made in the petition. The respondent also relied on the decision of the NCLT Hyderabad Bench in M/S Sanghi Textiles Pvt. Ltd., where an amendment under similar circumstances was disallowed.
Tribunal’s Observations and Findings
The Tribunal rejected the objections raised by the respondent and distinguished the Sanghi Textiles case by noting that the amendments in that case sought to introduce a new cause of action and were made after an inordinate delay of more than a decade. In contrast, the present case involved only a correction to the date of default, which could be clearly identified from existing records like bank statements and the CRILC report.
Referring to the Supreme Court’s observations in Dena Bank, the bench reiterated that the absence of an express prohibition or deadline in the IBC for amending pleadings allowed the Adjudicating Authority to exercise discretion. It further noted that the NPA date, i.e., May 1, 2020, is normally 90 days after the actual date of default, making February 1, 2020, the accurate date.
The Tribunal observed that “though the pleadings in the matter had been completed, however, in order to resolve the real issues, in our view, it is necessary that amendment in the Form-1 filed by the Applicant Bank is allowed.”
The bench concluded that the amendment was crucial to determining the merits of the main petition and that refusing it on a technicality would hinder the cause of justice. Therefore, by exercising powers under Section 60(5)(a) of the IBC read with Rule 11 of the NCLT Rules, the application was allowed, subject to certain conditions.
Verdict
The Tribunal permitted Axis Bank to amend Form-1 to reflect February 1, 2020, as the date of default. The amendment was allowed despite the pleadings being closed, as it was necessary to determine the real dispute and was supported by evidence already on record. The Tribunal directed the applicant to file the amended Form-1 within ten days, serve it on the respondent, deposit a cost of ₹50,000 in the Prime Minister’s National Relief Fund, and provided both parties an opportunity to file a reply and rejoinder accordingly. Thus, IA No. 1382 of 2023 was allowed and disposed of.
Appearance
For Financial Creditor: Adv. Mr. Nausher Kohli a/w Apurva Sanglikar i/b Nidhi Partners
For Corporate Debtor: Adv. Mr. Viraj Parikh i/b Adv. Mr. Agam H Maloo.
Cause Title: Axis Bank Limited V. Yashwant Dugdh Prakriya Limited
Case No: IA(I.B.C.)/ 1382 (MB) 2023 in CP(IB)/707 (MB)/2022
Coram: Nilesh Sharma [Member-Judicial], Sameer Kakar [Member-Technical]
