M/S. SURENDRA TRADING COMPANY versus M/S. JUGGILAL KAMLAPAT JUTE MILLS COMPANY LIMITED AND. OTHERS

Citation: [2017] 9 S.C.R. 743 · Decided: 19-09-2017 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

[2017] 9 S.C.R. 743 
MIS. SURENDRA TRADING COMPANY 
V. 
MIS. JUGGILAL KAMLAPAT JUTE MILLS 
COMPANY LIMITED AND. OTHERS 
(Civil Appeal No. 8400 oL2017 etc) .. 
SEPTEMBER 19,2017 
(A.K. SIKRI AND ASHOK BHUSHAN, JJ.] 
Insolvency and Bankruptcy Code, 2016: 
A 
B 
c 
s.9(5) proviso thereto - Time limit of seven days in rectifYing 
''the defects in the application for initiation of co1porate insolvency . 
resolution process, whether mandatory or direct01y - Held: 
Provision for removing the defects within seven days is directory 
and not mandatory in nature - However, if the defects are not 
removed within seven days, the applicant, while refiling the 
D 
application after removing the defects, is required to file an 
application explaining sufficient case as to why the defects could 
not be removed/cured within seven days - The application u!s. 9(5) 
can be entertained by the Adjudicating Authority only after i('is 
satisfied that sufficient case is made out for the delay. 
· ' .. 
E 
Allowing the appeals, the Court 
HELD: 1. No valid reason is given by National Company 
Law Appellate Tribunaf (NCLAT) while coming to the conclusion 
that the period mentioned in proviso for sub-secthin (5) of s.9 of 
Insolvency and Bankruptcy Code, 2016,, is mandatory. Taking 
F 
note of the provisions of Section 12 of the Code and pointing out 
the time limit for completion of insolvency resolution process is 
180 days, which period can be extended by another 90 days, hardly 
provides any justification to construe the p.rovisions of proviso 
to sub-section (5) of Section 9 in the manner in which it is done 
by the Tribunal. It is to be borne in mind that limit of 180 days 
G 
mentioned in Section 12 also starts from the date of admission of 
the application. Period prior thereto which is consumed, after 
the filing of the application under Section 9 (or for that matter 
under Section 7 or Section 10), whether by the Registry of the 
adjudicating authority in scrutinising the application or by the H 
743 
I 
) 
744 
SUPREME COURT REPORTS 
[2017} 9 S.C.R. f---
A applicant in removing the defects or by the adjudicating authority 
in admitting the application is not to be taken into account. In 
fact, till the objections are removed, it is not to be treated as 
application validly filed inasmuch as· only after the application is 
complete in every respect, it is required to be entertained. In 
B this scenario, making the period of seven days contained in the ' 
proviso as mandatory, does not commend this Court. No purpose 
is going to be served by treating this period as mandatory. In a 
given case, there may be weighty, valid and justifiable reasons 
for not able to remove the defects within seven days. 
Notwithstanding the same, the effect would be to reject the 
C application. [Para 20) [761-F-H; 762-A-B) 
2. Whether such a rejection would be treated as rejecting 
the application on merits thereby debarring the application from 
filing fresh application or it is to be treated as an administrative 
order since the rejection was because of the reason that defects 
D were not removed and application was not examined on merits. 
In the former case it would be travesty of justice that even if the 
case of the applicant on merits is very strong, the applicant is 
shown the door without adjudication of his application on merits. 
If the latter alternative is accepted, then rejection of the application 
in the first instance is not going to serve any purpose as the 
E applicant would be permitted to file fresh application, complete 
in all aspects, which would have to be entertained. Thus, in either 
· case, no purpose is served by treating the aforesaid provision as 
mandatory. [Para 21) [762-C-E) 
3. Various provisions of the Code would indicate that there 
F are three stages. First stage is the filing of the application. The 
Registry of the adjudicating authority is supposed to scrutinise 
the same to find out as to whether it is complete in.all respects or 
there are certain defects. If it is complete, the same shall be 
posted for preliminary hearing before the adjudicating authority. 
G If there are defects, the applicant would be notified about those 
defects so that these are removed. For this purpose, seven days 
time is given. Once the· defects.are removed then the application 
would be posted before the adjudicating authority. When the 
application is listed before the adjudicating authority, it has to 
take a decision to either admit 

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