NCLT Amravati Clarifies Law on Amendment of Date of Default in Section 7 Petitions

NCLT Amravati Clarifies Law on Amendment of Date of Default in Section 7 Petitions

Introduction

The National Company Law Tribunal (NCLT), Amravati Bench has delivered a significant judgment, holding that a change in the incorrect date of default mentioned in the original petition can be allowed before final adjudication, provided it does not introduce a new cause of action and no prejudice is caused to the corporate debtor by such an amendment. This ruling provides clarity on the permissibility of amendments in Section 7 petitions under the Insolvency and Bankruptcy Code (IBC).

Factual Background

The Canara Bank filed a Company Petition (CP) under Section 7 of the IBC, seeking initiation of corporate insolvency resolution process against the corporate debtor, M/s. Vasavi Power Services Pvt Ltd. The applicant argued that the financial creditor had inconsistently claimed the date of default as 17.08.2023, which contradicts the Non-Performing Assets (NPA) classification date of 30.11.2015 and the dates recorded in the Inspection Report (IR).

Procedural Background

The applicant sought dismissal of the CP, arguing that the inconsistent dates render the petition incomplete and legally untenable. The respondent countered that the date of default under Section 3(12) of the IBC need not be strictly construed as the date of NPA and that the amendment does not introduce a new cause of action.

Issues

1. Amendment of Date of Default: The NCLT held that the amendment of the incorrect date of default is permissible before final adjudication, provided it does not introduce a new cause of action.

2. No Prejudice to Corporate Debtor: The Tribunal emphasized that the amendment should not cause prejudice to the corporate debtor.

Contentions of the Parties

Applicant's Contentions: The applicant submitted that the inconsistent dates of default render the petition defective and that new documents annexed to the Rejoinder without prior leave are impermissible.

Respondent's Contentions: The respondent argued that the amendment does not introduce a new cause of action and that there is no bar against filing additional documents prior to the final order.

Reasoning and Analysis

The key issue before the NCLT was whether the amendment of the incorrect date of default would be permissible before final adjudication. The Tribunal examined the precedents and found that the NCLAT in Apple Sponge & Power Ltd. v. PNB had allowed substitution of the date of default with the NPA date, which was a matter of public record. The Tribunal noted that in the present case, the amendment was sought before final adjudication and did not introduce a new cause of action.

The bench of Shri Umesh Kumar Shukla (Technical Member) and Shri Kishore Vemulapalli (Judicial Member) distinguished the present case from the judgment in Milind Kashiram Jadhav, where the NCLAT held that the NPA date cannot automatically be classified as the date of default without mentioning any specific instance of default. In the present case, the applicant sought to replace the incorrect default date with the NPA classification date, which was claimed as the default date in the petition.

The Tribunal emphasized that the amendment should not cause prejudice to the corporate debtor and should not introduce a new cause of action. In this case, the change in date of default from the mentioned originally in the petition to the corrected date of default did not introduce any new cause of action and caused no prejudice to the corporate debtor.

In this case the petitioner was represented by Mr. Manav Gecil Thomas, Advocate. Meanwhile the respondent was represented by Mr. Amir Bavani, Advocate.

Outcome

The NCLT dismissed the application, holding that the change in date of default from the mentioned originally in the petition to the corrected date of default does not introduce any new cause of action and causes no prejudice to the corporate debtor.