Tribunal Allows State Bank of India to Amend Default Date Despite Opposition, Ensures Appellant's Right to Contest Amendment
In a significant judgment, the National Company Law Appellate Tribunal (NCLAT), Principal Bench in New Delhi, has upheld the amendment of the default date in an insolvency application filed by the State Bank of India (SBI) against personal guarantor Saranga A. Aggarwal. The Tribunal, presided over by Justice Ashok Bhushan and Barun Mitra, dismissed the appeal filed by Aggarwal against the decision of the National Company Law Tribunal (NCLT), Mumbai Bench, which allowed the amendment of the default date from March 2, 2015, to April 5, 2016.
The case revolves around a credit facility extended by SBI to AA Estates Pvt. Ltd., with Aggarwal and others acting as personal guarantors. Following the corporate debtor's default, SBI initiated insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016. The bank sought to amend the date of default in the application, citing issues with the service of the initial notice under Section 13(2) of the SARFAESI Act.
Aggarwal challenged the amendment, arguing that it introduced a time-barred cause of action, as the new default date would have been expired by the time the amendment was sought. He contended that the amendment deprived him of a valid defense and altered the bank's original case.
However, the Tribunal found that the amendment did not withdraw any admissions nor take away Aggarwal's defenses. It emphasized that the adjudicating authority had granted liberty to the appellant to file a reply to the amended petition and raise all objections, including those concerning limitation.
The Tribunal cited precedents from the Supreme Court and earlier judgments of the NCLAT, which allow amendments necessary for effective adjudication of disputes, provided they do not cause injustice to the opposing party. It underscored that amendments could be permitted at any stage of proceedings to ensure that the real questions in controversy are determined.
Justice Bhushan stated, "The amendment in the date of default is necessary for effective adjudication of the controversy between the parties. The appellant has full liberty to file a reply and challenge the validity of invocation and raise objections on limitation."
The judgment reaffirms the principle that while procedural amendments can be made to ensure the proper adjudication of insolvency proceedings, they must not infringe upon the substantive rights of parties involved. It also highlights the importance of ensuring that all parties have the opportunity to present their case fully, thus maintaining the balance between procedural flexibility and substantive justice.
The judgment is expected to have significant implications for similar cases where procedural amendments in insolvency applications are sought by financial creditors.
Bottom Line:
Insolvency and Bankruptcy Code - Amendment in date of default in Section 95 application - Permissibility under law - Amendment does not take away valid defence nor withdraws any admission - Appellant has liberty to raise objections and pleadings regarding limitation and other contentions in reply to the amended petition.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 95, SARFAESI Act, Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, Order 6, Rule 17 of the Civil Procedure Code
