Legal Review and Analysis of Livein Aqua Solutions Pvt Ltd vs HDFC Bank Ltd 2025 INSC 1349

In-Short

Case: Livein Aqua Solutions Pvt. Ltd. vs. HDFC Bank Ltd. (2025 INSC 1349)The Supreme Court held that a procedural defect, like a faulty affidavit in a Section 7 IBC application, is curable and does not render the application void. It emphasized that the mandatory notice for curing defects must be issued under the substantive provision of the IBC (S. 7(5)(b)) and not just under the NCLT's general procedural rules.

1. Heading of the Judgment

Case Title: Livein Aqua Solutions Private Limited vs. HDFC Bank Limited
Citation: 2025 INSC 1349
Court: Supreme Court of India
Civil Appeal No.: 11766 of 2025
Judges: Justice Sanjay Kumar and Justice Alok Aradhe
Date of Judgment: November 24, 2025

2. Related Laws and Sections

This judgment primarily interprets and deals with the interplay between the following statutes and rules:

• The Insolvency and Bankruptcy Code, 2016 (IBC):
  Section 7: Application for initiation of Corporate Insolvency Resolution Process by a financial creditor.
  Section 7(5)(b) & its Proviso: Power of the Adjudicating Authority (NCLT) to reject an incomplete application, but only after giving the applicant a 7-day notice to rectify the defects.
  Section 62: Appeal to the Supreme Court.

• The National Company Law Tribunal Rules, 2016 (NCLT Rules):
  Rule 4(1): Requires an application under Section 7 of the IBC to be filed in Form 1.
  Rule 10(1): Specifies the procedure for filing applications under the IBC until specific rules are notified.
  Rule 34(4): Mandates that every petition or application before the NCLT must be verified by an affidavit in Form NCLT.6.
  Rule 28: Pertains to the scrutiny of petitions and the procedure for handling defective filings.
  Rule 38(5): Deals with the service of notices and processes.

3. Basic Judgment Details

• Appellant: Livein Aqua Solutions Private Limited (Corporate Debtor)

• Respondent: HDFC Bank Limited (Financial Creditor)

• Origin of the Case: The respondent-bank filed an application under Section 7 of the IBC before the NCLT, Ahmedabad, to initiate the Corporate Insolvency Resolution Process (CIRP) against the appellant-company.

• Procedural Defect: The application, verified on July 26, 2023, was supported by an affidavit that was deposed on July 17, 2023. The NCLT treated this as a fatal defect.

• Path to Supreme Court:
  NCLT: Rejected the bank's application, holding it was defective.
  NCLAT: Allowed the bank's appeal and restored the application, remanding it to the NCLT for a decision on merits without curing the defect.
  Supreme Court: The appellant-company challenged the NCLAT's order.

4. Core Principle and Analysis of the Judgment

The Central Issue

The short but significant legal issue before the Supreme Court was whether an application under Section 7 of the IBC, which is supported by an affidavit bearing a date prior to the date of verification of the application itself, should be rejected at the threshold as being non est (non-existent in law) or whether such a procedural defect is curable.

The Supreme Court's Analysis and Reasoning

The Court's analysis can be broken down into two key components:

A. The Primacy of Substantive Law over Procedural Technicalities

The Supreme Court firmly rejected the appellant's argument that a defective affidavit rendered the entire application non est. The Court drew a clear distinction between a "defective" filing and a "non-existent" one. It emphasized that rules of procedure are the handmaidens of justice, not its masters. Citing its own precedents in Vidyawati Gupta and Uday Shankar Triyar, the Court held:

"Procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. Procedure... should never be made a tool to deny justice."

The Court reasoned that a mere discrepancy in the dates of the affidavit and the verification was neither an incurable nor a fundamental defect that went to the root of the matter. It was a technical irregularity that could be easily rectified by filing a new, proper affidavit.

B. The Mandatory Nature of Notice under Section 7(5)(b) of the IBC

This was the cornerstone of the Court's decision. The Supreme Court scrutinized the procedure followed by the NCLT Registry and found it wanting. The NCLT had issued a general notice under Rule 28 of the NCLT Rules on its website and notice board, listing 26 defective petitions, including the bank's.

The Court held that this was insufficient to comply with the mandatory requirement of the proviso to Section 7(5)(b) of the IBC. The key distinctions made by the Court were:

• Specific vs. General Notice: The IBC proviso requires a notice to be given specifically "to the applicant" to rectify the defect. A general notice applicable to multiple cases does not satisfy this statutory mandate.

• Substantive Law vs. Procedural Rules: The IBC, being the substantive legislation governing insolvency, prevails over the general procedural rules of the NCLT. The obligation to issue a notice under Section 7(5)(b) is a specific statutory command that cannot be bypassed by relying on general rules of procedure.

• Reference to Precedent: The Court relied on its earlier judgment in Dena Bank vs. C. Shivakumar Reddy, which had held that the adjudicating authority must give a notice to the applicant to cure defects before rejection, and that there is no automatic penalty for not curing it within seven days; the time can be extended for the ends of justice.

Therefore, the Supreme Court concluded that since no specific notice was ever issued to HDFC Bank under the proviso to Section 7(5)(b) of the IBC, the rejection of its application by the NCLT was legally unsustainable.

5. Final Outcome and Supreme Court's Directions

The Supreme Court partly allowed the appeal and issued the following directions:

1. It upheld the NCLAT's finding that the NCLT's rejection order was flawed due to the non-issuance of a mandatory notice under Section 7(5)(b) of the IBC.

2. However, it corrected the NCLAT's error in ignoring the defective affidavit. The NCLAT should have directed the bank to cure the defect instead of sending the matter back for merits hearing straight away.

3. The Supreme Court directed:
   The respondent-bank (HDFC) must cure all defects in its application, including the defective affidavit, within seven days from the date of this judgment (November 24, 2025).
   Upon such curing of defects, the NCLT, Ahmedabad Bench, shall take up the application for hearing on merits and in accordance with the law.

4. The parties were directed to bear their own costs.

6.  (MCQs) Based on the Judgment

Question 1: In the case of Livein Aqua Solutions vs. HDFC Bank, what was the primary procedural defect in the Section 7 IBC application filed by the bank?
(a) The application was not filed in the prescribed Form 1.
(b) The affidavit supporting the application was deposed on a date earlier than the date of verification of the application.
(c) The application was filed after the expiry of the limitation period.
(d) The bank failed to appear for the first hearing before the NCLT.

Question 2: According to the Supreme Court's judgment, why was the general notice issued by the NCLT Registry under Rule 28 of the NCLT Rules considered insufficient?
(a) Because it was not published in a national newspaper.
(b) Because it did not specify the exact nature of the defects in each application.
(c) Because it failed to satisfy the mandatory requirement of a specific notice to the applicant under the proviso to Section 7(5)(b) of the IBC.
(d) Because it allowed only five days to cure the defects instead of seven.