Amendment Of Default Date In Insolvency Plea Is A Procedural Correction, Not A Fresh Cause Of Action
Introduction
The National Company Law Tribunal (NCLT), Mumbai Bench, comprising Prabhat Kumar (Member-Technical) and Sushil Mahadeorao Kochey (Member-Judicial), has clarified that merely allowing correction of the date of default in an insolvency application does not give rise to a fresh cause of action. The tribunal held that such an amendment only rectifies a factual inaccuracy and does not revive a time-barred claim.
Factual Background
The Indian Bank (erstwhile Allahabad Bank), as the applicant, filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the NCLT Rules, 2016, seeking permission to amend the date of default in Company Petition No. C.P. (IB)/571(MB)2024. The amendment was sought to correctly reflect the factual default date ascertained from records.
Procedural Background
The applicant bank approached the NCLT for leave to amend after realizing the need to correct the default date stated in its earlier petition. The respondent, a personal guarantor, objected to the amendment on the ground that it would amount to reviving a time-barred cause of action.
Issues
1. The main issue before the Tribunal was whether allowing correction of the date of default in an insolvency petition constitutes a fresh cause of action, thereby rendering the application time-barred under the Limitation Act, 1963.
Contentions of Parties
The applicant relied on the judgment in Sanjeeb Ranjeet Das v. M/s Punjab National Bank, arguing that the adjudicating authority has inherent power to permit additional documents or corrections necessary for proper adjudication and that such rectification does not alter the substance of the cause of action.
In contrast, the respondent relied on Indrajeet Singh Bindra v. Ramesh Kumari and Others (2024 SCC Online Del 8613), contending that allowing amendment at this stage would effectively revive a time-barred claim and amount to creating a new cause of action.
Reasoning and Analysis
The Tribunal distinguished the decision in Indrajeet Singh Bindra on factual grounds, noting that in that case, the amendment had resulted in a fresh cause of action that was clearly barred by limitation. In the present matter, however, the correction merely rectified the factual date of default already established by records and did not introduce any new claim or liability.
The NCLT observed that the purpose of adjudication under the Insolvency and Bankruptcy Code is to ascertain the existence of debt and default. Hence, correction of the default date does not affect the maintainability of the petition. It further emphasized that the procedural flexibility inherent in insolvency proceedings allows for such amendments in the interest of substantive justice.
Implications
This decision reinforces the principle that procedural corrections, such as amending the date of default, do not amount to revival of time-barred claims. It provides clarity for creditors seeking to rectify technical or clerical errors in insolvency filings without fear of limitation objections. The decision also underscores the Tribunal’s pragmatic approach in balancing procedural compliance with the objective of expeditious resolution under the IBC.
In this case the appellant was represented by Ms. Vaishali Bhilave, Advocate. Meanwhile the respondent was represented by Mr. Malhar Zatakia and Mr. Neil Moondra i/b Ms.Aishwarya Pawar, Advocates.