M/S. Anantha City Digital Communications Private Limited

The provisions of Section 10 of the I & B Code, 2016, contemplates initiation of the CIRP process by a Corporate Applicant, subject to satisfying the terms and conditions, as it has been provided under Section 10 of the I & B Code, 2016. The said provisions Section 10 of the I & B Code, 2016, is extracted hereunder: -

The Appellant herein is an Applicant, to the application preferred under Section 10 of the I & B Code, 2016. In the said application which was registered as CP(IB)/31/10/AMR/2025, he has prayed for initiation of the CIRP process against the Corporate Applicant, M/S. Anantha City Digital Communications Private Limited. The said application has been rejected by the Ld. Tribunal observing thereof that, since the Independent Auditor, in his report dated 27.08.2025 has observed, that, they are unable to furnish any report, whether to the balance sheet, profit and loss statement and cash flow statement contained in the audited financial statements for the year ended 31.03.2025, are not in agreement with the books of account, the financial statements that it does not reflect the true position of the assets and the liabilities of the corporate debtor and hence cannot be relied upon and cannot be considered and be taken as to be the foundation for the propose of admission of the corporate applicant into CIRP under section 10 of the code. Thus, the Tribunal has taken a view that, the Financial Statement as submitted by the Appellant since it didn't reflected the true position of the assets and liabilities of the Corporate Applicant, and hence cannot be relied upon to made as the basis for the purposes of invocation of the proceedings under Section 10 of the I & B Code, 2016.

It is contended by by the Ld. Counsels for the Appellant, that the finding, which has been recorded by the Tribunal is contrary to the facts of the case, because the financial statements, which were required to accompany the application filed under section 10 of the code, have been actually placed on record, that the application has been erroneously dismissed by NCLT primarily on the basis of the auditor’s disclaimer, which runs contrary to the fundamental objective of the Code, which is to revive financially distressed companies, that a disclaimer of opinion is often a direct symptom of the financial distress of a company who seeks to file section 10 petition in order to resolve its insolvency and that the role of the Ld. Adjudicating Authority, in a section 10 petition proceedings is only to check and confirm that the application is complete as per the stipulations provided in the Code and the Rules framed there under and that a default has occurred. He has further contended that he had fulfilled all the mandatory requirements for filing a Section 10, application as prescribed by the code and its rules, and that the auditor note was required to be addressed by the Interim Resolution Professional (IRP) during CIRP and not by NCLT at the admission stage. He has argued that Ld. NCLT’s order overlooks the established legal position as affirmed by Hon’ble Apex Court in the case of Innoventive Industries Limited v. ICICI Bank Limited (2018) 1 SCC 407, which has consistently held that, the Adjudicating Authority ought to have limited itself to ascertain the existence of a default and the completeness of the application which dedicating authority failed to observe in the instant case and therefore, the impugned order may be set aside.

There cannot be any doubt, in view of the finding recorded in the impugned order, that the Ld. Tribunal initially viewed the application as incomplete and did grant seven days’ time to the Appellant to produce the relevant documents such as annexures to the audited accounts for the financial years, 2023-24 and 2024-25, as well as the provisional financial accounts for the financial year 2025-26, made up to date not earlier than 14 days from the date of application, that is, 25.04.2025, in order to substantiate his application preferred under Section 10 of the I & B Code, 2016. It is observed that in compliance thereto, the Appellant did file a memo by Diary No. 1765 dated 01.09.2025, enclosing therewith the required documents in support of the application preferred under Section 10 of the I & B Code, 2016. But however, those documents were not found to be satisfactory by Ld. NCLT, on basis of observations made by the independent auditor in their report dated 25.08.2025. the contention of the appellant is that he has supplied all the documents required to accompany the application under section 10 of the code and that learn it NCLT should not have gone into the merits of those documents and should have restricted itself to satisfying as to whether application is complete in shape as per the provisions of section 10 of the code and of the rules made there under. More importantly, the Appellant has argued that the decision of learned NCLT runs counter to the ratio as laid down by Hon’ble Apex Court in the matter of Innoventive industries (Supra).

As the provisions contained under Section 10(3) requiring a mandate for furnishing the applications along with the information as contemplated therein, the use of word "Shall" as to be construed herein as to be made for the reason being that there could be no maximum level of satisfaction of supplying the documents to sustain the application under Section 10. Its consideration will be always dependent upon the wisdom of the Ld. Tribunal when it considers the application for its admission under Section 10 (4) on its merits. Once again we will have to reiterate a well-established principle that a procedural law is only required to satisfy the sustainability of the proceedings and presence of slackness or incompleteness of a documents to be supplied to sustain an application under Section 10 may not be taken a reason to reject the application. The Ld. Adjudicating Authority particularly when it is exercising powers under Section 10 has to ensure that there is no deprivation for the Applicant for sustaining his application to avail a chance to revive the Corporate Debtor because whatsoever the lacunas that has chanced that can always be rectified. It needs no special reference that rules of procedures are hand maidens of justice and should never be made as a weapon to be utilized with fatality to deny justice or to perpetuate any justice. At every stage of the proceedings the procedural defects / irregularities should not incapacitate a party to the proceedings to be denied with an effective opportunity, as such defects would always be curable and it ought not to be utilized to defeat the substantive right or to cause an injustice to a party to the proceedings.

We note that by the impugned order the application has been rejected primarily on the ground of incompleteness and lack of reliability of the documents produced by the appellant. If incompleteness is one of the issue, then the appellants can always be given another chance to rectify the defects and to represent their case before the competent authority after providing all the documents, designed for to support Section 10 of the I & B Code, 2016, application, in order to meet the ends of justice. As far as the other contention of the appellant is concerned, which is that the ratio as laid down by Hon’ble Apex Court has not been followed in letter and spirit, we are constrained to observe that indeed, in the impugned order, there is no evidence of any analysis having been carried out by NCLT.

Since the Appellant pleads that there happens to be a lack of proper appreciation of documents on record relied for the purposes of satisfying the conditions as contained under Section 10 of the I & B Code, 2016, for initiating the CIRP process as against the Corporate Applicant, and since we find merit in the said averment in view of the discussion as above, the impugned order would stand quashed and the matter is remitted back to the Ld. NCLT, to decide the application afresh by giving one more chance to the Appellant to produce the necessary documents in order to justify his Application and by giving due consideration to the ratio laid down by Hon’ble Apex Court in the matter of Innoventive industries (Supra), while deciding the case.

It is hoped and trusted that the Appellant would make all efforts to satisfy the lacuna with regard to the establishment of its financial status of the Appellant as existing on the date on which the application under Section 10 of the I & B Code, 2016, was preferred before the Ld. Adjudicating Authority.