Litigants Are Not Trained Advocates, Restoration Application Can't Be Dismissed Due To Counsel's Failure To Inform Of Proceedings: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) has held that the restoration application under Rule 48(2) of the National Company Law Tribunal (NCLT) Rules, 2016 cannot be dismissed if the application is filed within 30 days from the date of dismissal of the original petition. In the present case, the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was dismissed on the ground that the financial creditor did not appear when the matter was called out. However, the Tribunal held that non appearance of the Litigant due to failure on the part of its counsel to inform them of the proceedings cannot go against such litigant. Brief Facts: The present appeal has been filed by M/s Lok Sewak Leasing & Investment Pvt. Ltd (Appellant) challenging the Impugned Order dated 22.01.2025 passed by the National Company Law Tribunal, Mumbai Bench. In January 2024, the Respondent, M/s GBL Chemical Ltd., approached the Appellant for a short-term business loan of Rs. 7,03,00,000/- at an interest rate of 10.21% per annum, to be repaid in six instalments of Rs. 1,19,16,667/- each, commencing from 08.02.2024 over a 120-day period. Thereafter, the terms of the loan were incorporated in a Facility Agreement executed on 24.01.2024. A demand promissory note and letter of continuity executed on 19.01.2024. in favor of the Appellant. An Intimation Letter dated 01.04.2024 and a Demand-cum-Acceleration Notice dated 06.04.2024 were served on the Respondent by which outstanding amount of Rs. 4,77,28,287/- (computed as on 05.04.2024) was claimed within seven days. Despite receiving the notice, the Respondent failed to clear the dues by 13.04.2024, thereby committing a default under the Facility Agreement. An application was filed under section 7 of the Code which was dismissed by the Adjudicating Authority for non-prosecution due to the non appearance of the Appellant's counsel. The Appellant submitted that this dismissal resulted solely from the failure of its then-counsel to appear or inform the Adjudicating Authority of the e-filed affidavit, a circumstance entirely beyond the Appellant's control. It was further submitted that the Appellant complied with the directions of the Adjudicating Authority and served a copy of the Restoration Application on the Respondent. Additionally, both parties were heard when the matter was taken up for consideration. The Impugned has failed to properly address the submissions advanced thereby violating the principle of natural justice. Per contra, the Respondent submitted that the Adjudicating Authority rightly dismissed the Restoration Application due to the Appellant's non-compliance with the order dated 04.09.2024, and non-appearance on 30.09.2024, as recorded in the Impugned Order. It was further submitted that the Restoration Application was filed beyond the mandatory 30-day period prescribed under Rule 48(2) of the NCLT Rules, 2016. The Respondent contended that the dismissal order was passed on 30.09.2024, and the advance copy of the Restoration Application was served on the Respondent only on 25.11.2024, well beyond the permissible period. the Appellant neither sought an extension of time to file the remaining documents nor provided any explanation for its failure to comply fully. Lastly, it was submitted that the dismissal of the Section 7 Application on 30.09.2024, was not solely for non-prosecution but also for non-compliance with the order dated 04.09.2024. The Respondent submitted that this dual basis for dismissal precludes restoration under Rule 48(2), which applies only to dismissals for non-appearance. Observations: The Tribunal noted that the matter was called twice but neither the Appellant nor its representative appeared before the Adjudicating Authority. Additionally, the Appellant was given two weeks time to file the agreement between the parties along with the financial statement and NeSL certificate by way of an additional affidavit. However, the said affidavit was not filed by the Appellant leading to the conclusion that the Appellant was serious for the prosecution of the case therefore the Application was dismissed by the Adjudicating Authority. It further observed that as per Rule 48(2) of the NCLT Rules, the Restoration Application needs to be filed by the Litigant within 30 days. In the present case, the application was filed within the stipulated period. It rejected the argument of the Respondent that since the copy of the Application was not received by him on time, the application cannot be said to have been filed on time. The Tribunal further noted that the Adjudicating Authority did not mention anything regarding the non-appearance of the Appellant and its counsel on the date of original ...

Litigants Are Not Trained Advocates, Restoration Application Can't Be Dismissed Due To Counsel's Failure To Inform Of Proceedings: NCLAT

Mohd Malik Chauhan

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