Unexplained Delay In Filing Second Petition U/S 94 Of IBC After Dismissal Of First Reflects Malafide Conduct Of Litigant: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan, Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that filing a second petition under Section 94 of the IBC, without disclosing that the earlier petition based on the same facts and cause of action had been dismissed, reflects mala fide conduct on the part of the litigant. Therefore, the second petition cannot be entertained unless sufficient explanation is provided for the delay in filing it after the dismissal of the first petition. The present two appeals have been filed by co-guarantors against orders passed by National Company Law Tribunal (NCLT) by which it dismissed an application filed under section 94 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Appellant submitted that though the reasons for non-appearance in the present case was genuine, the Adjudicating Authority had dismissed the restoration application without allowing an opportunity to explain the reasons leading to the non-appearance during the hearing of Petition No. 380 of 2024. It was further argued that the Adjudicating Authority by not considering the submissions made by the new counsel while passing the impugned order did not act in conformity with the principles of natural justice. This had deprived the Appellant an opportunity of being heard causing miscarriage of justice. Per contra, the Respondent submitted that neither the Appellant nor her Counsel had ever informed the Adjudicating Authority about her illness and medical prescriptions have been placed before this Tribunal for the first time which cannot be looked into at the appeal stage. It was further contended that the Adjudicating Authority had correctly held that the Appellant had failed to adduce satisfactory explanation for filing the second Section 94 petition when their first Section 94 petition vide No.364 of 2023 had already been dismissed for non-prosecution. The Tribunal noted that the Adjudicating Authority had also very clearly stated its mind that in the event of non-appearance of the Personal Guarantor, the mater will be dismissed for non-prosecution. Inspite of this clear warning, the Appellant failed to mark presence either in person or through the Counsel leading to dismissal of Petition No. 455 of 2023. It held that “the conduct of the litigant is clearly dubious and it clearly appears that the Appellant was more interested in delaying the proceedings by absenting themselves from appearing before the Adjudicating Authority when the matter was listed for hearing. The intention of the Appellant was to buy more time so as to avoid the execution of the Possession Notice and avail the benefit of moratorium under Section 96 of IBC.” The Tribunal further observed that the Appellant filed the second petition on the same facts and cause of action without any liberty to do so and failed to disclose that the first petition based on the same cause of action had already been dismissed. The NCLT was right in seeking explanation for filing the second petitioner and upon finding the explanations proffered unsatisfactory dismissed the petition. The reliance on the NCLAT's judgment in Venus Sagar is misplaced as this judgment was based on facts peculiar to that case. It concluded that “when the Section 94 petition had already been dismissed once earlier, any vigilant litigant would have taken care not to be lackadaisical again. However, even the newly engaged counsel also sought adjournment. This clearly shows that Appellant and the new counsel was still non-serious in pursuing the matter on merits. The same elusive conduct of the Appellant of non-appearance or seeking of adjournment on the dates of hearing clearly continued.” Accordingly, the present appeals were dismissed. Case Title: MR. MANOJ AGGARWAL Versus KARNATAKA BANK LIMITED Case Number: Company Appeal (AT) (Insolvency) No. 4 of 2025 Order Date: 02/09/2025 Click Here To Read/Download The Order

Unexplained Delay In Filing Second Petition U/S 94 Of IBC After Dismissal Of First Reflects Malafide Conduct Of Litigant: NCLAT

Mohd Malik Chauhan

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