NCLAT: Forcing Litigant To Argue On Merits Without Reply To RP’s Report U/S 99 IBC Violates Natural Justice; Ex-Parte Orders Set Aside
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that when a litigant has not filed a reply to the Resolution Professional’s (RP) report under Section 99 of the Insolvency and Bankruptcy Code, 2016 (IBC), due to sufficient and explained causes, it would be unjustified to require them to argue on the merits of the application.
Background of the Case
The appeal was filed by Nandini Choudhary, a personal guarantor of Servel India Pvt. Ltd., challenging the order dated 24.04.2025 of the National Company Law Tribunal (NCLT), New Delhi Bench (Court-II) in I.A. No.737 of 2025. Both the Appellant and her husband, Rahul Chaudhary, had furnished personal guarantees for credit facilities extended by Canara Bank to the Corporate Debtor.
Canara Bank initiated insolvency proceedings under Section 95 of the IBC against both guarantors. Two separate petitions were registered: C.P. (IB) No.334/ND/2024 against the wife (Appellant) and C.P. (IB) No.335/ND/2024 against the husband. Both matters were listed together before the Adjudicating Authority.
On 13.11.2024, counsel for the guarantors appeared and sought time to file replies to the RP’s report. The Tribunal granted two weeks. The RP undertook to serve a complete set of the application along with annexures. On 06.12.2024, both matters were listed together. In the husband’s case, counsel appeared, submitted that the personal guarantor was unwell, and produced medical prescriptions. The Tribunal granted further time and fixed 27.01.2025 for filing the reply. However, in the wife’s case, the NCLT noted the absence of representation and, considering that no reply had been filed, proceeded to pass an ex-parte order and fixed 09.12.2024 as the next date. On 09.12.2024, the Tribunal admitted the Section 95 application against the Appellant.
The Appellant subsequently filed I.A. No.737 of 2025 seeking recall of both orders dated 06.12.2024 and 09.12.2024, citing her husband’s illness as the reason she could not prepare and file a reply. She argued that her counsel had appeared in both matters, but the Tribunal wrongly recorded absence in her case.
Submissions Before NCLAT
The Appellant contended that the sequence of events made it clear that both matters were called together, and counsel had in fact appeared for both. Since time was granted in the husband’s case on account of illness, the same should have applied in her case as well. The recall application was supported by an affidavit, enclosing medical records to substantiate the husband’s serious illness. It was urged that the NCLT erred in rejecting the recall plea and that the orders had been passed in violation of natural justice.
On the other hand, counsel for Canara Bank and the RP argued that the Appellant was given ample opportunity to file her reply but failed to do so. They maintained that even when asked to present her defence, she sought adjournment, showing that she had no valid defence.
Findings of the Tribunal
The NCLAT examined the record and noted that on 06.12.2024, both matters were indeed listed together as Item Nos.205 and 206. Counsel had sought time, which was recorded in the husband’s case but not in the wife’s matter. As a result, the NCLT proceeded ex-parte against her. Importantly, the Appellate Tribunal observed that the recall application was supported by a detailed affidavit explaining the inability to file a reply due to the husband’s illness. The NCLT, however, failed to properly address these reasons. Rejecting the Respondent’s submission, the NCLAT categorically stated: “When the reply was not even filed by the Appellant to the report of the Resolution Professional, asking the Appellant to address on merits of Section 95 application was not required at that stage.” It further held that there was no finding by the Adjudicating Authority that the Appellant had deliberately absented herself or intended to delay the proceedings.
Verdict
Holding that principles of natural justice had been violated, the NCLAT set aside the NCLT’s orders dated 06.12.2024 and 09.12.2024. The Appellant has been granted two weeks’ time to file her reply to the RP’s report. The Adjudicating Authority has been directed to proceed with C.P. (IB) 334/ND/2024 in accordance with law. The appeal was accordingly allowed, with the Appellate Tribunal clarifying that it had not entered into the merits of the Section 95 application, which would be considered by the NCLT.
Appearance
For Appellant: Mr. Mayank Bhargava and Mr. Rajdeep Saraf, Advocates.
For Respondents: Mr. Brijesh Kumar Tamber and Mr. Prateek Kushwaha, Advocates for R-1. Mr. Sandeep Bajaj, Mr. Devansh Jain, Ms. Shrishti Jeswani, Advocates for R-2.
Cause Title: Nandini Choudhary V. Canara Bank and Ors.
Case No: Company Appeal (AT) (Insolvency) No. 814 of 2025
Coram: Justice Ashok Bhushan [Chairperson], Mr. Barun Mitra [Technical Member]
