NCLAT Rules, Litigants Are Not Trained Advocates, Restoration Application Can't Be Dismissed Due To Counsel's Failure To Inform Of Proceedings
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member), has held that a litigant cannot be penalised for the lapse of their counsel if sufficient cause is shown, particularly when the restoration application under Rule 48(2) of the NCLT Rules, 2016 is filed within the prescribed time.
The Tribunal was dealing with an appeal filed by M/s Lok Sewak Leasing & Investment Pvt. Ltd., a registered NBFC, challenging the order dated 22.01.2025 passed by the NCLT, Mumbai Bench, which had dismissed the restoration application filed by the appellant against the earlier dismissal of its Section 7 IBC petition.
The background of the case reveals that in January 2024, the respondent, M/s GBL Chemical Ltd., had approached the appellant seeking a short-term loan of ₹7.03 crores, repayable in six equal instalments with 10.21% annual interest. This arrangement was formalised through a Facility Agreement dated 24.01.2024, supported by a demand promissory note and a letter of continuity. Despite initially repaying two instalments, the respondent defaulted on the third, leading to the issuance of an Intimation Letter on 01.04.2024 and a Demand-cum-Acceleration Notice dated 06.04.2024, demanding payment of the outstanding sum of ₹4.77 crores.
Subsequently, the appellant filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the NCLT. On 04.09.2024, the Adjudicating Authority granted the appellant two weeks' time to file an additional affidavit enclosing key documents such as the loan agreement, financials for 2023–24, and the NeSL certificate. Although the appellant e-filed the affidavit on 27.09.2024, it remained defective due to minor issues flagged by the registry.
When the matter came up on 30.09.2024, neither the appellant nor its counsel appeared before the NCLT, and the affidavit had not been formally placed before the bench. As a result, the Section 7 application was dismissed for non-prosecution. The appellant later contended that this lapse occurred solely because their then-counsel failed to communicate the case status, which left them unaware of the dismissal. Upon appointing a new counsel and learning of the order, the appellant promptly filed a restoration application on 29.10.2024.
The NCLT, however, dismissed the restoration application as well, stating that the appellant had failed to cure the defects or submit necessary documents despite sufficient opportunity. The Tribunal further observed that the litigant showed no seriousness in prosecuting the matter.
Before the NCLAT, the appellant argued that the restoration application was filed within 30 days from the date of dismissal, as mandated by Rule 48(2) of the NCLT Rules. It further asserted that the delay in curing defects and absence from the hearing stemmed from the inaction and negligence of its previous counsel, and not due to any fault or indifference on the part of the appellant itself.
The NCLAT took note of the fact that the additional affidavit had indeed been filed within time but remained under defects due to curable issues, such as unclear pages. The Tribunal also noted that the restoration application was filed within the stipulated period and found no valid ground in the respondent’s claim that the delay in serving the copy to them would render the application time-barred.
Crucially, the NCLAT underscored that while restoration applications require a sufficient cause to be made out, the use of the word “shall” in Rule 48(2) indicates that if such cause is shown within the statutory timeframe, restoration must follow. It held that the reason advanced by the appellant — non-appearance due to the failure of their counsel to act diligently — was indeed a sufficient cause. The Appellate Tribunal further highlighted the spirit of the rule, stating that the dismissal for non-prosecution is not meant to defeat meritorious claims, especially when a party is actively pursuing the matter but is let down by legal representation.
Referring to the Supreme Court's decision in Rafiq & Anr. v. Munshilal & Anr [(1981) 2 SCC 788], the NCLAT reaffirmed that “a litigant who has entrusted his case to his lawyer cannot be penalized for the lapse or negligence of his lawyer.” It also cited the Delhi High Court ruling in Sunita v. Lalit Sansawal [FAO No. 118 of 2024], which emphasised that restoration applications should be dealt with liberally as the right to represent one’s cause is fundamental.
Taking these factors into account, the NCLAT allowed the appeal and set aside the impugned order. The original petition under Section 7 of the IBC, filed as C.P. (IB) No. 631(MB)/2024, stood restored before the Adjudicating Authority for adjudication on merits. The Tribunal clarified that it had not examined the merits of the debt and default claims, leaving the parties to substantiate their cases during further proceedings. No costs were awarded, and both parties were directed to appear before the Adjudicating Authority on 15.07.2025 for further hearing.
Appearance
For Appellants: Mr. Akshay Srivastava, Mr. Vivek Kumar, Ms. Raveena Paniker, Mr. Krishna Upreti, Mr. Sudhakar Kulwant, Advocates.
For Respondents: Mr. Aditya Dewan, Mr. Parag Khandhar, Mr. Varun Kalra, Mr. Tapan Raokar, Advocates for R-1.
Cause Title: M/S Lok Sewak Leasing & Investment Private Limited V. M/s GBL Chemical Limited
Case No: Comp. App. (AT) (Ins) No. 483 of 2025
Coram: Justice Rakesh Kumar Jain [Judicial Member], Mr. Naresh Salecha [Technical Member], Mr. Indevar Pandey [Technical Member]
