NCLAT Rules, Unexplained Delay In Filing Second Petition U/S 94 Of IBC After Dismissal Of First Reflects Malafide Conduct Of Litigant
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member), has held that the filing of a second petition under Section 94 of the Insolvency and Bankruptcy Code, 2016 (IBC), without disclosing the dismissal of the first petition based on the same facts and cause of action, reflects mala fide conduct and abuse of judicial process. The Tribunal ruled that such a petition cannot be entertained unless a satisfactory and bona fide explanation is provided for the delay in refiling after dismissal of the earlier one.
Background
The two appeals were filed by co-guarantors, a mother and son, Mrs. Vimla Devi and Mr. Manoj Aggarwal, both personal guarantors to M/s MMR Agro Foods Pvt. Ltd., which had availed credit facilities from Karnataka Bank Ltd. The corporate debtor’s account was declared as Non-Performing Asset (NPA) on 30.11.2022, following which the bank issued a notice under Section 13(2) of the SARFAESI Act. To prevent the takeover of their mortgaged properties by the Court Receiver, both appellants filed petitions under Section 94 of the IBC—Vimla Devi filed Petition No. 455/2023 and Manoj Aggarwal filed Petition No. 364/2023—seeking initiation of insolvency resolution proceedings as personal guarantors. However, both petitions were dismissed for non-prosecution after repeated adjournments. Thereafter, just one day before the scheduled possession dates fixed by the Receiver, both appellants filed second Section 94 petitions—Vimla Devi (Petition No. 380/2024) and Manoj Aggarwal (Petition No. 347/2024)—without disclosing the dismissal of their earlier petitions. These, too, were dismissed by the National Company Law Tribunal (NCLT), New Delhi, for non-prosecution and for lack of bona fide explanation.
Appellants’ Contentions
The appellants contended that their non-appearance before the NCLT was due to genuine reasons—in Vimla Devi’s case, serious illness and old age, and in Manoj Aggarwal’s case, reliance on previous counsel who failed to diligently pursue the matter. It was argued that the Adjudicating Authority failed to afford a fair opportunity of hearing and erred in dismissing their restoration applications without considering the reasons for non-appearance. They further claimed that the IBC and NCLT Rules, 2016 do not expressly prohibit the filing of a second Section 94 petition after dismissal of the first for non-prosecution, relying on the NCLAT’s ruling in Venus Sugar Ltd. v. SASF, where refiling was allowed under exceptional circumstances.
Respondent’s Submissions
The Respondent Bank argued that both appellants were misusing the judicial process with an intent to delay recovery proceedings and to exploit the moratorium under Section 96 of the IBC. It was contended that filing successive Section 94 petitions, timed strategically just before possession proceedings, demonstrated clear mala fides. The bank also highlighted that the appellants failed to disclose the dismissal of their first petitions while filing the second, amounting to suppression of material facts. It was submitted that medical prescriptions and illness claims were raised for the first time before the NCLAT and could not be accepted at the appellate stage.
Observations Of The Tribunal
The NCLAT observed that the record of proceedings clearly indicated repeated adjournments, non-appearances, and a pattern of filing petitions just before property possession dates, reflecting deliberate intent to stall recovery. “The conduct of the litigant is clearly dubious. It 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 was to buy more time and avail the benefit of moratorium under Section 96 of IBC,” the Bench observed.
The Tribunal emphasized that the Adjudicating Authority had granted ample opportunities and had clearly warned the appellants that failure to appear would result in dismissal for non-prosecution. Despite this, both appellants remained absent or repeatedly sought adjournments. The Bench further held that filing a second Section 94 petition based on identical facts and cause of action, without liberty from the NCLT or disclosure of the earlier dismissal, constituted abuse of process of law. “When the first petition under Section 94 had already been dismissed, any vigilant litigant would have been cautious and diligent in prosecuting their case. The filing of a second petition, without disclosing the dismissal of the earlier one, reflects mala fide intention and lack of bona fides,” the Bench stated.
On Counsel’s Negligence
The Tribunal also addressed the argument that litigants should not suffer for the negligence of their counsel, observing that while the principle of liberal interpretation applies generally, it cannot override the time-bound nature of proceedings under the IBC, where efficiency and adherence to timelines are paramount. “While adopting a justice-oriented approach, it cannot be overlooked that IBC is a special legislation designed for timely and efficient resolution. The Adjudicating Authority was right in acting against unjustified delays caused by repeated and unnecessary adjournments,” the NCLAT noted.
The NCLAT concluded that both appellants had engaged in repetitive litigation and suppressed material facts, amounting to abuse of the insolvency framework. It affirmed the NCLT’s orders dismissing the petitions and upheld the imposition of ₹20,000 cost on Vimla Devi, to be deposited in the Prime Minister’s National Relief Fund. Accordingly, both appeals were dismissed, with the Tribunal holding that: “Unexplained delay and repeated filing of petitions under Section 94 of the IBC on the same facts and cause of action, without disclosing prior dismissal, demonstrates mala fide intent. The second petitions were rightly rejected as an abuse of process of law.”
Appearance
For Appellant: Mr. Gulshan Kr. Sachdeva, Advocate.
For Respondent: Mr. Gautam K. Singhal, Ms. Anjali Maurya, Ms. Aastha Vishnoi, Ms. Swaksha Mandhyan, Mr. Rajat Chaudhary, Advocates.
Cause Title: Mr. Manoj Aggarwal Versus Karnataka Bank Limited
Case No: Company Appeal (AT) (Insolvency) No. 4 of 2025
Coram: Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), Mr. Arun Baroka (Technical Member)
