30 days Delay in filing appeal under NCLT rules can be condoned on sufficient cause : NCLAT [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that a 30-day delay in filing an appeal under National CompanyLaw Tribunal (NCLT) rules can be condoned for sufficient cause.

The Appellant i.e. M/s Lok Sewak Leasing & Investment Pvt. Ltd who is the Financial Creditor, under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“Code”), challenging the Impugned Order dated 22.01.2025 passed by the National Company Law Tribunal, Mumbai Bench, Court – IV (“Adjudicating Authority”). M/s GBL Chemical Ltd., who is the Corporate Debtor, is the Respondent.

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The Appellant submitted that it is a Non-Banking Financial Company (NBFC) duly registered with the Reserve Bank of India, engaged in providing short-term loans to clients. The Appellant contended that 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.

The Appellant further submitted that the terms, were incorporated in a Facility Agreement dated 24.01.2024, executed by the Respondent, its Director, Mr. Ramakant Shankarmal Pilani, and its parent company, M/s Ganesh Benzoplast Ltd., as co-borrowers. A demand promissory note and letter of continuity dated 19.01.2024 were also executed in favour of the Appellant.

The Appellant contended that while the Respondent paid the first two instalments on 13.02.2024 and 01.03.2024, it defaulted on the instalment of Rs. 1,19,16,667/- due on 25.03.2024. The Appellant submitted that it issued an Intimation Letter dated 01.04.2024 and a Demand-cum-Acceleration Notice dated 06.04.2024, demanding the outstanding amount of Rs. 4,77,28,287/- (computed as on 05.04.2024) within seven days. The Appellant further contended that, despite receiving the notice, the Respondent failed to clear the dues by 13.04.2024, thereby committing a default under the Facility Agreement.

The Appellant submitted that, in response to the Respondent’s default, it applied Section 7 of the Code on 08.05.2024 before the Adjudicating Authority, seeking initiation of the CIRP against the Respondent which was registered as C.P. (IB) No. 631(MB)/2024 ("Section 7 Application").

The Appellant submitted that based on liberty granted by the Adjudicating Authority’s order dated 04.09.2024, it e-filed an Additional Affidavit dated 26.09.2024 on 27.09.2024 (e-filing no. 2709138047692024), placing the Facility Agreement and other requisite documents on record. The Appellant contended that the affidavit was served on the Respondent via email on 27.09.2024 at its registered email address. However, the Appellant submitted that due to minor defects noted by the registry of NCLT, the affidavit remained under objection on 30.09.2024.

The Appellant contended that on 30.09.2024, the Section 7 Application was dismissed by the Adjudicating Authority for non-prosecution due to the nonappearance of its then-counsel. The Appellant submitted that the Adjudicating Authority erroneously observed that the Appellant appeared disinterested in pursuing the matter, as no counsel appeared, and the additional affidavit was not formally presented. The Appellant contended 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.

The Appellant submitted that it was unaware of the dismissal of the Section 7 Application on 30.09.2024 due to the failure of its then-counsel to communicate the status of the case or the dismissal order. The Appellant contended that despite multiple attempts to contact the then counsel, it received no response, leaving it uninformed about the proceedings until a new counsel was engaged.

The Appellant submitted that, upon learning of the dismissal through its newly engaged counsel, it promptly filed an application on 29.10.2024 under Rule 48(2) r/w Rule 11 of the National Company Law Tribunal Rules, 2016, seeking restoration of the Section 7 Application. The Appellant contended that the application was registered as Rst. A (IBC) No. 73(MB)/2024 ("Restoration Application").

The Appellant further submitted that on 27.11.2024, the Adjudicating Authority directed it to serve a copy of the Restoration Application on the Respondent’s counsel, adjourning the matter to 22.01.2025. The Appellant submitted that it duly complied with the Adjudicating Authority’s direction by serving the Restoration Application on the Respondent’s counsel. The Appellant further submitted that both parties were heard on 22.01.2025, when the Restoration Application was taken up for consideration.

The Appellant submitted that the Section 7 Application is meritorious, as it establishes a clear debt and default by the Respondent, substantiated by the Facility Agreement, demand promissory note, and Demand-cum-Acceleration Notice. The Appellant contended that the dismissal of the Section 7 Application for non-prosecution and the subsequent refusal to restore it have unjustly deprived the Appellant of its right to pursue legitimate claims under the Code.

The Respondent submitted that the appeal lacks substance and is an attempt to obfuscate the Appellant’s repeated failures in complying with the Adjudicating Authority’s directions and pursuing its case diligently. The Respondent contended 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. The Respondent submitted that the Restoration Application was filed beyond the mandatory 30-day period prescribed under Rule 48(2) of the NCLT Rules, 2016.

A three member bench of Justice Rakesh Kumar Jain, Member (Judicial) , Mr. Naresh Salecha, Member (Technical) and Mr. Indevar Pandey, Member (Technical) observed that in terms of Rule 48 (2) of the NCLT Rules, 2016, the restoration application is required to be filed by such litigant within 30 days. The court observed that the restoration application filed was filed by the Appellant on 29.10.2024 which was done within stipulated 30 days. During pleadings, the Respondent submitted that the Appellant did not file the restoration application within stipulated 30 days, since, the Respondent did not receive the copy of such restoration application on time.

It was ruled that as per the Rule 48 of the NCLT Rules, 2016, if sufficient cause is made out, and is within the stipulated 30 days, the Tribunal is obligated to restore the same. Thus, the Rule 48 (2) of uses the word “shall” which signify that if sufficient cause is made out, then it is expected that the Tribunal shall allow restoration application. The purpose of dismissal for non-prosecution is for procurement of the concerned party and his counsel and not to dismiss the appeal without going into the merit.

The Tribunal held that the dismissal of restoration application on the ground, that the additional affidavit was lying in defects with registry, cannot be allowed to be sustained.

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