Commercial Litigant Cannot Shift Blame to Counsel for Repeated Non-Appearance in Restoration Applications: NCLAT [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that a commercial litigant cannot evade the consequences of repeated non-appearance and negligence in prosecuting proceedings by shifting blame to counsel, and the Adjudicating Authority is justified in dismissing restoration applications under Rule 48 of the NCLT Rules, 2016 when the litigant demonstrates persistent lack of diligence.

R Mall Developers Pvt. Ltd., the appellant filed a Section 9 application against Lemon Chilli Veg Gaurmet Foods LLP, the respondent in 2017. The application was dismissed on 06.06.2022 for non-prosecution due to the appellant’s counsel’s absence. The appellant filed Restoration Application which was also dismissed on 15.11.2022 for non-appearance. Subsequently, RA No. 225 of 2023 and a Delay Condonation Application were filed after a 160-day delay.

The Adjudicating Authority (NCLT Mumbai) dismissed both applications on 29.01.2025, citing the appellant’s gross negligence and lack of bona fide intent. Aggrieved, the appellant appealed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The appellant contended that the NCLT erred by dismissing the restoration applications despite their prompt action in filing RAs after each dismissal. Reliance was placed on Collector, Land Acquisition, Anantnag v. Katiji (AIR 1987 SC 1353) and Rafiq v. Munshilal (1981) 2 SCC 788, arguing that substantial justice must prevail over technicalities and a litigant cannot suffer for counsel’s negligence. The appellant emphasized its vigilance in pursuing remedies and asserted that the NCLT violated principles of natural justice.

The Respondent countered that the appellant’s conduct reflected chronic negligence, including repeated non-appearances, belated filings, and failure to provide credible reasons for delays. Citing Moddus Media Pvt. Ltd. v. M/s Scone Exhibition Pvt. Ltd. (2017 SCC OnLine Del 8491), it argued that commercial entities owe a heightened duty of vigilance and cannot circumvent consequences by blaming counsel. The Respondent asserted that the appellant’s pattern of delay and non-appearance amounted to abuse of process.

The NCLAT bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that the appellant, as a commercial entity, failed to demonstrate due diligence. The Tribunal noted that the Section 9 application was dismissed after the appellant’s counsel remained absent despite prior notice of hearings. The first RA was also dismissed for non-appearance, and the second RA was filed after a 160-day delay without sufficient cause.

The NCLAT held that Rule 48 of the NCLT Rules, 2016 requires restoration applications to be filed within 30 days with sufficient cause for non-appearance, which the appellant failed to establish. The Tribunal distinguished the cited Supreme Court precedents, noting they applied to illiterate or remote litigants, not commercial entities aware of legal processes. The NCLAT affirmed that the Adjudicating Authority correctly dismissed the applications, as the appellant’s conduct demonstrated a deliberate pattern of negligence rather than inadvertent error.

The NCLAT concluded that the appellant’s repeated defaults and lack of bona fide intent justified the dismissal of the restoration applications. The appeal was dismissed with no costs, upholding the principle that equity aids the vigilant, not the negligent.

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