2025 (10) TMI 124 - AT - IBC

Appeal dismissed for repeated non-appearance; lack of due diligence under NCLT Rule 48(2) bars restoration and condonation

R Mall Developers Pvt Ltd. Versus Lemon Chilli Veg Gaurmet Foods LLP

The NCLAT dismissed the appeal and refused restoration, finding repeated non-appearance of the appellant and its counsel demonstrated lack of due ... Dismissal of Company Petition u/s 9 filed on account of (repeated) non-appearance of the designated counsel before the Adjudicating Authority - sufficient cause is found for non- appearance of any litigant or his counsel or not - lack of due diligence - applicability of principles that equity aids the vigilant and not the negligent - HELD THAT:- A reading of Rule 48 of the National Company Law Tribunal Rules, 2016 makes it clear that the restoration application is required to be filed within 30 days from the date of dismissal order and the applicant should satisfy the Tribunal with sufficient cause explaining his absence or non-appearance which had led to dismissal of the application. The findings of the Adjudicating Authority are that the petitioner being a commercial entity was expected to be vigilant in prosecuting their matter but from their conduct have displayed lack of due diligence in this regard. Holding that the petitioner has failed to provide satisfactory cause to justify the restoration application and the related delay condonation application, the Adjudicating proceeded to dismiss the same. This is a clear case of repeated non-appearance of the Appellant leading to dismissal of the main petition and the restoration applications. The Appellant cannot claim to be unaware of the legal proceedings particularly when the proceedings have been dismissed repeatedly on grounds of non-appearance of the counsel. This is not an isolated lapse on the part of their counsel but a repeated and deliberate disregard of the dates fixed for hearing by the Adjudicating Authority. The invocation of NCLT Rule 48(2) can be allowed only in bonafide cases where a party has demonstrated genuine reasons or sufficient cause for absence and where the litigant has acted with promptness and good faith in seeking restoration. The Appellant cannot claim unfettered right of restoration without adequate reasons. In the present case, apart from shifting the entire blame on the erstwhile counsel, no other genuine grounds have been cited to justify their slackness in pursuing the ongoing court proceedings leading up to the institution of the second RA. Neither has sufficient or credible cause put on record to explain why the second RA was filed with delay. The Appellant not only belatedly the filing of the second RA but also belatedly file the Condonation of Delay Application. Further, even when the second RA came up for hearing they failed to appear when it was listed for hearing. It is not found that the dismissal of the restoration application to have been done on grounds of procedural technicalities but due to repeated lapse on the part of the Appellant to be present before the court inspite of several opportunities having been given to be present. The Adjudicating Authority is agreed upon that the Appellant cannot be allowed to create a smoke-screen out of the absence of counsel to circumvent the consequences of their own impromptitude and lack of diligence in pursuing their interests before the court diligently. In the face of such negligence, inaction and lack of bonafide on the part of the Appellant, no adequate or sufficient cause has been furnished before the Adjudicating Authority to justify the second RA. There are no merit in the Appeal. The Appeal stands dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a petition dismissed for non-appearance can be restored under Rule 48 of the NCLT Rules, 2016 where the applicant alleges non-appearance due to counsel's negligence, and whether the restoration application filed beyond thirty days satisfies 'sufficient cause'. 2. Whether repeated non-appearance and delay by a commercial litigant preclude equitable relief of restoration and condonation of delay, including the applicability of the principle 'equity aids the vigilant and not the negligent'. 3. Whether the default of an advocate constitutes a sufficient ground for restoration and delay condonation where the litigant is a commercial entity and there is a pattern of repeated non-prosecution. ISSUE-WISE DETAILED ANALYSIS Issue 1: Restoration under Rule 48(2) of NCLT Rules - legal framework and sufficiency of cause Legal framework: Rule 48(1)-(2) of the NCLT Rules, 2016 permits the Tribunal, in its discretion, to dismiss for default or decide on merits; where a petition is dismissed for default the applicant may file for restoration within thirty days and must satisfy the Tribunal that there was 'sufficient cause' for non-appearance. A proviso bars re-opening decisions disposed on merits. Precedent Treatment: The Tribunal relied on prior authorities emphasizing the duty of litigants to be vigilant and that relief under restoration rules is available only on bonafide demonstrations of sufficient cause and promptness in seeking restoration. Interpretation and reasoning: The Court examined the chronology: initial hearing with oral transfer directions, two subsequent missed hearings culminating in dismissal, filing of first RA which itself was dismissed for non-prosecution, and a second RA filed beyond the 30-day period without timely condonation. The Court held that Rule 48(2) requires both timely filing and credible explanation; mere attribution to counsel's mistake without additional corroboration or prompt corrective action does not satisfy 'sufficient cause.' The Court treated the statutory 30-day timeline and the requirement to 'satisfy the Tribunal' as mandatory thresholds to trigger restoration relief. Ratio vs. Obiter: Ratio - Restoration under Rule 48(2) is contingent on timely application and demonstration of sufficient cause; where repeated non-appearance and delayed pursuit of restoration occur, the Tribunal may lawfully refuse restoration. Obiter - Observations on the nature of 'sufficient cause' illustrative of factors (e.g., promptness, good faith) but grounded in the facts of repeated non-prosecution. Conclusions: The Court concluded that the second restoration application failed Rule 48(2) because it was filed out of time and did not present sufficient or credible cause; the Adjudicating Authority's refusal to restore was justified. Issue 2: Condonation of delay and the conduct of a commercial litigant - standards of vigilance and promptness Legal framework: Condonation of delay is discretionary and intertwined with Rule 48(2)'s requirement of promptness and sufficient cause; equitable principles like 'equity aids the vigilant' inform the exercise of discretion. Precedent Treatment: The Court referred to authorities holding that litigants must remain vigilant in prosecuting cases instituted by them and that courts need not rescue litigants who exhibit negligence in pursuing litigation. It distinguished cases where litigants were uninformed, illiterate or remotely located (where leniency has been extended). Interpretation and reasoning: The Court analyzed the pattern of conduct: initial absence after oral transfer directions, dismissal of main petition, dismissal of first RA for non-appearance, belated filing of second RA, belated filing of delay condonation application (approx. 160 days), multiple adjournments and further non-appearance at hearings. The Court reasoned that such a sustained pattern indicates lack of bonafide intent and an absence of due diligence. For a commercial entity, the expectation of vigilance is higher; mere blaming of counsel without evidence of remedial steps (e.g., substitution of counsel, steps to ensure attendance) is insufficient. Ratio vs. Obiter: Ratio - Repeated and deliberate non-appearance by a commercial litigant justifies refusal to condone delay; a litigant who institutes proceedings owes an unequivocal duty to pursue them with diligence. Obiter - Illustrative comment that leniency is more appropriate for non-commercial, illiterate, or remote litigants. Conclusions: The Court upheld the view that a commercial litigant's repeated defaults disentitle it from equitable relief; dismissal of restoration and delay condonation was appropriate given established negligence and lack of prompt remedial action. Issue 3: Attribution to counsel's negligence - extent to which advocate's default can excuse litigant Legal framework: Courts have recognized that an advocate's default may, in some circumstances, constitute sufficient cause to relieve a litigant, particularly where the litigant is uninformed, illiterate, or lacks access to court processes; but this principle is not absolute and must be balanced against the litigant's duty to monitor proceedings and take corrective measures. Precedent Treatment (followed/distinguished): The Court distinguished precedents where relief was granted because the litigant was essentially helpless or unfamiliar with court procedures; it followed authorities that require vigilance from litigants, particularly commercial entities, and that counsel's default will not automatically absolve such litigants. Interpretation and reasoning: The Court found that the present facts involved repeated non-appearance across multiple dates and multiple applications; the litigant, being a commercial entity, could not credibly claim helplessness due to counsel's dereliction. The Court noted absence of evidence of any affirmative steps taken to mitigate counsel's default (no substitution, no direct engagement to ensure appearance). The Court therefore treated counsel's negligence as insufficient to establish 'sufficient cause' absent supporting facts demonstrating prompt remedial conduct or special circumstances. Ratio vs. Obiter: Ratio - Advocate's negligence does not automatically constitute sufficient cause for restoration or condonation where the litigant is a commercial party and there is a pattern of sustained non-appearance; litigant must demonstrate prompt corrective measures and bona fide conduct. Obiter - The principle that advocate's default may justify relief in cases of non-commercial, uninformed litigants remains valid but fact-specific. Conclusions: The Court concluded that blaming counsel, without more, did not justify restoration or condonation in the factual matrix of repeated defaults by a commercial litigant; the Adjudicating Authority rightly refused to grant relief. Cross-reference and overall conclusion Cross-reference: Issues 1-3 converge on the same threshold: timely, bona fide action plus credible explanation are prerequisites for restoration under Rule 48(2); a commercial litigant's repeated non-prosecution and delayed attempts at restoration weigh decisively against relief. The Court cross-checked the chronology, prior dismissals, belated condonation, and absence of remedial steps to reach a holistic conclusion. Overall conclusion: The Court found no merit in the appeal; the Adjudicating Authority's dismissal of the restoration application and denial of delay condonation were upheld as lawful exercises of discretion given the sustained pattern of non-appearance, belated filings, and absence of sufficient cause. No costs were awarded.