2025 (12) TMI 1675 - AT - Companies Law

Company petition dismissed after party's absence and missed document-filing directions; Rule 11 recall allowed, restoration ordered for decision on merits.

Whether a recall/restoration application under Rule 11 of the NCLT Rules was maintainable against an order dismissing a company petition when the ... Non-compliance of the earlier directions given by the Learned Tribunal and non-appearance of the Appellant - Rejection of restoration application - HELD THAT:- As per the judicial precedents and the settled procedure contemplated under law, if in any proceedings where any of the parties are called upon to perform a certain act in order to help decide the case, which in the present case was production of certain documents by the Appellant, non-performance of such act either by negligence or deliberate dereliction are to be dealt with by closing the opportunity to perform such act at a later date so that the party indulging in such dereliction will lose his chance to defend himself through such act at a later stage. Thus, if a party does not appear despite being summoned, he is to be set ex-parte; if he fails to produce documents, his opportunity will be closed and such documents, even if produced at a later date, will not be considered for the purposes of deciding the case. Thus, in the instant case, on the said date, the Tribunal at the most could have closed the opportunity of the Appellant to produce the documents on record, which were called for by the orders of 29.04.2025 and 03.06.2025. It is a settled law that in any judicial proceedings where the party to the proceedings is not present on the date when the hearing is held, the Tribunal or the Courts thereof seized with the proceedings should refrain itself from dismissing the Company Petition on merits. Propriety demands that the Tribunal, at the most could have dismissed the Company Petition for want of prosecution. Having not done so, the order itself of 17.06.2025, on the face of it, will fall to be within the ambit of Rule 11 of NCLT Rules to be recalled on an application to be preferred by the Appellant, which the Appellant did by filing Restoration Application (IBC)/9/2025, seeking recall of the order of 17.06.2025 and praying that the Company Petition may be heard on its own merits - if the proceeding is decided ex-parte in the absence of the Learned Counsel for the parties, then obviously the Restoration Application would be maintainable, and the order sought to be recalled, will not amount to be review of an order, i.e., order of 17.06.2025, because such order has not adjudicated the proceedings on merits and has been passed in the absence of the Appellant or his counsel. Thus, the application preferred under Rule 11 of the NCLT Rules for seeking recall of the order dated 17.06.2025, would be very well maintainable and cannot be treated as to be review of the order of 17.06.2025 because the said order was not an adjudication on merits, but rather based on procedural flaws because of procedural flaw of the Learned Tribunal. Besides that, in any proceedings, howsoever a party to the proceedings might have derelict in compliance with the procedural orders passed by the Tribunals or the Courts during the proceedings, that itself should not be taken as to be the reason for not to interfere in the proceedings owing to the past conduct of the party to the proceedings who was required to comply with certain directions as per the principles laid down in the matters of Qaiser Sibtain [1996 (2) TMI 612 - ALLAHABAD HIGH COURT]. The Tribunal ought to have exercised its inherent powers to meet the ends of Justice by recalling the order of 17.06.2025 and deciding the Company Petition itself on its merits rather than rejecting the Restoration Application and thereby depriving the merit adjudication of the Company Petition - the impugned order is quashed and the restoration application is recalled. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether dismissal of a company petition on the hearing date, in the absence of the applicant/counsel and for non-compliance with directions to file documents, could validly be treated as a dismissal 'on merits' rather than merely for default/non-prosecution, and whether such an order was liable to be recalled. (ii) Whether an application under Rule 11 of the NCLT Rules seeking recall/restoration of such dismissal was maintainable, or whether it necessarily amounted to an impermissible 'review' of the earlier dismissal order. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Propriety of dismissing the company petition on merits in the absence of the applicant and despite non-compliance with directions Legal framework (as discussed by the Court): The Court proceeded on the settled principle that where a party does not appear on the date fixed, the matter should not be decided on merits; at most it may be dismissed for want of prosecution. The Court also applied the procedural approach that non-compliance with directions to produce documents is ordinarily addressed by closing the opportunity to file such material, rather than terminating the entire proceeding on merits in the party's absence. Interpretation and reasoning: The Court held that if a party fails to perform a procedural act (such as producing documents), the appropriate course is to close that party's opportunity, and thereafter decide the matter on available material. Similarly, if a party does not appear, the proper course is to proceed ex-parte or treat it as non-prosecution; deciding the matter on merits in the party's absence is improper. Applying these principles, the Court found that on the relevant hearing date the Tribunal, instead of merely closing the opportunity to file documents or dismissing for non-prosecution, dismissed the company petition while the applicant/counsel was absent, and treated it as defective/not maintainable, thereby effectively deciding it on merits contrary to settled procedure. Conclusion: The dismissal order was procedurally flawed because it went beyond permissible consequences of non-appearance and non-compliance; it was therefore within the scope of recall. Issue (ii): Maintainability of recall/restoration under Rule 11 and whether it amounted to impermissible review Legal framework (as discussed by the Court): The Court examined the Tribunal's inherent powers under Rule 11 of the NCLT Rules to recall an order passed ex-parte and not in conformity with the mandate governing adjudication in a party's absence (the Court referred to Rule 48 in this context). The Court also considered the principle that, while deciding a recall/restoration request, past conduct should not be used as a decisive ground to refuse recall; the relevant inquiry is whether sufficient grounds exist concerning the default leading to the impugned order. Interpretation and reasoning: The Tribunal rejected recall on the basis that the earlier dismissal was 'final' and not solely for non-prosecution, and that recall would amount to a review. The Court disagreed, holding that the earlier dismissal, having been passed in the absence of the applicant/counsel and in a manner inconsistent with the procedural mandate, was in substance an ex-parte disposal affected by procedural flaw, not a genuine adjudication on merits. Consequently, a recall application to set aside such ex-parte/procedurally flawed dismissal does not constitute a review. The Court further held that even if there had been dereliction in complying with earlier directions, such prior inaction should not be treated as a bar to recalling an ex-parte/procedurally defective order; the Tribunal should have exercised inherent powers to secure a merits-based determination. Conclusion: The recall/restoration application under Rule 11 was maintainable and was wrongly rejected as a review; the rejection order was quashed, the dismissal order was recalled, and the company petition was restored for decision on merits.