TaxTMI 
TaxTMI 
2026 (7) TMI 662
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....i) The Appellant and Rathi Powertech Pvt. Ltd./Respondent and Operational Creditor entered into a License User Agreement dated 01.03.2022, under which the Respondent, which is the owner of the trademark "POWERTECH" for manufacture and marketing of TMT Bars, granted the Appellant, a licence to use the said trademark for a monthly licence fee of Rs. 23,00,000/- plus applicable GST. The tenure of the agreement was for one year. (ii) Clause 20 of the Agreement entitled the Appellant to terminate the arrangement by giving three months' advance written notice in the event of breach, non-feasibility, non-viability or any other unforeseen reason, while continuing payment of royalty during the notice period. (iii) Prior to expiry of the original term, the parties executed an Addendum dated 28.02.2023 extending the Agreement till 28.02.2025 and enhancing the monthly royalty/licence fee to Rs. 30,00,000/- plus applicable GST. All other terms and conditions of the original Agreement remained unchanged. (iv) On 03.06.2024, the Commission for Air Quality Management (CAQM), NCR and Adjoining Areas, directed closure of the Appellant's manufacturing unit under Sec....
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....lay of only seven (7) days beyond the prescribed period of limitation and the same falls well within the condonable period of fifteen (15) days contemplated under the proviso to Section 61(2) of the Code. 4. He submits that the Appellant was prevented by sufficient cause from filing the Appeal within the initial period of thirty days. The Appellant came to know of the impugned order dated 08.12.2025 only on 26.12.2025 while independently checking the website of the Adjudicating Authority after repeated attempts to contact its erstwhile counsel failed. 5. He further submits that the previous counsel neither informed the Appellant about the passing of the impugned order nor disclosed that the Appellant's right to file reply had already been closed by the Adjudicating Authority. The Appellant was under the bona fide impression that the matter was listed on 05.01.2026 and that its reply could still be filed. 6. Ld. Counsel submits that immediately upon acquiring knowledge of the impugned order, the Appellant engaged the present counsel. However, owing to the intervening winter vacations and the non-availability of the present counsel, who was travelling during that period,....
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....l facts which go to the root of the alleged operational debt. 11. Ld. Counsel submits that the parties had entered into a License User Agreement dated 01.03.2022, subsequently extended by an Addendum dated 28.02.2023. Under Clause 20 of the Agreement, the Appellant possessed a contractual right to terminate the arrangement upon issuance of a three months' prior notice in writing. After closure of the Appellant's manufacturing unit pursuant to the order dated 03.06.2024 issued by the Commission for Air Quality Management (CAQM), the Appellant invoked Clause 20 and issued a termination notice dated 10.06.2024. He further submits that upon expiry of the three months' notice period on 10.09.2024 and payment of all amounts payable during such notice period, no further royalty or licence fee remained due and payable. 12. He submitted that the Respondent has failed to disclose the termination notice before the Adjudicating Authority and has raised its claim on the basis of alleged dues for a period subsequent to the effective termination of the Agreement. 13. It is further submitted that the Section 9 application is founded merely upon proforma invoices and not upon f....
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....appearance through counsel, accepted notice and acknowledged receipt of the petition. The Adjudicating Authority, in the interest of justice, granted one week's time to file a reply. 20. Ld. Counsel submits that despite the specific judicial direction contained in the order dated 19.11.2025, no reply whatsoever was filed by the Appellant within the period granted by the Adjudicating Authority. On the next date of hearing, i.e., 08.12.2025, the Appellant again appeared through counsel and merely sought an adjournment without assigning any sufficient or cogent reason explaining non-compliance of the earlier order. 21. Respondent reiterated that neither any draft reply was placed on record nor any application seeking extension of time was filed. No exceptional circumstances were disclosed before the Adjudicating Authority which could justify the Appellant's failure to comply with the order dated 19.11.2025. He submits that the Adjudicating Authority was therefore fully justified in exercising its discretion and closing the Appellant's right to file reply. 22. It is further submitted that even after the order dated 08.12.2025 was passed, the Appellant failed to tak....
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.... unsupported by any material particulars. It is further argued that the conduct of the Appellant must be assessed cumulatively. The repeated defaults before the Adjudicating Authority coupled with the delayed filing of the present Appeal demonstrate a consistent pattern of negligence and lack of diligence. 28. Ld. Counsel submits that the settled position of law is that a litigant cannot avoid the consequences of its own inaction merely by attributing fault to its advocate. Reliance is placed on the judgment of the Hon'ble Supreme Court in Salil Dutta v. T.M. & M.C. (P) Ltd., (1993) 2 SCC 185, wherein it was held that an advocate acts as an agent of the litigant and that there is no absolute rule permitting a party to disown its advocate and seek relief. Reliance is also placed on the judgment of the Hon'ble Supreme Court in Rajneesh Kumar v. Ved Prakash, 2024 SCC OnLine SC 3380, wherein it was observed that litigants have an independent obligation to remain vigilant regarding proceedings affecting their rights and cannot routinely seek condonation by alleging negligence on the part of counsel. 29. He further submits that the Appellant is a private limited company man....
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.... thirty days by a delay of seven days. The delay admittedly falls within the outer limit of fifteen days contemplated under the proviso to Section 61(2) of the Code. 36. The Appellant has explained that the impugned order was never communicated by its erstwhile counsel. According to the Appellant, despite repeated attempts to contact the counsel, no information regarding the proceedings was furnished. It is the case of the Appellant that it became aware of the impugned order, only on 26.12.2025 after independently verifying the status of the matter from the website of the Adjudicating Authority. Immediately thereafter, steps were taken to engage present counsel and initiate appellate proceedings. 37. The Respondent has opposed the application on the ground that the explanation is vague and unsupported by documentary evidence and that the Appellant has demonstrated a pattern of negligence both before the Adjudicating Authority and before this Appellate Tribunal. 38. The expression "sufficient cause" occurring in limitation statutes has repeatedly received liberal interpretation from the Hon'ble Supreme Court where refusal to condone delay would result in denial of adjud....
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....ceedings under the Code carry serious civil consequences upon admission of an application under Section 9, including commencement of the corporate insolvency resolution process, declaration of moratorium and displacement of the management of the Corporate Debtor. It is therefore imperative that a party is not denied an effective opportunity to place its defence before such consequences ensue. 45. The Appellant has consistently maintained that all documents and necessary instructions had been supplied to its erstwhile counsel and that the failure to file the reply was solely attributable to the negligence of the counsel. The Respondent, on the other hand, contends that these allegations are unsupported by documentary evidence and do not constitute sufficient cause. 46. While the Respondent is correct in contending that mere allegations against counsel cannot, by themselves, justify restoration of procedural rights, the issue cannot be decided solely on that basis. Courts are required to balance two equally important considerations; first, the judicial proceedings must be conducted with diligence and discipline, and secondly, that substantive justice should not be defeated mere....
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.... a litigant cannot engage a lawyer and thereafter completely abandon responsibility for the litigation. The proposition is unexceptionable. However, the present case concerns a single procedural default resulting in closure of the right to file reply in insolvency proceedings carries serious consequences, which may include initiation of CIRP Proceedings against the appellant. 51. We further note that the Appellant has not remained absent from the proceedings altogether. Appearance had been entered before the Adjudicating Authority. Subsequently, a new counsel also appeared before the Adjudicating Authority on 05.01.2026 seeking an opportunity to place the defence on record. These circumstances indicate that the Appellant was interested in contesting the proceedings and had not abandoned the litigation. 52. The Respondent's reliance upon the decision of this Appellate Tribunal in R Mall Developers Pvt. Ltd. v. Lemon Chilli Veg Gourmet Foods LLP, Company Appeal (AT) (Insolvency) Nos.527 & 528 of 2025. The said judgment emphasizes that a litigant cannot create a smoke-screen by merely blaming counsel and must demonstrate its own diligence. On the contrary, we note that appellant....