NCLAT Allows Party To Contest Ex-Parte Proceedings, Says Parties Shouldn't Be Penalised For Counsel's Mistakes

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has observed that an advocate's duty extends beyond diligently conducting a case.

It includes maintaining regular communication with the client and informing them about the status of proceedings.

A bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha made the observation while setting aside an NCLT order that had dismissed an application seeking recall of an order setting proceedings ex-parte.

“The utmost duty of an Advocate apart from conducting the case diligently is also to have regular communication with their parties and to inform them about status of their case. We are also of the view that for the mistake or wrong committed by the Counsel, the Parties should not be penalised,” the tribunal observed.

The appeal challenged a May 5, 2026 order of the NCLT, Delhi. The order had dismissed an application seeking recall of an October 8, 2024 order by which the proceedings had been set ex-parte.

Before the NCLAT, the appellant submitted that the October 8 order had been passed when the appellant was not represented before the NCLT. It was further submitted that the counsel had not provided information about the proceedings or the orders passed by the tribunal.

The appellant claimed that the counsel had not informed them about the status of the proceedings. The appellant said this came to light while scrolling through the NCLT portal before October 8, 2024.

The recall application was filed on December 5, 2024. The appellant argued that parties should not be penalised for the non-performance of their counsel and that a sympathetic view should have been taken by the NCLT.

Opposing the appeal, the respondent pointed out that notices had been issued on March 21 and June 9, 2023. The appellant had appeared before the NCLT and was granted four weeks to file a reply.

However, no reply was filed, even though the matter was listed six times thereafter. The respondent also submitted that the recall application was intended to keep the proceedings pending and that the appeal had been filed for the same purpose.

The NCLAT noted that four weeks had first been granted on June 9, 2023 to file the reply. The reply was not filed, following which the proceedings were set ex-parte against the appellant on October 8, 2024.

The tribunal recorded the appellant's explanation that the counsel had not been providing information about the orders passed by the NCLT. The appellant had also stated that this was why the reply could not be filed in time.

The NCLAT observed that proceedings before a court, where parties are represented by counsel, must be conducted with due diligence. It said an advocate's duty also includes regularly communicating with the client and informing them about the status of the case.

The tribunal further held that parties should not be penalised for mistakes or wrongs committed by their counsel. It also observed that, as far as possible, pending matters should be adjudicated on merits unless a party is intentionally failing to contest the matter diligently.

The NCLAT accordingly decided to give the appellant one opportunity to file the reply. It directed that the reply be filed before the NCLT within one week, with an advance copy to the counsel for the respondent.

The tribunal set aside the NCLT's May 5, 2026 order. It clarified that if the reply was not filed within one week, the NCLT's May 5 order as well as the October 8, 2024 order would automatically revive.

The bench also directed the appellant to pay ₹10,000 in costs to the respondent within one week. It said some prejudice had been caused to the respondent and that this could be compensated through costs.

The appeal was disposed of in these terms. Pending interlocutory applications were also disposed of.