Rejoinder Material Cannot Be Excluded At Preliminary Stage If It Relates To Debt, Default: NCLT Chandigarh

The National Company Law Tribunal (NCLT), Chandigarh Bench, has declined to remove documents and explanations introduced through a rejoinder from the record of an insolvency proceeding.

It held that their relevance to the dispute over debt and default should be examined when the main petition is heard.

“The material sought to be excised, being ledger reconciliations, TDS records, and the explanation regarding the disputed payment of Rs. 11,00,000/-, bears directly upon the question of debt and default that lies at the heart of the main petition,” a bench comprising Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal observed.

The tribunal held that the objections raised by Bhagwati Lacto Vegetarian Exports Pvt. Ltd. concerned the evidentiary worth and effect of the material. It ruled that those issues were better considered while hearing and adjudicating the main insolvency petition rather than at the preliminary stage.

The application was filed by Bhagwati Lacto Vegetarian Exports under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the NCLT Rules, 2016. The company, which is the corporate debtor in the main insolvency proceeding, sought rejection of the rejoinder filed by RB Assets And Developers Pvt. Ltd., the operational creditor. It also sought removal of the documents and annexures accompanying the rejoinder from the record.

The corporate debtor had filed its reply to the main petition on April 29, 2024. It raised objections over the opening ledger balance, a payment of Rs. 11 lakh that did not appear in the operational creditor's books, omitted purchase orders and invoices, deductions towards TDS, Adhat and labour, and an alleged inconsistency in the date of default and the bank certificate.

The operational creditor subsequently filed its rejoinder on July 11, 2024. The rejoinder was taken on record by the tribunal on March 25, 2025.

The corporate debtor contended that the rejoinder was not merely a response to its reply. It argued that the filing was an attempt to rectify defects in the original petition.

According to the company, the rejoinder introduced fresh annexures and material. This included an explanation that the Rs. 11 lakh payment had been “inadvertently” credited to the ledger of a sister concern.

It also pointed to a UDIN-generation record concerning its financial statements, substituted ledger accounts for financial years 2020-21 to 2023-24 incorporating previously omitted TDS entries, and a bank statement. The applicant claimed that these materials had not formed part of the original petition.

The corporate debtor relied on Ajanta Enterprises v. Bimla Charan Chatterjee, Gurjant Singh v. Krishan Chander, Sawani Singh Sodha v. State of Rajasthan, Anant Constructions (P) Ltd. v. Ram Niwas, as affirmed in Noorul Hassan v. Nahakpam Indrajit Singh, and Magnum Sea Foods Ltd. v. Ashadeep Aquaculture (P) Ltd.

It argued that a rejoinder cannot be used to introduce a new case or cure defects in the original pleading. Allowing the material to remain on record, it argued, would also cause prejudice to the company.

The tribunal, however, found that the objections went to the evidentiary worth and effect of the material. It held that they did not provide a basis to remove the material at this stage.

The bench also distinguished the judgments relied upon by the corporate debtor. It observed that those cases arose from civil suits governed by the Code of Civil Procedure, 1908. They dealt with the scope of a “replication” within the framework of a plaint, written statement, and replication.

“This Tribunal, while exercising jurisdiction under the IBC, is not bound by the CPC; its procedure is governed by Rule 11 of the NCLT Rules, 2016, which confers wide latitude to pass such orders as may be necessary for meeting the ends of justice. The rationale of the cited judgments, in our opinion, cannot be applied to the present proceedings,” the bench observed.

The tribunal further noted that the rejoinder had already been taken on record by its March 25, 2025 order. The application, it observed, effectively sought reconsideration of that order without demonstrating any error apparent or exceptional circumstance warranting such a course.

The bench also found that the material sought to be removed included ledger reconciliations, TDS records and the explanation concerning the Rs. 11 lakh payment. It observed that these materials directly related to the question of debt and default in the main petition.

Removing the material before its merits were examined, the bench observed, would not further a complete and fair adjudication.

The tribunal therefore left the objections open for consideration at the hearing of the main insolvency petition. To prevent prejudice from the additional documents and explanations introduced through the rejoinder, it granted the corporate debtor two weeks to file a sur-rejoinder/reply to the rejoinder.

The application was accordingly disposed of.