Natural Justice in Remand Proceedings | Right to File Additional Affidavit After De Novo Adjudication : NCLAT

The National Company Law Appellate Tribunal (NCLAT) has reaffirmed the foundational principle that procedural rules must not impede natural justice. In a significant ruling, the NCLAT set aside an order of the National Company Law Tribunal (NCLT) that denied a financial creditor the right to file an additional affidavit after remand, holding that such refusal violated the principles of fair opportunity and effective adjudication under Section 424 of the Companies Act, 2013 and the Insolvency and Bankruptcy Code (IBC), 2016.

Background & Facts

The Dispute

The appellant, Vinod Anand, a financial creditor, initiated proceedings under Section 7 of the IBC, 2016 against Golden Rolls Private Limited (the corporate debtor) before the NCLT, Delhi. The appellant claimed that he had extended a loan of Rs. 2,28,87,885 to the corporate debtor at an interest rate of 9% compounded annually. The proceedings under Section 7 were dismissed by the NCLT on 09.10.2025, not on merits but on the borrowed ground that parallel proceedings under Sections 241 and 242 of the Companies Act, 2013 (pertaining to oppression and mismanagement) had been dismissed for lack of substantiated allegations.

Key Facts

• 15.03.2016: Appellant extended a loan of Rs. 2,28,87,885 to the corporate debtor.
• 09.10.2025: NCLT dismissed the Section 7 application, relying on the dismissal of parallel proceedings under Sections 241 and 242 of the Companies Act, 2013.
• 19.12.2025: NCLAT allowed the appeal (Company Appeal (AT) (INS) No. 1898/2025) and remanded the Section 7 proceedings to the NCLT for fresh adjudication, using the terms revival and afresh.
• 24.03.2026: Appellant filed IA(IBC) 1543(DB)/2026 seeking permission to file an additional affidavit in the revived Section 7 proceedings.
• 29.05.2026: NCLT rejected the application, leading to the present appeal.

Procedural History

• CP(IB) No. 125(ND)/2024: Initiated under Section 7 of the IBC, 2016.
• 09.10.2025: NCLT dismissed the Section 7 application.
• Company Appeal (AT) (INS) No. 1898/2025: Filed before NCLAT; allowed on 19.12.2025 with directions to decide the Section 7 application afresh.
• 24.03.2026: Appellant filed IA(IBC) 1543/2026 for permission to file an additional affidavit.
• 29.05.2026: NCLT rejected the application, prompting the present appeal (Company Appeal (AT) (Ins) No. 1048/2026).

Relief Sought

The appellant sought:

• Permission to file an additional affidavit in CP(IB) No. 125(ND)/2024.
• Any other relief deemed appropriate by the Tribunal.

The Legal Issue

The central question before the NCLAT was whether a party could be absolutely barred from filing an additional affidavit after an order of remand directing the proceedings to be decided de novo, particularly when the prior dismissal was not based on merits but on procedural or borrowed grounds.

Arguments Presented

For the Appellant

• The appellant contended that the NCLT’s refusal to permit the filing of an additional affidavit was contrary to the principles of natural justice enshrined in Section 424 of the Companies Act, 2013.
• The remand order dated 19.12.2025 directed the proceedings to be decided afresh, implying that the appellant should have been allowed to supplement its pleadings to present its case effectively.
• The appellant relied on Rule 39 and Rule 40 of the NCLT Rules, 2016, which permit the filing of additional affidavits with the Tribunal’s leave, and argued that Rule 55 (which restricts pleadings after the reply) should be interpreted directory, not mandatory, especially in the context of remand.
• The appellant cited the definition of pleadings under Rule 2(19) of the NCLT Rules, 2016, which includes additional statements and supplemental affidavits, to argue that the additional affidavit fell within the ambit of permissible pleadings.

For the Respondent

• The respondent argued that Rule 55 of the NCLT Rules, 2016 bars the filing of pleadings after the reply, and no exception should be made even after remand.
• The respondent contended that the appellant had failed to file a rejoinder in earlier proceedings, and this past conduct should disentitle the appellant from filing an additional affidavit.
• The respondent relied on the NCLT’s observation that the Appellate Tribunal had not granted explicit liberty to file an additional affidavit in its remand order.

The Court's Analysis

The NCLAT conducted a detailed analysis of the procedural fairness and natural justice principles governing the proceedings before the NCLT. Key observations included:

1. Procedural Rules as Handmaids of Justice: The Tribunal emphasized that procedural rules must facilitate, not obstruct, the dispensation of justice. Rigid adherence to procedural formalities should not deprive parties of an effective opportunity to present their case, particularly when the proceedings are remanded for fresh adjudication.

   "The procedures, governing judicial proceedings, it needs no special reference, that they are the handmade of justice. Primarily, the underlining concept, as applicable, invariably in any of the judicial proceedings has been that caution is to be exercised by courts that none of the parties participating in the proceedings may by the end of the proceedings have any grievance, from the perspective that they had not been permitted to avail or were not granted an effective opportunity of hearing when the lis in which he or she is a party was seized with the court under the judicial proceedings."

2. Remand Order and De Novo Proceedings: The NCLAT interpreted the remand order dated 19.12.2025, which directed the Section 7 proceedings to be decided afresh, as implying that the proceedings were to be reinitiated from the inception stage. The terms revival and afresh were held to mean that the parties should be permitted to file additional pleadings, as the earlier dismissal was not based on merits but on borrowed grounds from unrelated proceedings.

   "The two expressions, of 'revival' and 'afresh' which were given in the order of remand by the Appellate Tribunal in Company Appeal (AT) (INS) No.1898/2025, has to be assigned with a special reference... Meaning thereby, the pleadings, thus placed by the parties in the proceedings of CP(IB)-125(ND)/2024, was never ventured into or scrutinized judicially nor were deliberated either by the parties or by the Ld. Tribunal."

3. Merger of Interlocutory Orders: The Tribunal held that interlocutory orders passed prior to the final dismissal on 09.10.2025 stood merged with the final order and were deemed set aside upon remand. Thus, the NCLT could not rely on earlier orders (such as directions to file a rejoinder) to deny the appellant’s application for filing an additional affidavit.

   "All the interlocutory orders prior to remand in the proceedings of CP (IB)125/2024, stand merged and has met its judicial death, they cannot be retrieved back."

4. Interpretation of NCLT Rules, 2016: The NCLAT examined Rule 55, Rule 39, and Rule 40 of the NCLT Rules, 2016, and held that:

   • Rule 55, which restricts pleadings after the reply, is directory, not mandatory, and permits the Tribunal to allow additional pleadings with its leave.
   • Rule 39 and Rule 40 explicitly provide for the filing of additional affidavits and evidence, subject to the Tribunal’s discretion.
   • The definition of pleadings under Rule 2(19) includes additional statements and supplemental affidavits, reinforcing the appellant’s right to file the additional affidavit.

   "If the definition of pleading as contained therein, it is inclusive of additional statement and supplemental statement, that means it will include the application preferred by the appellant in the shape of additional affidavit, being IA(IBC)1543/2026."

5. Principles of Natural Justice: The Tribunal reiterated that Section 424 of the Companies Act, 2013 mandates strict adherence to the principles of natural justice in all proceedings before the NCLT and NCLAT. Denying a party the opportunity to file an additional affidavit in a remanded proceeding would violate this statutory mandate.

   "The acceptance of its pleading would obviously be subject to its rebuttal, being filed by the Respondent under Sub-Rule (4) of Rule 40 of the NCLT Rules, 2016. Hence, the company appeal stands 'allowed'."

6. Precedent on Past Conduct: The NCLAT relied on the judgment in Qaiser Sibtain v. District Judge, Allahabad (1996 SCC OnLine All 137), which held that past conduct of a party should not be a ground for denying relief in an application under consideration. The Tribunal applied this principle to reject the NCLT’s reliance on the appellant’s earlier failure to file a rejoinder.

   "While considering the question of grant of a relief in an application may not be denied on the basis of the past conduct, as past conduct becomes immaterial for considering a relief prayed for in an application under consideration before the Ld. Tribunal."

The Verdict

The NCLAT allowed the appeal and set aside the impugned order dated 29.05.2026 passed by the NCLT. The Tribunal directed that:

• The additional affidavit sought to be filed by the appellant in IA(IBC) 1543/2026 shall be taken on record.
• The respondent shall be permitted to file a rebuttal affidavit under Sub-Rule (4) of Rule 40 of the NCLT Rules, 2016.
• The proceedings under Section 7 of the IBC, 2016 shall continue to be adjudicated afresh by the NCLT in accordance with the principles of natural justice.

What This Means For Similar Cases

Natural Justice Overrides Procedural Rigidity

• Tribunals and courts must prioritize substantive fairness over rigid procedural adherence, especially in remanded proceedings.
• Parties should not be penalized for past procedural lapses when the proceedings are directed to be decided de novo.
• Remand orders directing afresh adjudication imply that parties must be allowed to supplement their pleadings to present their case effectively.

Interpretation of NCLT Rules: Directory, Not Mandatory

• Rule 55 of the NCLT Rules, 2016 should be interpreted as directory, permitting the Tribunal to allow additional pleadings with its leave, particularly in remanded proceedings.
• Rule 39 and Rule 40 explicitly empower the Tribunal to permit additional affidavits and evidence, reinforcing the flexibility of procedural rules in service of justice.
• The definition of pleadings under Rule 2(19) includes additional statements and supplemental affidavits, broadening the scope of permissible filings.

Merger Doctrine Applies to Interlocutory Orders

• Interlocutory orders passed prior to a final dismissal merge with the final order and are deemed set aside upon remand.
• Tribunals cannot rely on pre-remand procedural orders (e.g., directions to file a rejoinder) to deny relief in remanded proceedings.
• Practitioners should argue that remand wipes the slate clean, entitling parties to a fresh opportunity to present their case without being handicapped by past procedural defaults.