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NCLAT: Eastern Power Can't Be Penalized for Lawyer's , Restores ₹20.72 Crore Claim
The has ruled that a litigant cannot be forced to suffer for the of its counsel, clearing the path for to pursue its ₹20.72 crore claim for electricity supplied during the insolvency of a corporate debtor. A bench comprising Judicial Member Justice Sharad Kumar Sharma and Technical Members Arun Baroka and Indevar Pandey set aside the 's decision that had dismissed the company's application for and subsequently rejected its on .
When a Lawyer Abandons the Client: The Power Company's Predicament
The dispute stems from the Corporate Insolvency Resolution Process (CIRP) of . Eastern Power, as the distribution licensee under the , supplied electricity to the corporate debtor—an protected under . Despite the , the power supply continued, and the company claims ₹20.72 crore as for consumption between and .
After the liquidator failed to remit the amount, Eastern Power moved I.A. No. 1061/2021 before the in , seeking directions for payment. The application, however, was dismissed for on when its counsel, , did not appear. The company later discovered that Mr. Sharma had not been attending hearings, having entrusted the matter to a junior associate without the client's knowledge. When Eastern Power attempted to change counsel, the previous advocate refused to issue a , citing unpaid fees—a refusal that legally barred the engagement of new counsel under Rule 39 of the Rules.
The Limitation Roadblock: 30 Days or ?
The respondent, , opposed the restoration, arguing that the application filed on —over seven and a half months after the dismissal—was hopelessly barred by , which prescribes a 30-day limit. The had accepted this argument, but the NCLAT disagreed.
The appellate tribunal emphasized that
applies the
to proceedings before it, and
enables
if
is shown.
"The period of limitation for filing the proceedings before superior appellate Court… has not to be tested with the precision as compared to the other provisions of the I&B Code,"
the bench observed. It held that the appellant's inability to obtain an NOC from the former counsel constituted
, especially since the counsel's conduct was deliberate and not a mere oversight.
'Deliberate and Intentional': Distinguishing Misconduct from Negligence
The NCLAT drew a sharp line between a lawyer's inadvertent negligence and an intentional act of abandoning a client.
"The very fact that
, after being engaged by the appellant, had entrusted the brief to his junior colleague… is not a process permissible under the law,"
the bench stated, adding that such conduct
"renders the very conduct of
to be disillusioning the appellant and rather betraying the trust reposed."
Citing the 's judgment in
Rafiq and Another vs. Munshilal and Another
(1981) 2 SCC 788, the tribunal reiterated that a party who has done everything in its power—engaged a counsel, paid fees, and trusted the lawyer—should not suffer for the lawyer's default.
"It is a settled principle of law that no party to the proceedings should be made to suffer of his rights to judicial remedies saved by
, because of the mistakes of its counsel,"
the bench noted.
The tribunal also addressed the ethical dilemma under Rule 39 of the Rules and , recognizing that a client may be trapped without an NOC from a recalcitrant former counsel. In such cases, the court held, the delay in filing a restoration application must be viewed leniently.
Key Observations from the Judgment
-
"We make it very clear that at this point of time, that when a Counsel is engaged in relation to the matters for pursuing the matter of statutory companies or corporation… they cannot entrust the brief of the case to the junior Counsel to pursue the matter of the statutory corporation."
-
"Here it is not a negligence of the Counsel, which is a subject matter of consideration but rather a deliberate act which was having a perpetuated act of the earlier Counsel, which was backed by ."
-
"In these eventualities, the appellant cannot be shouldered with the responsibility of his Counsel's non-appearance on 08.11.2023."
-
"The law never intended to eliminate the application of provisions contained under Section 238A and that is why the expression 'as far as may' under Section 238A, prescribes an element of discretion."
Decision and Implications
The NCLAT allowed the appeal, quashing the NCLT order of and recalling the dismissal of I.A. No. 1061/2021. It directed the to consider Eastern Power's claim on its merits, free from any bar of limitation. The ruling reinforces the principle that caused by counsel's should not extinguish , particularly when the litigant is a statutory entity performing essential public functions. The judgment also serves as a caution for lawyers engaged by government corporations, emphasizing that they cannot simply hand over briefs to juniors and abdicate personal responsibility.
