Courts should permit delayed replies to contest merits absent grave prejudice, subject to costs.

Catalyst Trusteeship Limited filed a petition against JUD Cements Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), being CP (IB) No. 40 of 2026. Notice was issued on 2 June 2026, and the appellant appeared before the Adjudicating Authority on 7 July 2026. On that date, the respondent also filed IA No. 112 of 2026 seeking an interim moratorium, and the appellant was granted time to file a reply/counter.

The appellant sought certain documents from the respondent by emails dated 18 and 22 July 2026 and filed its reply to IA No. 112 of 2026 on 24 July 2026. On 27 July 2026, the appellant was directed to file its reply in the Section 7 petition. It thereafter filed IA No. 145 of 2026 seeking production of documents; that application was dismissed on 10 August 2026, and the appellant’s right to file its reply was forfeited.

The appellant subsequently filed IA No. 160 of 2026 seeking recall of the order dated 10 August 2026. The Adjudicating Authority dismissed that application by order dated 10 September 2026, leading to the present appeal.

Whether the appellant should be granted one further opportunity to file its reply in the pending Section 7 IBC petition after its right to file the reply had been forfeited by the Adjudicating Authority?

Whether the order dismissing the appellant’s recall application warranted appellate interference in the interests of deciding the dispute on merits?

The Tribunal applied the procedural framework governing proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, including the requirement of expeditious adjudication, which the respondent argued was reflected in the statutory 14-day timeline.

The Tribunal further applied the principle that, unless grave prejudice would be caused to the opposite party, parties should ordinarily be given an opportunity to contest the lis on merits.

It also exercised its appellate and procedural discretion to impose appropriate conditions, including costs and strict timelines, while granting a limited further opportunity.

The Tribunal acknowledged that the appellant had failed to file its reply to the Section 7 petition along with the reply filed in relation to IA No. 112 of 2026, and that the Adjudicating Authority had thereafter forfeited its right to file the reply.

However, the Tribunal found that the appellant’s failure arose, at least in part, from its understanding that the order dated 7 July 2026 granted time only to respond to the interim-moratorium application, particularly since the order referred to filing a reply/counter in that context.

Although the respondent alleged delay and misuse of process, the Tribunal concluded that no grave prejudice had been demonstrated. Balancing procedural discipline and the need to decide the Section 7 petition on merits, it granted one final opportunity subject to immediate filing, a limited opportunity for rejoinder, cooperation in the proceedings, and payment of costs.

The respondent was permitted to file a rejoinder by 21 September 2026. The parties were directed to appear before the Adjudicating Authority on 21 September 2026 and cooperate in the early disposal of the Section 7 petition; the respondent was specifically directed not to seek an adjournment on that date. The Adjudicating Authority was requested to conclude the proceedings in accordance with law. The appellant was also directed to deposit costs of ₹50,000 in the Prime Minister’s Relief Fund within three working days.