World number 44 Manika beat Chen, ranked 23rd in the ITTF chart, 6-11, 11-6, 11-5, 11-7, 8-11, 9-11 and 11-9 in a hard-fought quarterfinal battle.
The first day started well for India with almost all of its players in action advancing to the next round.
With this win over her Guyana opponent, India are now cruising 2-0 in the women's table tennis team event.
Manika Batra registered a comfortable win after India's doubles pair of Reeth Tennison and Sreeja Akula registered win over RSA duo.
In a judgement which has left everyone in shock, the federation has been suspended for 6 months and an administrator has been appointed to handle the case further.
The 26-year-old also questioned the federation for their failure to act promptly on the issue.
Manika bowed out of the Olympics after losing in Round 3 of the singles event.
Indian paddler Sharath Kamal advanced into the next round after beating Portuguese Tiago Polonia 4-2.
India failed to win any medal on Day 2 of the mega event on Sunday.
Earlier, Batra had stormed into the second round of the women's singles category after a 4-0 (11-7, 11-6, 12-10, 11-9) win over Great Britain's Tin-Tin Ho on Saturday.
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