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CASE NAME: ADITYA KHAITAN & ORS. VERSUS IL AND FS FINANCIAL SERVICES LIMITED

CASE NUMBER: CIVIL APPEAL NOS. 6411-6418 OF 2023

DATED ON: OCTOBER 03, 2023

QUORUM: HON’BLE JUSTICE J.K. MAHESHWARI & JUSTICE K.V. VISWANATHAN

INTRODUCTION:

The appeals challenge the High Court’s decision to dismiss applications for taking on record their written statements in a civil suit. The court ruled that the 30-day period for filing written statements had expired on 08.03.2020. The court also ruled in Sagufa Ahmed and Others Vs. Upper Assam Plywood Products Private Limited and Others (2021) 2 SCC 317, since the orders of this that the order dated 23.03.2020, effective from 15.03.2020, would not benefit the applicants/defendants since the limitation period had expired. The court also ruled that the court’s orders under Article 142 of the Constitution of India only extended the period of limitation, not the period up to which delay can be condoned.

FACTS OF THE CASE:

The plaintiff, IL and FS Financial Services Limited, filed a suit for recovery of money and consequential reliefs in C.S. No. 177 of 2019 against nine defendants. The 30-day period for filing written statements expired on 08.03.2020 and the condonable period of 90 days expired on 06.06.2020.

The appellants filed applications for the defendants on 20.01.2021, requesting an extension of the time for the defendants’ written statements. The reasons for this were the declaration of COVID-19 as a pandemic, the Government of India’s advisories, the Disaster Management Act, the lockdown imposed by the Government of West Bengal, and the closure of the answering applicant’s office.

The affidavits relied on the court’s order dated 23.03.2020 and 10.07.2020, which extended the period of limitation until further orders. The plaintiffs opposed these applications, arguing that the orders would not help since the limitation period had expired before 15.03.2020. The plaintiff relied on the judgment of 18.09.2020 in Sagufa Ahmed to support its contention. The High Court accepted the plaintiff’s stand but did not take the written statements on record.

LEGAL PROVISIONS:

CONSTITUTION OF INDIA

Article-142: Enforcement of decrees and orders of Supreme Court and unless as to discovery, etc.-

(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or orders so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe.

(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself.”

CODE OF CIVIL PROCEDURE

ORDER 5 RULE 1(1): Summons.— When a suit has been duly instituted, a summons may be issued to the defendant to appear and answer the claim and to file the written statement of his defence, if any, within thirty days from the date of service of summons on that defendant. Provided that no such summons shall be issued when a defendant has appeared at the presentation of plaint and admitted the plaintiff’s claim

Order 8 Rule 1:Written statement.- The defendant shall, within thirty days from the date of service of summons on him, present a written statement of his defence:

Provided that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the written statement on such other day, as may be specified by the court, for reasons to be recorded in writing and on payment of such costs as the court deems fit, but which shall not be later than one hundred twenty days from the date of service of summons and on expiry of one hundred twenty days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.”

ORDER 8 RULE 10: Procedure when party fails to present written statement called for by Court.—Where any party from whom a written statement is required under rule 1 or rule 9 fails to present the same within the time permitted or fixed by the Court, as the case may be, the Court shall pronounce judgment against him, or make such order in relation to the suit as it thinks fit and on the pronouncement of such judgment a decree shall be drawn up.

COMMERCIAL COURT ACT:

Section – 16: Amendments to the Code of Civil Procedure, 1908 in its application to commercial disputes-

(1) The provisions of the Code of Civil Procedure, 1908 (5 of 1908) shall, in their application to any suit in respect of a commercial dispute of a Specified Value, stand amended in the manner as specified in the Schedule.

(2) The Commercial Division and Commercial Court shall follow the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, in the trial of a suit in respect of a commercial dispute of a Specified Value.

(3) Where any provision of any Rule of the jurisdictional High Court or any amendment to the Code of Civil Procedure, 1908 (5 of 1908), by the State Government is in conflict with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, the provisions of the Code of Civil Procedure as amended by this Act shall prevail.

ISSUES RAISED:

• Whether the High Court was justified in rejecting the application for extension of time dated 20.01.2021 and in not taking the written statements on record.
• Whether the appellants are allowed to file the written statement after the expiration the limited time period in the special circumstances or not.

CONTENTION OF APPELLANT:

Mr. Sanjoy Ghose, Senior Counsel for the appellants, used the judgment in Prakash Corporates vs. Dee Vee Projects Limited, (2022) 5 SCC 112, to argue that extraordinary measures are crucial in extraordinary circumstances. The court noted that orders of 23.03.2020, 06.05.2020, and 10.07.2020 were addressed in the same In re: Cognizance for Extension of Limitation. The court distinguished Sagufa Ahmed’s case (supra) in paras 28.1, 28.2 and 33.4 of Prakash Corporates (supra), stating that the period envisaged in the order dated 23.09.2021 should be excluded from computing the period of limitation even for filing the written statement. The court ruled that the decision in Sagufa Ahmed is irrelevant to the present case, as the extended period expired on 06.06.2020.

CONTENTION OF RESPONDENT:

Mr. Sahil Tagotra, learned Counsel for the Respondent reiterated the findings of the High Court and submitted that the applicants have forfeited their right to file the written statements and the hon’ble High Court justified in rejecting the application for extension of time dated 20.01.2021 and not taking the written statements on record.

COURT’S ANALYSIS:

The Supreme Court has extended the deadlines for statutes of limitations in cases related to the pandemic. The court took suo motu cognizance and issued orders under Article 142 of the Constitution of India, protecting parties’ rights and ensuring their remedies and defenses were not barred. The orders of 23.03.2020 and 08.03.2021 were issued in a case involving Sagufa Ahmed (supra), which extended the limitation prescribed under the Arbitration & Conciliation Act, 1996 and Section 138 of the Negotiable Instruments Act, 1881 until further orders. The court also extended the period between 15.03.2020 and the lifting of lockdown in the jurisdictional area.

The Supreme Court of India has issued directions to address the challenges faced by litigants during the COVID-19 pandemic. The order dated 08.03.2021 extended the period of limitation prescribed under general law or special laws, with effect from 15.03.2020 until further orders. The court believes that the order dated 15.03.2020 has served its purpose and should come to an end.

The court has also excluded the period from 15.03.2020 to 14.03.2021, allowing the balance period of limitation remaining as of 15.03.2020 to become available with effect from 15.03.2021. The period from 15.03.2020 to 14.03.2021 will also be excluded from computing periods prescribed under various laws. The government is also required to amend guidelines for containment zones, allowing for medical emergencies, essential goods and services, time-bound applications, and educational and job-related requirements.

The Court has directed that the period from 15.03.2020 to 14.03.2021 will be excluded from computing the period prescribed under various laws, including the Arbitration and Conciliation Act, 1996, Commercial Courts Act, 2015, and Negotiable Instruments Act, 1881. This decision has a significant impact on the current controversy, as it excludes the period for computing outer limits within which the court or tribunal can condone delay.

The Court in Prakash Corporates (supra) also noted that the order of 08.03.2021 and subsequent orders by a Bench of three Hon’ble Judges were not available for the Bench which decided Sagufa Ahmed’s case. The outer limit within which the court or tribunal can condone delay is 120 days from the date of summons.

JUDGEMENT:

As has been set out hereinabove, summons was served on 07.02.2020, but the 30 days period expired on 08.03.2020 and the outer limit of 120 days expired on 06.06.2020. The applicants filed for written statements and extension of time on 20.01.2021, and the High Court’s judgment needs to be set aside. The principle underlying the court’s orders dated 08.03.2021, 27.04.2021, and 23.09.2021, in In Re: Cognizance for Extension of Limitation would benefit the applicants-defendants.

The Appeals are allowed, and the written statements filed on 20.01.2021, are directed to be taken on record. The suit will proceed with the appeals, and the appeal stands allowed with no order as to costs.

 

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Click here to view the full judgement: ADITYA KHAITAN & ORS. VERSUS IL AND FS FINANCIAL SERVICES LIMITED

JUDGEMENT REVIEWED BY: ABHISHEK SINGH