Supreme Court Allows Delayed Written Statements in Commercial Suit: Aditya Khaitan vs. IL&FS (2023)

Date of the Judgment: October 3, 2023

Citation: 2023 INSC 867

Judges: J.K. Maheshwari and K.V. Viswanathan, JJ.

Can a party be denied the right to file a written statement in a commercial suit due to delays caused by the COVID-19 pandemic, even if the initial deadline had passed? The Supreme Court of India recently tackled this critical question, focusing on the interpretation of its own orders extending limitation periods during the pandemic. The case revolves around whether these extensions apply to the outer limit for condoning delays in filing written statements. The judgment was delivered by a two-judge bench comprising Justices J.K. Maheshwari and K.V. Viswanathan, with Justice K.V. Viswanathan authoring the opinion.

Case Background

The respondent, IL and FS Financial Services Limited, filed a suit for recovery of money in the High Court at Calcutta on August 30, 2019. The appellants, who were the nine defendants in the suit, were served summons on February 7, 2020. As this was a commercial suit, the 30-day period for filing written statements was set to expire on March 8, 2020. An additional 90-day period, during which delay could be condoned, ended on June 6, 2020. The defendants did not file their written statements within these timelines. On January 20, 2021, the defendants filed applications seeking to have their written statements accepted, citing the COVID-19 pandemic and the related lockdown as reasons for the delay. They also relied on the Supreme Court’s orders extending limitation periods.

Timeline

Course of Proceedings

The High Court at Calcutta dismissed the defendants’ applications, stating that the 30-day period for filing written statements had expired on March 8, 2020. The High Court also held that the Supreme Court’s order of March 23, 2020, extending limitation periods, would not apply, as the limitation period had already expired before March 15, 2020. The High Court relied on the Supreme Court’s judgment in Sagufa Ahmed and Others vs. Upper Assam Plywood Products Private Limited and Others (2021) 2 SCC 317, which held that the orders of the Supreme Court under Article 142 of the Constitution of India extended only the “period of limitation” and not the period up to which delay could be condoned. Aggrieved by this decision, the defendants appealed to the Supreme Court.

Legal Framework

The case primarily involves the interpretation of the following:

• Order 8 Rule 1 of the Code of Civil Procedure, 1908, as amended by the Commercial Courts Act, 2015, which stipulates that a defendant must file a written statement within 30 days of receiving summons. It also allows for an extension of up to 120 days from the date of service of summons, after which the right to file a written statement is forfeited.
• The Supreme Court’s suo motu orders in In Re: Cognizance for Extension of Limitation, particularly the orders of March 23, 2020, and March 8, 2021, which were issued to address the difficulties faced by litigants due to the COVID-19 pandemic.

The Supreme Court’s order of March 23, 2020, stated:

“…a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.”

The Supreme Court’s order of March 8, 2021, stated:

“…the period from 15.03.2020 till 14.03.2021 shall stand excluded in computing the periods prescribed under Sections 23(4) and 29-A of the Arbitration and Conciliation Act, 1996, Section 12-A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.”

These orders were passed under Article 142 of the Constitution of India, which empowers the Supreme Court to pass orders necessary for doing complete justice in any cause or matter pending before it.

Arguments

Appellants’ Arguments:

• The appellants argued that the Supreme Court’s judgment in Prakash Corporates vs. Dee Vee Projects Limited, (2022) 5 SCC 112, clarified that the orders extending limitation during the pandemic should also apply to the period for filing written statements, even if the initial period had expired.
• The appellants contended that the orders passed by the Supreme Court in In Re: Cognizance for Extension of Limitation, particularly the orders of March 8, 2021, April 27, 2021, and September 23, 2021, should be considered. These orders, according to the appellants, effectively distinguished the earlier judgment in Sagufa Ahmed.
• The appellants emphasized that the COVID-19 pandemic and the resulting lockdown significantly impacted their ability to file the written statements within the prescribed timelines.
• The appellants argued that the exclusion of time should apply to the outer limit for condoning delay, not just the initial limitation period.

Respondent’s Arguments:

• The respondent argued that the High Court’s decision was correct, as the initial 30-day period for filing written statements had expired before the Supreme Court’s extension orders came into effect.
• The respondent relied on the Supreme Court’s judgment in Sagufa Ahmed, which held that the extension orders only applied to the “period of limitation” and not to the period for condoning delay.
• The respondent contended that the appellants had forfeited their right to file the written statements by not adhering to the prescribed timelines.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Was the High Court justified in rejecting the application for extension of time dated 20.01.2021 and in not taking the written statements on record?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

1. Sagufa Ahmed and Others vs. Upper Assam Plywood Products Private Limited and Others (2021) 2 SCC 317 – Supreme Court of India: This case was initially relied upon by the High Court to reject the application for taking the written statement on record. The Supreme Court in the present case distinguished this case.
2. Prakash Corporates vs. Dee Vee Projects Limited, (2022) 5 SCC 112 – Supreme Court of India: This case was relied upon by the appellants. The Supreme Court in the present case relied on this case.
3. In Re: Cognizance for Extension of Limitation – Supreme Court of India: The Supreme Court considered its own orders dated March 23, 2020, May 6, 2020, July 10, 2020, March 8, 2021, April 27, 2021, and September 23, 2021.
4. Order 8 Rule 1 of the Code of Civil Procedure, 1908 – This provision was considered in the context of the Commercial Courts Act, 2015.

Authorities Considered by the Court

Judgment

The Supreme Court allowed the appeals, setting aside the High Court’s judgment. The Court directed that the written statements filed by the appellants on January 20, 2021, be taken on record and that the suit be proceeded with.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court distinguished the judgment in Sagufa Ahmed and Others vs. Upper Assam Plywood Products Private Limited and Others (2021) 2 SCC 317, stating that the subsequent orders passed in In Re: Cognizance for Extension of Limitation had expanded the protection to include the outer limits for condoning delay.
• The Supreme Court followed the judgment in Prakash Corporates vs. Dee Vee Projects Limited, (2022) 5 SCC 112, which had clarified the applicability of the extension orders to the period for filing written statements.
• The Supreme Court relied on its own orders in In Re: Cognizance for Extension of Limitation, particularly the orders of March 8, 2021, April 27, 2021, and September 23, 2021, to support its decision.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure that the extraordinary circumstances of the COVID-19 pandemic did not unjustly prejudice the rights of litigants. The court emphasized that the orders extending limitation were meant to protect the rights of parties by ensuring that their remedies and defenses were not barred due to the pandemic. The Court also noted that the subsequent orders passed in In Re: Cognizance for Extension of Limitation had expanded the protection to include the outer limits for condoning delay, which was not the case when Sagufa Ahmed was decided. The Court also took note of the fact that the country was returning to normalcy and Courts and Tribunals were functioning either physically or virtually.

Fact:Law Ratio

The Supreme Court’s decision was heavily influenced by the legal interpretation of its own orders and the relevant provisions of the Code of Civil Procedure, 1908, as amended by the Commercial Courts Act, 2015. However, the factual context of the COVID-19 pandemic also played a role in the Court’s reasoning.

Logical Reasoning

Key Takeaways

• The Supreme Court’s orders extending limitation during the COVID-19 pandemic apply to the period for filing written statements in commercial suits, even if the initial period had expired before the extension orders.
• The outer limit for condoning delay in filing written statements is also subject to the extension of time granted by the Supreme Court.
• The judgment in Sagufa Ahmed has been distinguished by subsequent orders and the judgment in Prakash Corporates.
• Courts should adopt a liberal approach in considering applications for extension of time in cases where delays were caused by the COVID-19 pandemic.

Directions

The Supreme Court directed that:

• The written statements filed by the appellants on January 20, 2021, be taken on record.
• The suit be proceeded with thereafter.

Development of Law

The ratio decidendi of this case is that the Supreme Court’s orders extending limitation during the COVID-19 pandemic apply not only to the initial period of limitation but also to the outer limits for condoning delay, particularly in the context of filing written statements in commercial suits. This judgment clarifies and expands upon the earlier position of law as stated in Sagufa Ahmed, which had held that the extension orders only applied to the period of limitation and not to the period for condoning delay. The present judgment, read with Prakash Corporates, establishes that the benefit of the extension of time granted by the Supreme Court should be given to litigants in all cases where the delay is attributable to the extraordinary circumstances of the pandemic.

Conclusion

In conclusion, the Supreme Court’s judgment in Aditya Khaitan & Ors. vs. IL and FS Financial Services Limited provides much-needed clarity on the applicability of its COVID-19 related extension orders to the filing of written statements in commercial suits. By distinguishing its earlier judgment in Sagufa Ahmed and relying on its subsequent orders and the judgment in Prakash Corporates, the Court has ensured that litigants are not unjustly penalized for delays caused by the pandemic. This decision reinforces the principle that the law should assist those who are vigilant and that extraordinary circumstances require extraordinary measures to protect the rights of parties.

Category

✓ Commercial Law

  ✓ Commercial Courts Act, 2015

    ✓ Section 16, Commercial Courts Act, 2015

✓ Civil Procedure

  ✓ Code of Civil Procedure, 1908

    ✓ Order 8 Rule 1, Code of Civil Procedure, 1908

✓ Limitation Law

  ✓ Extension of Limitation

✓ Supreme Court of India

  ✓ Article 142, Constitution of India

FAQ

Q: What was the main issue in the Aditya Khaitan vs. IL&FS case?

A: The main issue was whether the Supreme Court’s orders extending limitation during the COVID-19 pandemic also applied to the period for filing written statements in commercial suits, especially when the initial deadline had passed before the extension orders.

Q: What did the Supreme Court decide?

A: The Supreme Court decided that the extension orders did apply to the period for filing written statements, even if the initial deadline had expired. The Court allowed the delayed written statements to be taken on record.

Q: What is the significance of this judgment?

A: This judgment clarifies that the outer limits for condoning delay in filing written statements are also subject to the extension of time granted by the Supreme Court during the COVID-19 pandemic. It ensures that litigants are not penalized for delays caused by the pandemic.

Q: What is the impact of this judgment on future cases?

A: This judgment will serve as a precedent for cases where delays in filing written statements occurred due to the COVID-19 pandemic. It reinforces the principle that extraordinary circumstances require extraordinary measures to protect the rights of parties.

Q: What is the relevance of the judgment in Sagufa Ahmed?

A: The judgment in Sagufa Ahmed was distinguished by the Supreme Court in this case. The Court clarified that subsequent orders had expanded the protection to include the outer limits for condoning delay, which was not the case when Sagufa Ahmed was decided.