On expiry of 120th day from the date of service of summons, the defendant does not forfeits the right to file the written statement in the circumstantial situation of COVID-19

Case title:

Prakash Corporates vs Dee Vee Projects Limited

Date of Order:

14th February, 2022

Bench:

Dinesh Maheshwari, Vikram Nath

Parties: 

Petitioner: Prakash Corporates

Respondent: Dee Vee Projects Limited

SUBJECT: 

By way of this appeal, the appellant has challenged the order passed by the High Court of Chhattisgarh at Bilaspur in WP No. 312 of 2021, whereby the High Court has upheld the order dated 22.06.2021, as passed by the Commercial Court (District Level), Nava Raipur, Chhattisgarh declining the prayer of the defendant-appellant for granting further time to file its written statement. 

The defendant-appellant has questioned the orders with reference to the view of the challenges faced by the country and difficulties of the litigants due to COVID-19 pandemic granting them for extension of the period of limitation prescribed under the general law of limitation or under any special law which was upheld 

IMPORTANT PROVISIONS:

The proviso of Order VIII Rule 1of CPC as incorporated by Commercial Courts Act- on expiry of 120 days from date of service of summons, the defendant shall forfeit the right to file a written statement and the Court shall not allow the written statement to be taken on record.

Section 12-A and Section 16 of the Act as under: -

“12-A. Pre-Institution Mediation and Settlement. – (1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.

(2) The Central Government may, by notification, authorise the Authorities constituted under the Legal Services Authorities Act, 1987 (39 of 1987), for the purposes of pre-institution mediation.” “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.

OVERVIEW:

• Businesses between the litigants in this case and their related entities existed, particularly in respect to the public contract works. Two of these contract tasks are the subject of the current dispute.
• According to two work orders, it appears that the plaintiff-respondent subcontracted some of these works to the defendant-appellant.
• The dispute is about the financial obligations resulting from and covered by the subcontracts granted to the appellant.
• According to the Insolvency and Bankruptcy Code, 20164, the appellant sent the respondent a demand notice on July 1st 2020 requesting payment of an alleged operational debt of Rs. 17,94,11,835/-. On July 13, 2020, the respondent sent a response to the abovementioned notice, contesting the claim put up by the appellant and, in turn, asserting an excess payment claim of Rs. 3,73,24,821 against the appellant.
• The respondent (corporate debtor), according to the appellant, failed to pay its outstanding operational debt, so the appellant went to the National Company Law Tribunal, Cuttack Bench, asking for the beginning of a corporate insolvency resolution process against the respondent under Section 9 of the Code.
• On the other hand, the plaintiff-respondent filed the aforementioned lawsuit against the defendant-appellant on December 21, 2020, seeking to collect the aforementioned sum of Rs. 3,73,24,821 plus interest at a rate of 12% per annum, which was purportedly an excess payment made to the appellant.
• The plaintiff-respondent also submitted a request for temporary attachment orders prior to judgement under Order XXXVIII Rule 5 read in conjunction with Section 151 CPC.
• According to Section 12-A of the Act, the court granted another application made by the respondent asking to do away with the pre-institution mediation requirements. The defendant-appellant was then served with a summons for an appearance and the submission of a written statement as well as a response to the said interim application on January 6, 2021.
• The appellant did appear before the Trial Court on the scheduled date, i.e., January 18, 2021, in response to the summons, but she also filed an application under Section 10 read with Section 151 CPC for a stay of suit proceedings on the justification that the NCLT was currently hearing the case between the parties.
• On February 2, 2021, the appellant requested an extension of time in order to submit its written statement and response to the interim application due to the illness of one of the firm's partners. However, the court instead ordered the parties to submit their respective responses to the pending applications and instructed the appellant to submit its written statement on the following date.
• Due to the senior counsel's unavailability, the appellant requested a second opportunity to file the written statement on February 24, 2021, while the respondent had already filed its response to the motion for a stay of the lawsuit proceedings. The Trial Court provided a second chance for Rs. 200 in fees. More time was requested for filing the written statement on March 15, 2021. The Court provided the appellant with more time to file the written statement, but at a cost of Rs. 500.
• Due to the second wave of the COVID-19 pandemic, when almost all institutions experienced setbacks with the disruption of their regular operations due to illnesses, lock-downs, and containment measures, the jurisdictional High Court issued an administrative order for the curtailed functioning of Courts on April 5, 2021. Trial Court postponed the subject to 22.06.2021 so that both applications may be argued.
• The Commercial Courts Act of 2015 replaced Order V's Rule 1(1) and Order VIII's Proviso to Rule 1 and required the appellant to file the written statement within 30 days of the date of summons serving, or within 30 days after 06.01.2021.
• Additionally, the appellant could have been given until the 120th day following the date of service of the summons to file the written statement for reasons that needed to be documented in writing and upon payment of any costs that the Trial Court deemed appropriate; however, after the 120th day following the date of service of the summons, the defendant-right appellant's to file the written statement was forfeited, and the Court could not have permitted the written statement to be taken into account. There is no question that the 120th day following the date of summons serving expired on May 6, 2021.
• When the Trial Court took up the case for consideration on June 22, 2021, the appellant again requested an extension in order to file the written statement. This prayer was challenged on behalf of the respondent with the allegation that more than 120 days had expired since service of summons. The Trial Court held that the appellant had lost its right to file the written statement, citing the case order-sheets as well as the relevant proviso to Order VIII Rule 1 CPC.
• The defendant-appellant filed a writ case under Article 227 of the Indian Constitution with the High Court, seeking to challenge the aforementioned order dated 22.06.2021, which the HC upheld. As a result, the defendant-appellant filed a petition under Article 32 with the Supreme Court of India.

ISSUES RAISED: 

Whether on expiry of 120th day from the date of service of summons, the defendant has the right to file the written statement.

ARGUMENTS ADVANCED BY THE APPELLANT: 

• It was essentially submitted on behalf of the appellant that on 06.05.2021, the Court was closed due to imposition of lockdown in pandemic control measures; and on 22.06.2021, the application was filed seeking time for filing written statement on medical ground as the counsel for the appellant was in quarantine.
• The period between 15.03.2020 and 14.03.2021 would be excluded when calculating the period of limitation prescribed under general law or under special laws, it was further argued with reference to the orders made by this Hon'ble Court in Suo Motu Writ Petition (Civil) No. 3 (SWMP) of 2020; and on 27.04.2021, the suspension of limitation was further extended. 
• As a result, it was argued that the Trial Court erred in not accounting for the lockdown period when it calculated the statute of limitations. Reference was made to several decisions of Hon’ble Court, including those in SCG Contracts (India) Private Limited v. K.S. Chamankar Infrastructure Private Limited and Ors.: (2019) 12 SCC 210 and SS Group Pvt. Ltd. v. Aaditiya J. Garg and Anr.: 2020 SCC OnLine SC 1050.
• The relevant complaint was brought by the respondent at the time the order dated 23.03.2020 given by this Court in SMWP No. 3 of 2020 was in effect, according to the learned counsel, and summons was also served on the appellant at that time.
• The argument has been that the entire period from 15.03.2020 until 02.10.2021 stands excluded when computing the period of limitation, and that, obviously, covers the prescribed period for filing written statement in the present case. This argument has been made with reference to various other orders passed in SMWP No. 3 of 2020.
• The orders in SMWP No. 3 of 2020 were designed to shield the litigants from pandemic-related issues and eliminate the necessity for individualized justifications in each and every case.
• The Trial Court and the High Court neglected to take into account the adverse circumstances faced by the appellant, including the fact that the appellant firm's partners and their family members had COVID-19 and were either in quarantine or were attending to other family emergencies, in addition to the fact that the entire district of Raipur had been declared a containment zone and restrictions/lockdown had been imposed in the month of April 2021.

ARGUMENTS ADVANCED BY THE RESPONDENT:

• First, it was argued that because the contested order was appealable, a petition under Article 227 of the Indian Constitution could not have been filed to challenge it.
• Further, it was argued that the Commercial Court lacked the authority to extend the deadline past the 120-day mark in light of the ruling in SCG Contracts (above). The argument that the order in SMWP No. 3 of 2020 was merely for the purpose of extending the term of limitation and not forgiving delay was further supported by a decision of this Court in the matter of Sagufa Ahmed and Ors. v. Upper Assam Polywood Products Private Limited and Ors.: (2021) 2 SCC 317.
• The plaintiff-respondent's senior counsel has emphasized that the appellant cannot claim the extension of period of limitation by reference to the orders passed in SMWP No. 3 of 2020, particularly when its right to file the written statement remains forfeited by operation of law, in their response to the aforementioned arguments and in support of the contested orders.

JUDGEMENT ANALYSIS:

• First, the High Court ruled that the Order VIII Rule 1 order was not appealable under Order XLIII CPC and that the petition may therefore be maintained. Nonetheless, the High Court decided that no Court can extend the restriction established by the statute in regards to the challenge to the order made by the Trial Court.
• The defendant-appellant has turned to the Honorable Supreme Court in an effort to contest the order that the High Court had previously issued.
• The Supreme Court ruled that it would be unrealistic and illogical to assume that even though this Court has provided for the exclusion of the period for institution of the suit, a suit that has already been filed beyond the statute of limitations (if the statute of limitations had expired between 15.03.2020 and 02.10.2021) may still be filed within 90 days of 03.10.2021 but that the written statement deadline, if it had expired during that period, must be construed against the defendant.
• In those final orders, this Court made it plain that the time period from 15.03.2020 to 02.10.2021 should not be included when calculating the statute of limitations for any lawsuit, appeal, application, or proceeding.
• Combining all of these considerations, the Hon'ble Court stated that it was unable to accept the respondent's arguments that the defendant-appellant would not be entitled to the relaxation provided by the extraordinary orders passed by this Court because of an earlier appearance or a request for an adjournment.

CONCLUSION:

• It must be emphasized once more that the orders in SMWP No. 3 of 2020 were extraordinary actions taken in extraordinary situations, and their execution cannot be restricted in accordance with the normal course of law.
• The aforementioned order was issued by this Court with the intention of helping vigilant plaintiffs who were precluded from filing a lawsuit within the allotted time period by general or special legislation due to the epidemic and the lockdown. 
• It goes without saying that the origins of the law of limitations lie in Roman proverbs, one of which is "vigilantibus et non dormientibus jura subveniunt," which indicates that the law will only support those who are watchful about their rights and not those who sleep over them.
• Any argument that the written statement should have been filed on such Trial Court non-business days, which were also fairly depressing days for humanity, cannot be accepted only since it is unrealistic and absurd.