2021 (2) TMI 1363 - HC - Companies Law

Court denies extension for filing written statements in commercial suit, emphasizes 120-day deadline.

The court dismissed the defendants' applications for an extension of time to file written statements in a commercial suit, emphasizing the mandatory ... Extension of time to file written statement in commercial suits - mandatory outer limit of 120 days for filing written statement under the Commercial Courts Act, 2015 - distinction between prescribed period and discretionary grace period - requirement to record reasons in writing and impose costs when condoning delay up to 120 days - effect of Supreme Court orders in Suo Motu Writ Petition (C) No. 3 of 2020 on limitation - strict and mandatory construction of amendments to the Code of Civil Procedure by the Commercial Courts Act, 2015Extension of time to file written statement in commercial suits - mandatory outer limit of 120 days for filing written statement under the Commercial Courts Act, 2015 - requirement to record reasons in writing and impose costs when condoning delay up to 120 days - Interpretation and applicability of the second proviso to Order V Rule 1 and proviso to Order VIII Rule 1 (as substituted by the Commercial Courts Act, 2015) governing filing of written statements in commercial suits. - HELD THAT: - The amendments introduced by the Commercial Courts Act, 2015 prescribe an initial statutory period of 30 days to file a written statement and provide a discretionary, condonable grace period of a further 90 days such that 120 days from service is the outer, mandatory limit. Within the post-30-day period the court may allow the written statement only for reasons recorded in writing and on payment of such costs as the court deems fit. Beyond 120 days the defendant forfeits the right to file a written statement and the court has no power to extend time further. The object of the Act-speedy disposal of high value commercial disputes-requires a strict, mandatory construction of these time-limits. This construction is consistent with the reasoning of the Supreme Court in SCG Contracts India Private Limited and subsequent authorities noting the mandatory character of the amended provisions. [Paras 15, 20, 25, 26]The second proviso to Order V Rule 1 and the proviso to Order VIII Rule 1 as amended by the Commercial Courts Act, 2015 impose a mandatory outer limit of 120 days (30 days prescribed plus a discretionary 90-day grace) for filing written statements; reasons must be recorded and costs may be imposed if the court allows filing within that outer limit, and no extension is permissible beyond 120 days.Distinction between prescribed period and discretionary grace period - effect of Supreme Court orders in Suo Motu Writ Petition (C) No. 3 of 2020 on limitation - Whether the Supreme Court's orders in Suo Motu Writ Petition (C) No. 3 of 2020 (and subsequent orders) operated to extend the discretionary 90-day grace period available under the Commercial Courts Act, 2015. - HELD THAT: - The Supreme Court's orders beginning March 23, 2020 were held to extend the period of limitation (i.e., the prescribed limitation period) but not the maximum period up to which delay can be condoned under a statute. In the present case the original 30-day period expired prior to March 15, 2020 when the Supreme Court's suspension took effect; therefore the suspension could not be read to enlarge the discretionary 90-day grace available under the Commercial Courts Act. The Supreme Court has clarified that its order benefits vigilant litigants prevented by the pandemic from initiating proceedings within the prescribed limitation, and does not operate to extend statutory discretion to condone delay beyond the limits set by the statute. [Paras 19, 23, 24]The Suo Motu orders extending limitation do not enlarge the discretionary 90-day condonable period under the Commercial Courts Act; they extended prescribed limitation periods only and cannot be invoked to permit filing beyond the statutory outer limit where the prescribed period expired before March 15, 2020.Extension of time to file written statement in commercial suits - requirement to record reasons in writing and impose costs when condoning delay up to 120 days - Whether the applications of the eight defendants for extension of time to file written statements should be allowed on the facts of this case. - HELD THAT: - The applying defendants failed to demonstrate promptness or provide material particulars as to why they could not file written statements within the statutory 30-day period; they did not specify dates when documents were obtained, when advocates were instructed, or the period of inability caused by the pandemic. The applications were bereft of particulars necessary for the court to record reasons and to exercise its discretion under the proviso. Given that the prescribed period had expired before the Supreme Court's suspension took effect and that no cogent grounds were shown for condonation within the 120-day outer limit, the court was not satisfied to exercise discretion in favour of allowing the written statements. [Paras 17, 27, 28]The applications for extension of time to file written statements by the eight defendants are dismissed for want of sufficient promptness and material particulars; no order as to costs.Final Conclusion: The court interpreted the Commercial Courts Act amendments as prescribing a mandatory outer limit of 120 days for filing written statements (30 days prescribed plus a discretionary 90-day grace with reasons and costs), held that the Supreme Court's suspension of limitation did not extend the statutory grace period where the prescribed period had already expired before March 15, 2020, and dismissed the eight applications for extension of time to file written statements for failure to show promptness or sufficient grounds. Issues Involved:1. Extension of time to file written statements by defendants in a commercial suit.2. Applicability of the Supreme Court's orders on the suspension of limitation periods due to the COVID-19 pandemic.3. Interpretation of the provisions of the Commercial Courts Act, 2015, and the Code of Civil Procedure, 1908 regarding the filing of written statements.4. Consideration of previous judgments and their applicability to the current case.Issue-wise Detailed Analysis:1. Extension of Time to File Written Statements:Eight defendants in a commercial suit pending in the Commercial Division of the High Court applied for an extension of time to file their written statements. The suit was filed on August 30, 2019, and the writ of summons was issued on February 6, 2020. The defendants received the summons on February 7, 2020. According to Order V Rule 1 and Order VIII Rule 1 of the Code of Civil Procedure, 1908, as applicable to commercial suits, the initial 30-day period to file written statements expired on March 8, 2020, and the 120-day period expired on June 6, 2020. The defendants did not file their written statements within these periods and later applied for an extension in January 2021.2. Applicability of the Supreme Court's Orders on Suspension of Limitation Periods:The defendants argued that the period of limitation was suspended due to the Supreme Court's order dated March 23, 2020, in Suo Motu Writ Petition (C) No. 3 of 2020, which suspended the limitation period from March 15, 2020, due to the COVID-19 pandemic. They contended that this suspension should apply to their case, allowing them to file their written statements beyond the prescribed period.3. Interpretation of the Provisions of the Commercial Courts Act, 2015, and the Code of Civil Procedure, 1908:The second proviso to Order V Rule 1 and the proviso to Order VIII Rule 1, as amended by the Commercial Courts Act, 2015, prescribe an outer limit of 120 days for filing written statements from the date of service of summons. The court emphasized that this period is mandatory, and beyond 120 days, the defendant forfeits the right to file the written statement. The court referred to previous judgments, including SCG Contracts India Private Limited v. K.S. Chamankar Infrastructure Private Limited, which reinforced the mandatory nature of this period.4. Consideration of Previous Judgments and Their Applicability:The court considered several previous judgments to determine the applicability of the Supreme Court's orders and the mandatory nature of the 120-day period. The judgment in Siddha Real Estate Development Private Limited v. Golden Goenka Credit Private Limited was noted, which dealt with a similar issue and held that the 90-day period beyond the initial 30 days is an additional period, not an extension of the limitation period. The court also referred to Sagufa Ahmed v. Upper Assam Plywood Products Private Limited, which clarified that the Supreme Court's order dated March 23, 2020, extended only the period of limitation and not the period up to which delay can be condoned. The court further cited New India Assurance Company Limited v. Hilli Multipurpose Cold Storage Private Limited, which reiterated that the 120-day period for filing written statements in commercial suits is mandatory.Conclusion:The court concluded that the applications for extension of time to file written statements were not supported by sufficient grounds. The defendants did not exhibit promptness or provide adequate reasons for their delay. The court emphasized the mandatory nature of the 120-day period for filing written statements in commercial suits and dismissed the applications for extension of time without any order as to costs.