Supreme Court Rules on Extension of Limitation Period in Commercial Suits
The Supreme Court of India recently ruled in the case of Aditya Khaitan & Others v. IL & FS Financial Services Limited, clarifying the applicability of the extension of limitation period due to the COVID-19 pandemic in commercial suits. The decision addresses whether the order issued by the Supreme Court in In Re: Cognizance for Extension of Limitation applies to the outer limit for filing written statements in commercial disputes.
Background of the Case
The case arose from a commercial suit filed by IL & FS Financial Services Limited in the Calcutta High Court for the recovery of dues against Aditya Khaitan and others. The summons was served to the defendants on February 7, 2020. As per the Commercial Courts Act, 2015, the defendants had 30 days to file their written statements, with an additional condonable period of 90 days. Thus, the total permissible period ended on June 6, 2020.
However, due to the COVID-19 pandemic, the Supreme Court took suo motu cognizance and issued an order on March 23, 2020, extending the limitation period for all proceedings. The appellants (defendants) argued that this order should apply to the filing of written statements in their case as well.
Key Legal Issues
- Whether the Supreme Court’s suo motu order of March 23, 2020, applied to commercial suits, including the outer limit for filing written statements.
- Whether the judgment in Sagufa Ahmed v. Upper Assam Plywood Products (2021) correctly interpreted the limitation extension orders.
- Whether the High Court erred in rejecting the defendants’ written statements.
Arguments by the Petitioners (Aditya Khaitan & Others)
The petitioners argued:
- The Supreme Court’s order extending the limitation period applied to all proceedings, including commercial suits.
- The delay in filing the written statement was due to the pandemic and should be excused under extraordinary circumstances.
- The decision in Prakash Corporates v. Dee Vee Projects Ltd. (2022) clarified that the extension of limitation applied to the outer limit for filing written statements.
Arguments by the Respondents (IL & FS Financial Services Limited)
The respondents contended:
- The time limit for filing the written statement had already expired before the Supreme Court’s order.
- The extension of limitation applied only to the prescribed limitation period, not the condonable delay period.
- The Sagufa Ahmed case established that once the condonable period expires, it cannot be revived by the Supreme Court’s orders.
Supreme Court’s Observations
On the Extension of Limitation Period
The Supreme Court held that the orders passed in In Re: Cognizance for Extension of Limitation applied to all limitation periods, including commercial suits.
“The orders passed by this Court on 23.03.2020, 06.05.2020, 10.07.2020, 27.04.2021, and 23.09.2021 clearly indicate that the exclusion of time applies to the period prescribed for filing written statements, including the outer limit.”
On the Applicability of the Sagufa Ahmed Judgment
The Court clarified that the Sagufa Ahmed case was decided before the later extension orders were issued. It held:
“The very basis of the judgment in Sagufa Ahmed that only the period of limitation was extended and not the condonable delay has been taken away by subsequent orders that expanded the protection.”
On the High Court’s Decision
The Supreme Court found that the High Court had erred in rejecting the written statements, stating:
“When the whole world was under the grip of a pandemic, parties could not have been expected to act in normal circumstances. The intent of this Court’s orders was to ensure that no litigant is prejudiced due to the pandemic.”
Final Judgment
The Supreme Court allowed the appeals and directed the Calcutta High Court to take the written statements on record. It ruled:
- The limitation period was extended for all matters, including commercial suits.
- The written statements filed by the defendants should be accepted.
- The suit should proceed accordingly, ensuring no prejudice to either party.
Impact of the Judgment
This ruling clarifies the application of limitation extensions in commercial disputes and ensures that procedural timelines are interpreted fairly. The judgment:
- Provides relief to litigants who faced delays due to COVID-19.
- Reinforces the binding nature of the Supreme Court’s suo motu orders.
- Overrules restrictive interpretations of previous limitation extension cases.
Conclusion
The Supreme Court’s decision underscores the need for courts to consider extraordinary circumstances when applying limitation laws. By allowing the written statements to be filed, the judgment ensures that justice prevails even in the face of unprecedented global crises.
Petitioner Name: Aditya Khaitan & Others.Respondent Name: IL & FS Financial Services Limited.Judgment By: Justice K.V. Viswanathan, Justice J.K. Maheshwari.Place Of Incident: Calcutta, West Bengal.Judgment Date: 03-10-2023.
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