The Supreme Court has held that the High Court's decision to reject the defendants' applications for an extension of time to file their written statements was not justified directing the written statements filed on January 20, 2021, to be taken on record. The High Court had dismissed the applications filed by the defendants on January 20, 2021 seeking an extension of time to file their written statements in a suit filed by the plaintiff. The defendants had failed to file their written statements within the original 30-day period, which expired on March 08, 2020, and the subsequent condonable period of 90 days, which expired on June 06, 2020.

A two-judge Bench of Justice J.K. Maheshwari and Justice K.V. Viswanathan explained that under Order 8 Rule 1 of the Commercial Courts Act, the defendant must file a written statement within 30 days of receiving a summons and the court can allow an extension up to 120 days, but if not filed within this period, the right to file the statement is forfeited.

The Court held, “As has been set out hereinabove, while summons was served on 07.02.2020, the 30 days period expired on 08.03.2020 and the outer limit of 120 days expired on 06.06.2020. The application for taking on record the written statements and the extension of time was filed on 20.01.2021. Applying the orders of 08.03.2021 and the orders made thereafter and excluding the time stipulated therein, the applications filed by the applicants on 19.01.2021 are well within time.”

Senior Advocate Sanjoy Ghose appeared for the Appellants and Advocate Sahil Tagotra appeared for the Respondents.

The defendants argued that they were unable to file their written statements due to the COVID-19 pandemic.

The central issue for consideration before the Court was whether the High Court was justified in rejecting the application for extension of time dated January 20, 2021 and in not taking the written statements on record.

The Court emphasized that during the global pandemic, the top Court had recognized that parties were not sleeping over their rights. In response, the Court had taken suo motu cognizance and issued orders under Article 142 of the Indian Constitution to extend deadlines, ensuring that parties' rights were protected.

The Court said that in the suo motu proceedings titled "In Re: Cognizance for Extension of Limitation," several orders were passed, which extended the limitation period. Among them the orders of March 23, 2020 and March 08, 2021 were contrasted. The first order extended the period of limitation due to the COVID-19 pandemic, allowing parties to file proceedings remotely. The second order further extended the limitation period, with specific guidelines.

The Court observed that the judgment in Sagufa Ahmed and Others Vs. Upper Assam Plywood Products Private Limited and Others (2021) 2 SCC 317, which relied on the limited scope of the first order, was no longer applicable due to subsequent orders expanding the protection. The Court further noted that the second order, reiterated in subsequent orders, expanded the protection by excluding the mentioned period for computing outer limits in condoning delays. This altered the basis of the Sagufa Ahmed judgment.

The Court said that the Prakash Corporates vs. Dee Vee Projects Limited, (2022) 5 SCC 112 case recognized these subsequent orders in allowing applications filed after the original limitation period.

Considering these subsequent orders, the Court concluded that the defendants' applications, filed on January 20, 2021, were well within time when applying the orders of March 08, 2021 and subsequent ones.

Therefore, the Court allowed the appeals, directing the written statements filed on Januray 20, 2021 to be taken on record, and instructed the proceedings to continue.

Cause Title: Aditya Khaitan & Ors. v. IL and FS Financial Services Limited, [2023INSC867]

Click here to read/download Judgment