Applicants Seeking Pandemic Relaxation For Limitation Under Section 34 Petition Cannot Simultaneously Claim IBC Moratorium Protection: Calcutta High Court
The Calcutta High Court bench of Justice Sabyasachi Bhattacharyya has held that if applicant of petition under Section 34 of the Arbitration Act seeks to benefit from the pandemic relaxation, it cannot simultaneously claim protection under the moratorium of Section 14 of the IBC.
The bench held that to avail the pandemic relaxation, the applicant need to show that the pandemic initially prevented it from filing the application on time.
The Supreme Court in In Re: Cognizance for Extension of Limitation directed the extension of period of limitation in all proceedings before Courts/Tribunals in light of COVID pandemic, including the Supreme Court from 15.3.2020 till further orders, and ultimately, by order dated 10.1.2022 held that the period from 15.3.2020 till 28.2.2022 shall stand excluded in computing the period of limitation.
Brief Facts:
The matter pertained to an application filed under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the arbitral award. The award was received by Marg Limited (Petitioner) on November 30, 2019, and the application under Section 34 was filed on November 16, 2023 which raised the question of whether this delay exceeded the statutory limitation period.
SREI Equipment Finance Limited (Respondent) argued that according to Section 34(3) of the Arbitration Act, an application to set aside an arbitral award must be made within three months from the date the award was received. A further thirty days' extension could be granted at the discretion of the court provided the applicant demonstrated sufficient cause for the delay. However, beyond this period, the statute explicitly prohibits the court from entertaining the application. The Respondent contended that the limitation period expired well before the application was filed. Even if the pandemic-related relaxation in limitation periods, as established by the Supreme Court, was considered, the extended deadline had lapsed by May 2022. Additionally, the Respondent pointed out that even accounting for the moratorium period due to the Corporate Insolvency Resolution Process (CIRP) of the Respondent company, which concluded on August 11, 2023, the application remained barred by limitation.
The Petitioner, however, relied on several judgments to support its contention that the application was filed within the permissible period. It argued that the Supreme Court's pandemic-related orders extended the limitation period until February 28, 2022, with an additional ninety days allowed thereafter, making the deadline fall in May 2022. Further, the Petitioner referred to the moratorium provisions under Section 14 of the Insolvency and Bankruptcy Code (IBC) and argued that the time during which the CIRP was ongoing should be excluded from the limitation period. The Petitioner contended that after the CIRP ended on August 11, 2023, the limitation period resumed, and the ninety-day extension granted due to the pandemic would begin from August 12, 2023 making the final deadline November 11, 2023. Since the court was on vacation during this period, the Petitioner argued that the application filed on November 16, 2023 should be considered within time.
Observations by the High Court:
The High Court noted that the Petitioner received the arbitral award on November 30, 2019 which triggered the limitation period under Section 34(3) of the Arbitration Act. The three-month period for filing an application to set aside the award expired on February 28, 2020 and an additional period of thirty days within which the court could exercise its discretion to condone any delay expired on March 30, 2020. However, before this period lapsed, the COVID-19 pandemic began to affect judicial proceedings from March 15, 2020 which prompted the Supreme Court to issue a series of orders extending the limitation period.
During the pendency of the CIRP concerning the Respondent company, which commenced on October 8, 2021, and concluded with the approval of the Resolution Plan on August 11, 2023, the Petitioner argued that the ninety-day extension granted by the Supreme Court should commence after the end of the CIRP, thus allowing the Petitioner to file the application by November 11, 2023.
The High Court, however, found that the Petitioner could not simultaneously benefit from both the pandemic-related relaxation and the IBC moratorium. The High Court held that the Supreme Court's extension was intended to assist vigilant litigants who were prevented by the pandemic from initiating proceedings within the prescribed limitation period. It held that the Petitioner had to demonstrate that the pandemic wholly prevented it from filing the application on time. However, by March 15, 2020, the Petitioner already exhausted the three-month period and fifteen days of the additional thirty-day period provided under Section 34(3).
If the petitioner wished to take advantage of the pandemic-related relaxation, it had to file the application by May 29, 2022. By attempting to defer the ninety-day extension to a period of its choosing, the High Court held that the Petitioner sought to benefit from the moratorium under the IBC which it found untenable. The High Court noted that from May 30, 2022, onwards, the petitioner was not prevented by the pandemic but by the IBC moratorium. Thus, the pandemic relaxation was no longer available to the Petitioner.
The High Court, therefore, dismissed the application as time-barred.
Case Title: Marg Limited Vs Srei Equipment Finance Limited And Connected Matters
Case Number: AP-COM/398/2024 and connected matters
Mr. Rohit Das, Adv. Ms. Kishwar Rahman, Adv. Ms. Divya Tekriwal, Adv. Mr. Preetam Majumdar, Adv. Ms. Sristi Roy, Adv. ...for the petitioner.
Mr. Swatarup Banerjee, Adv. Mr. Sariful Haque, Adv. Mr. Saubhick Choudhury, Adv. Ms. Tapasika Bose, Adv. ..for the respondent.
Date of Judgment: 20th August, 2024