Benefit Of SC Judgment On Extension Of Limitation During COVID-19 Can't Be Granted On Mere Asking, Especially When Party Is In Default: Allahabad HC

The Allahabad High Court has held that the benefit of extension of limitation during COVID-19, as per In Re Cognizance for Extension of Limitation, cannot be granted to a party merely for the asking, especially when there is default on the part of the party seeking such extension. 

While dismissing Bharat Sanchar Nigam Ltd.'s appeals under Section 37 of the Arbitration and Conciliation Act, 1996, the bench of Chief Justice Arun Bhansali and Justice Vikas Budhwar held,

“The benefit of the judgment in the case of cognizance of extension and limitation, IN RE (supra) cannot be granted on mere asking particularly when it is not the case of the BSNL that they were not aware about the pendency of the proceedings as rather to the contrary we find from the order sheet that on certain dates, the BSNL through its counsel stood represented and on other dates remained absent.”

Case Background

Bharat Sanchar Nigam Ltd (BSNL) floated a tender for laying optical fibre cable in District Bhadoi. Claimant was issued the workorder. Due to certain differences, claimant wrote to BSNL to clear its outstanding dues, else enter in arbitration.

In 2019, the Sole Arbitrator awarded the claim in favour of the claimants, which upheld by the Commercial Court, Varanasi under Section 34 of the Arbitration and Conciliation Act, 1996. In 5 arbitrations between the parties, the claim amount awarded to the claimant-respondent were Rs. 83,23,416, Rs. 15,24,931, Rs. 6,01,516, Rs. 13,96,465 and Rs. 5,04,568. BSNL filed an appeal under Section 37 of the Act against the awards and the orders passed by the Commercial Court.

Counsel for BSNL argued that due procedure was not followed by the Sole Arbitrator in proceeding with the arbitration. It was argued that after the rejoinder to written submissions had been filed, claimant sought time to amend the statement of claims which was rejected. However, later time was granted to the claimant to file a fresh statement of claims which was field beyond period prescribed under Section 24(2) of the Act.

It was argued that due to COVID-19, the counsel for BSNL suffered personal loss and was seriously ill, a fact which was not considered by the Sole Arbitrator while proceedings with the arbitration and passing an ex-parte award. It was also stated that the extension of limitation during COVID-19 was not taken into account by the Sole Arbitrator.

Counsel for claimant-respondent argued that BSNL did not bother to participate in the proceedings, and its conduct itself disentitles BSNL from any relief in appeal. It was argued that even though time was sought by BSNL for filing reply to fresh statement of claims, the same was never done and no one appeared on behalf of the body corporate in the arbitration proceedings.

High Court Verdict

On the perusal of the order sheet of the arbitral proceedings, the Court observed that on several occasions, after filing of the amended statement of claims, no one appeared on behalf of BSNL. It was observed that on certain occasions time was sought for filing replies only telephonically.

“The order sheet of the sole arbitrator beyond shadow of doubt depicts that the BSNL was not serious and rather reckless in prosecuting the proceedings before the sole arbitrator. Though at the relevant time the nation was affected with Covid-19 and there happened to be orders of the Hon'ble Supreme Court for excluding the period from 15.03.2020 to 28.02.2022 relatable to the proceedings 23(4) and 29A of the A & C Act, 1996 but, what is relevant is the conduct of the BSNL in pursuing the proceedings.”

The Court observed that BSNL was made aware of the non-appearance of it's counsel in the arbitral proceedings at every stage, however, no one appeared. The Court noted that BSNL did not attempt to inform the arbitrator about the impediments and illness of the counsel. It was held that the arbitrator could not have waited with the proceedings for unlimited period of time.

The Court observed that the period of limitation was extended by virtue of extension of limitation by the Supreme Court during COVID-19 period. Thus, it was held that fresh statement of claim was filed within time prescribed under Section 23(4) of the Act.

The Court relied on the decision of the Calcutta High Court in Yashovardhan Sinha HUF & Anr. Vs. Satyatej Vyapaar Pvt. Ltd., which was upheld by the Supreme Court, wherein it was held that the period of 6 months for exchanging pleadings in arbitration is not mandatory as no consequence of its non-compliance is provided in the Act. It was held that time period was provided as a directory measure to ensure that the arbitral proceedings are concluded in a timely manner.

Accordingly, holding that there was default on part of BSNL, the Court dismissed the appeals.

Case Title: Bharat Sanchar Nigam Limited and another v. Chaurasiya Enterprises and 2 others [APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 305 of 2024]

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