Gujarat High Court Reconsiders 120-Day Deadline For Written Statements In Commercial Cases, Says Should Accommodate Exceptional Circumstances

The division bench of Justices NV Anjaria and DM Desai observed, “Even though the legislature has made the particular provision mandatory, the court of law would not allow such provision to apply blindfolded irrespective of compulsive situation and the set of facts which may arise unprecedented, more particularly sticking to a mere letter without its spirit, in application of the provision, it can take toll of substantive rights of the parties by ignoring the compulsive situations arising beyond control.”

It added “Application of laws has to be realistic, not static. It is true that time limit prescribed for filing the written statement in the commercial suit is mandatory, yet the thing to be done within such time could be viewed as procedural. As far as the procedural provisions are concerned, even while not discounting its mandatory nature, they should be allowed to bend to suit the peculiar situation, without sacrificing its crux requirement.”

The above ruling came in a Special Civil Application which challenged the order of the Judge, Commercial Court, City Civil Court, Ahmedabad in a Commercial Civil Suit whereby the Commercial Court below had rejected the application of the petitioner-original defendant refusing the petitioner to file the written statement.

The respondent/plaintiff was involved in the business of undertaking contracts related to plumbing, water supply, and drainage systems. The petitioner, on the other hand, was a limited company in the power transmission and infrastructure EPC space, executing projects covering designs, testing, manufacturing, fabrication, and construction of various infrastructure projects.

The petitioner, formerly known as JMC Projects (India) Ltd., had been granted a contract in 2011 by the Ministry of Health and Welfare for the construction of the All India Institute of Medical Sciences building in Rishikesh. The petitioner subcontracted a portion of plumbing works and awarded it to the respondent.

The respondent submitted its bid on 01.03.2011, and after negotiations, was awarded the contract with a total price of Rs.6,60,00,000/-. However, the respondent was unable to complete the work and vacated the site on 30.09.2012. The petitioner terminated the contract on 18.12.2012, and the termination was not contested by the respondent.

Following this, the respondent submitted a final bill on 28.12.2012 for Rs.1,85,28,190/-. The petitioner alleged that this bill was inflated and later it was reduced to Rs.1,12,35,217/-. Despite the respondent initiating arbitration proceedings in 2017, the petition was dismissed on 18.01.2018 by the Allahabad High Court.

Subsequently, the respondent filed Commercial Civil Suit No. 48 of 2019 on 18.03.2019 for the recovery of Rs.1,12,35,217/- against the petitioner. The petitioner was served with the summons on 19.03.2019, requiring them to file a written statement by 19.04.2019. The petitioner, however, sought permission to file the written statement within the residual 90-day period, and the court granted this prayer on 11.05.2019.

Upon a State Government Notification, the case was transferred to the Court of Chief Judge, Small Causes Court, on 17.06.2019. The parties were directed to appear before this court on 10.07.2019.

The petitioner claims that, although the written statement was ready and notarized on 09.07.2019, they were unable to file it due to the transfer of the case and the subsequent delay in its listing before the Small Causes Court.

The suit was finally listed on 19.08.2019 as Commercial Civil Suit No.303 of 2019. The petitioner alleges that they were not informed about the date of the hearing until a notice was issued, stating that the next hearing would be on 07.10.2019.

The written statement was presented on this date, accompanied by an application to condone the delay and an application under Order VII Rule 11, both of which were contested. This petition was subsequently filed to address these issues.

The Court, in its observation on the application of the law of limitation, highlighted the importance of ensuring reasonable diligence on the part of litigants to prevent stale claims and the loss of evidence. It emphasized that while the cause of action may persist after the expiration of the limitation period, the right to action becomes barred as it goes dormant.

Furthermore, the Court distinguished the law of limitation into two segments: one pertaining to the limitation period for seeking substantive relief and the other specifying time-bound procedural actions in the litigation process. It noted that certain procedural timelines, such as the 120-day period for filing a written statement in a commercial suit, are legislatively mandated and must be adhered to.

The Court underscored the purpose of the justice delivery system, which is to enforce substantive rights rather than encourage procedural disputes. It urged a balance between adhering to the letter of the law and considering its spirit.

The Court acknowledged that exceptions exist even in the application of the laws of limitation, especially in cases involving fraud, disability, concealment, and other unavoidable situations. These exceptions, it noted, are not exhaustive, aiming to protect substantive rights by aligning the legal process with the factual context.

The Court specifically mentioned an exception created during the Covid-19 pandemic, where the Supreme Court, in the case of Prakash Corporates vs Dee Vee Projects Limited [(2022) 5 SCC 112]., applied the principle of dies non juridicus, and allowed for the exclusion of the extraordinary and uncontrollable period from the limitation period, recognizing the unique challenges posed by the pandemic.

The Court opined, “The above situation also represents what is considered as dies non juridicus-the days on which the Courts would not carry on the business. There is no reason that the situations like loss of papers, non-availability of physical record of the case, non-availability of the court or non-listing of the case could be classified as situational categories where the principles of dies non juridicus would apply.”

“The circumstances obtained in the present case could be said to be fortuitous circumstance for the defendant, created by quirk of facts and vagaries of the events. The petitioner defendant was not to be attributed with any fault for the same. Physical non-availability of record became the debilitating factor. The period of extraordinary circumstance, which prevents the litigant to act and disable the court from functioning is indeed to be viewed as "freezing time",” the Court added while overturning the order issued by the Commercial Court, City Civil Court, and simultaneously, granted the petitioner the opportunity to include its written statement in the record of the suit proceedings.

Appearance: Mr Manish Bhatt, Sr.Advocate For Ms Shailee S Joshi(11582) For The Petitioner(S) No. 1 Munjaal M Bhatt(8283) For The Petitioner(S) No. 1 Krishal H Patel(9644) For The Respondent(S) No. 1

LL Citation: 2023 LiveLaw (Guj) 195

Case Title: Kalpataru Projects International Limited Versus Ssa Projects Pvt. Ltd

Case No.: R/Special Civil Application No. 10439 Of 2023

Click Here To Read The Order / Judgement