120-day Limitation Period for filing Written Statement in Commercial Suits Mandatory, Supreme Court [Read Judgment]

The Supreme Court recently clarified that under the prevailing law, the 120-day time limit for filing the written statement in commercial suits is mandatory, leaving no room for courts to exercise their discretion to relax the same..The judgment to this effect was rendered last week by the Bench of Justices Rohinton Nariman and Vineet Saran. In the case at hand, the suit for recovery of money exceeding Rs. 6 crores had originally been filed in March 2017. Summons in the matter was issued to the defendant in July 2017..Ordinarily, the defendant in a such a suit has 30 days from the date of summons to file his written statement in the suit. This time limit may be extended for a further period of 90 days on the Court’s discretion and subject to the payment of appropriate costs. In effect, a 120-day time limit is set for the defendant to file the written statement in the suit..In the instant case, this 120-day time limit expired on November 11, 2017, by which date no written statement had been filed by the defendant. Regardless, the defendant went on to file an application to reject the plaint itself. This application was dismissed by a single judge in December 2017..However, on request by the defendant’s counsel, and in the absence of the plaintiff, the Court extended the time limit for filing a written statement in the matter to December 15, 2017, subject to payment of Rs. 25, 000 to the plaintiff. Accordingly, the defendant filed the written submissions..The plaintiff challenged this order in August 2018. The basis of this challenge was that the 120-day time cap was unambiguously made mandatory with recent amendments made to the Code of Civil Procedure (CPC), 1908, ushered in with the introduction of the Commercial Division and Commercial Appellate Division of High Courts Act, 2015..In September 2018, however, another single judge dismissed the plaintiff’s challenge, holding that the Court’s December 2017 order had attained finality and could not be assailed for that reason. Therefore, the defendant’s written statement was directed to be taken on record..This prompted the plaintiff to approach the Supreme Court challenging both single judge orders. The plaintiff pointed out that, following the introduction of the Commercial Courts Act, 2015, provisos were introduced to Order V, Rule 1, sub-rule (1) and Order VIII Rules 1 and 10 of the CPC. As a result, Courts were not left with any discretion to extend the time limit for filing written statement in a suit beyond 120 days from the date of the summons..Presently, the proviso under Order V, Rule 1 provides that if the defendant fails to file the written statement within the 120-day time limit, “…the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.”.Further, the proviso to Order VIII Rule 1, lays down that if the defendant fails to adhere to this limitation period, “…the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.“.To clear any ambiguity on whether this provision is mandatory or directory, the proviso under Rule 10 of Order VIII reiterates, “Provided further that no Court shall make an order to extend the time provided under Rule 1 of this Order for filing of the written statement.”.In view of these provisions, the Bench noted,.“What is of great importance is the fact that beyond 120 days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the Court shall not allow the written statement to be taken on record. This is further buttressed by the proviso in Order VIII Rule 10 also adding that the Court has no further power to extend the time beyond this period of 120 days.“.The Court also went on to note that the Delhi High Court, on at least two occasions, has held that under the amended law, the 120-day limitation period for filing written statements is mandatory. In this regard, reference was made to the cases of Oku Tech Private Limited v. Sangeet Agarwal & Ors and Maja Cosmetics v. Oasis Commercial Pvt. Ltd. The Bench held,.“We are of the view that the view taken by the Delhi High Court in these judgments is correct in view of the fact that the consequence of forfeiting a right to file the written statement; non-extension of any further time; and the fact that the Court shall not allow the written statement to be taken on record all points to the fact that the earlier law on Order VIII Rule 1 on the filing of written statement under Order VIII Rule 1 [which allowed for more Court discretion in the matter] has now been set at naught.”.In view of these observations, the Court allowed the plaintiff’s appeal..Incidentally, it also clarified that the mere filing of an application to reject the plaint itself, after the 120-day limitation period has run out, would not mean that the defendant can thereafter file his written statement. On this aspect, the Court referred to the following observation in RK Roja v, US Rayudu and Another,