In a significant decision, the Allahabad High Court ruled that the limitation extensions due to COVID-19 cannot be claimed automatically, especially in cases where a party has been negligent in pursuing its case. The court observed that extensions of deadlines set by the Supreme Court in response to the pandemic do not apply by default, emphasizing that parties must justify their delays with sufficient cause.
Background of the Case
The case originated from a dispute between Bharat Sanchar Nigam Limited (BSNL) and Chaurasiya Enterprises over contracts awarded for laying underground optical fiber cables in Bhadohi, Uttar Pradesh, in 2015. Disputes over unpaid dues led Chaurasiya Enterprises to issue demand notices in March 2019, requesting BSNL to settle outstanding amounts or appoint an arbitrator within 30 days. With no response from BSNL, Chaurasiya Enterprises sought arbitration through the Allahabad High Court, resulting in the appointment of Brahmdeo Mishra, a retired district judge, as the sole arbitrator.
After a series of proceedings, the arbitrator ruled in favor of Chaurasiya Enterprises in 2021, awarding a total of ₹1.23 crore across multiple cases. BSNL challenged the awards before the Commercial Court in Varanasi, citing procedural violations and bias. The Commercial Court dismissed BSNL’s objections, which led BSNL to file appeals under Section 37 of the Arbitration and Conciliation Act, 1996, before the Allahabad High Court.
Legal Issues and Key Arguments
BSNL’s appeal raised crucial questions about the impact of the COVID-19 pandemic on procedural timelines, including:
1. Applicability of COVID-19 Limitation Extensions:
– BSNL argued that the extensions granted by the Supreme Court should automatically apply to arbitration proceedings. The Supreme Court’s orders extended limitation periods for legal proceedings from March 15, 2020, to February 28, 2022, due to the pandemic’s impact.
– Chaurasiya Enterprises countered that the extensions were not meant to be automatic and could not excuse BSNL’s consistent lack of diligence during arbitration.
2. Failure to Attend Arbitration Proceedings:
– BSNL contended that the pandemic had severely affected its ability to participate in the arbitration proceedings. Its counsel, aged 70, contracted COVID-19, and his wife later succumbed to the virus, causing further disruptions.
– However, the High Court noted that BSNL failed to communicate its difficulties to the arbitrator adequately and did not seek further extensions despite being aware of the arbitration schedule.
3. Completion of Pleadings under Section 23(4) of the Act:
– BSNL argued that the six-month time limit for completing pleadings under Section 23(4) was violated, thus terminating the arbitrator’s mandate. Chaurasiya Enterprises maintained that delays were attributable to BSNL’s absence and not to any failure on the part of the arbitrator or the claimant.
Court’s Observations and Judgment
The Division Bench, comprising Chief Justice Arun Bhansali and Justice Vikas Budhwar, dismissed BSNL’s appeals, upholding the Commercial Court’s decision. The court underscored key principles:
– No Automatic Extension: The court held that COVID-19-related extensions were not automatic and must be applied in context, with parties required to demonstrate justified reasons for seeking such extensions. The court remarked, “Extensions provided during the pandemic cannot be invoked indiscriminately, especially in instances where a party has shown negligence.”
– Conduct of Parties: The court criticized BSNL’s lack of diligence, noting its failure to attend hearings, file written statements on time, and communicate genuine difficulties to the arbitrator. The court observed, “The benefit of COVID-19-related extensions cannot be availed by parties who are otherwise reckless and indifferent to procedural requirements.”
– Interpretation of Section 23(4): Referring to previous rulings, the court clarified that the six-month timeline for pleadings is directory rather than mandatory. The court stated, “While the six-month limit aims to ensure expediency, it does not automatically terminate the arbitrator’s mandate upon non-compliance, especially when delays are attributable to one party’s default.”
Case Details
– Case Title: Bharat Sanchar Nigam Limited & Another v. Chaurasiya Enterprises & Others
– Case Numbers: Arbitration Appeal No. 305/2024 (Leading) and connected appeals 306/2024, 307/2024, 308/2024, and 310/2024
– Court: Allahabad High Court
– Bench: Chief Justice Arun Bhansali, Justice Vikas Budhwar
– Counsels: B.K. Singh Raghuvanshi (for BSNL); Daya Shankar and Mahendra Kumar Mishra (for Chaurasiya Enterprises)
