Limitation Period under Arbitration and Negotiable Instrument Act extended- SC

May 11, 2020
Hon’ble Supreme Court SC determines

By Nihit Nagpal and Tulip De

Under both Arbitration and Conciliation Act, 1996 and Negotiable Instruments Act, 1881 timelines for initiating a legal action must be followed strictly and the delays are condoned only under exceptional circumstances. During these unprecedented times of the Covid-19 pandemic and the country wide lockdown, including closure of courts for non-urgent matters, following and complying with the statutory timelines has become difficult.

Considering the manner in which lives and economies have been disrupted by this viral outbreak, the Hon’ble Supreme Court by its order dated March 23, 2020 had extended the statutory timelines for filing pleadings[1]. The March 23, 2020 order was all-encompassing and was applicable to all Courts and Tribunals which included Arbitral Tribunals as well.

Extension of limitation Period under Arbitration Act and Negotiable Instrument Act

As the lockdown now stands extended, the Supreme Court Bench comprising of Chief Justice SA Bobde, Justice Deepak Gupta & Justice Hrishikesh Roy has vide order dated May 06, 2020[2] taken suo motu cognizance for extending the limitation period under the statutory provisions of Section 138 of the Negotiable Instruments Act and Section 29A of the Arbitration and Conciliation Act.

Relevant extract from Supreme Court’s order dated May 06, 2020 has been reproduced below:

The Bench observed “taking into consideration the effect of the Corona Virus (COVID-19) and resultant difficulties being faced by the lawyers and litigants and with a view to obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunal across the country including this Court, it is hereby ordered that all periods of limitation prescribed under the Arbitration and Conciliation Act, 1996 and under section 138 of the Negotiable Instruments Act, 1881 shall be extended with effect from 15.03.2020 till further orders to be passed by this Court in the present proceedings.”

The May 06, 2020 order of the Apex Court was passed in an application seeking extension of limitation for matters under Section 29A of the Arbitration Act and Section 138 of the Negotiable Instrument Act, 1881.

In view of the aforesaid development it would be relevant to enumerate the deadlines and statutory compliances under both the Statues:

Arbitration and Conciliation Act, 1996

Arbitration and Conciliation (Amendment) Act was amended in the year 2015 and inserted Section 29A which  fixes the time-period for passing the arbitral award at twelve months from the date of reference of the dispute to the arbitral tribunal and the same is extendable by another six months with the consent of the parties. Any further extensions can only be granted by the concerned Court and in order to seek an extension of the statutory timeline for completion of arbitration proceedings, both the parties (jointly) or either of the parties individually can file an application before the concerned Court within a reasonable period from either before or after the expiry of 12 months.

Negotiable Instruments Act 1881

The Timeline which must be followed under the Negotiable Instruments Act can be summarised as:

  1. A legal notice is to be sent to the drawer within 30 days from the receipt of return memo of a dishonoured cheque.
  2. In the legal notice, the drawer is to be given 15 days for making the payment, if the payment is made then the issue is settled.
  3. However, if the payment has not been made then a complaint can be filed under Section 138 of the Act within 30 days from the date of expiry of 15 days as specified in the notice.

The Bench further clarified that in case the limitation has expired after March 15, 2020 then the period from March 15 till the date on which the lockdown is lifted in the jurisdictional area where the where the dispute lies or the cause of action arises shall be extended for a period of 15 days after lifting of the lockdown. This means that if the limitation to file a particular case expired on March 18, 2020, then the extension granted will be till 15 days after the lifting of the lockdown.

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