COVID-19 – Dispute Resolution | Technology Transition And Some Recent Judgements

The outbreak of the coronavirus disease 'COVID-19' has affected the dispensation of justice the world over in more ways than was initially fathomed. With the World Health Organization declaring the disease as a pandemic on March 11, 2020 and pursuant to the earliest containment measures taken by various governments and authorities in India, the Indian courts too have been prompt in addressing the situation. As is widely known, lakhs of people including judges, lawyers, litigants and courts staff, frequent court premises making them amongst the more crowded spaces in the country, and rendering these individuals highly vulnerable to contracting the virus. Accordingly, several courts and tribunals across the country begun to restrict their functioning to the hearing of only urgent matters even before March 24, 2020, when the nationwide lockdown came into force.

Emphasis on urgent cases and adjournment of all other matters

As of now, the courts, tribunals and other forums in India have, restricted their functioning to entertain only urgent (and in some cases, "most urgent" or "extremely urgent") matters. The Supreme Court, High Courts, district courts and tribunals have issued ad hoc procedures and guidelines relating to mentioning, filing and hearing of such urgent matters. In some cases, modalities are being adjusted to keep up with the dynamic conditions. In the case of most forums, urgency is either to be conveyed telephonically or electronically, by way of a brief memo. Should the matter be deemed urgent by the judge or registrar in- charge, pleadings (as per the specified format, if any) and relevant documents are to be uploaded using e-filing facilities or sent to designated email IDs. Hearings are now primarily conducted through video conferencing, though this has not been without its fair share of issues relating to connectivity, inaudibility and/ or, lack of access to requisite technology and hardware faced by various stakeholders. For instance, in a recent case before the Rajasthan High Court 1 , a bail matter was adjourned owing to the infeasibility expressed by the judge of simultaneously hearing all the counsel for the parties over a video conference.

There is also lack of uniformity with respect to clarity on what constitutes an urgent, extremely urgent and most urgent matter. Further, all cases falling outside the scope of these descriptions have not been heard since the second week of March, 2020 and being adjourned from time to time, and in some cases, long dates are being given. Such adjournments would only add to the existing heavy backlog of cases. As a matter of fact, litigants have been advised to exercise caution in approaching the courts in matters that may not be of pressing urgency, and certain courts, including the Bombay High Court 2 , have even imposed costs on litigants on finding that mentioned cases were not, in fact, urgent. 

Transition to technology-based operations

In order to enable hearing of urgent matters, various methods are being implemented, including video conferencing technology as stated above. This added to the pre-existing endeavor by the Indian judiciary to embrace technology in its day-to-day functioning by, inter alia, enabling electronic filings and conduct of certain litigation and alternate dispute mechanisms proceedings via video-conferencing. More steps are currently underway at all levels of the judiciary to put in place workable technology- based systems for conduct of judicial proceedings so as to avoid any compromise on the core legal principles of adjudication. 

Taking cognizance of the steps taken by courts across the country, the Supreme Court vide an order dated April 6, 2020 in Suo Moto W.P. (Civil) No. 5/2020 has issued guidelines and expressly authorized the High Courts to adopt measures required to "ensure the robust functioning of the judicial system" through the use of video conferencing technologies during the COVID-19 pandemic.

The High Courts have been authorized to determine their respective modalities to make, what the Supreme Court has termed a "temporary transition to the use of video-conferencing technologies". All courts have been directed to maintain helplines for quality or inaudibility related complaints during the proceeding or immediately after its conclusion . District courts have been directed to comply with the procedures put in place by the concerned High Courts.

The Supreme Court has also directed that until appropriate rules are framed by the High Courts, video conferencing shall be mainly employed for hearing arguments whether at the trial stage or at the  appellate stage. Recording of evidence by way of video conferencing is permissible but only with the mutual consent of both parties. Further, in cases where arguments or recording of evidence in a courtroom is found necessary, social distancing norms are to be adhered to.

Extension of Limitation

Another significant measure by the Supreme Court to mitigate challenges being faced by litigants and their advocates owing to the pandemic has been by way of an order dated March 23, 2020 whereby the applicable period of limitation for filing petitions, applications, suits, appeals and all other proceedings have been extended with effect from March 15, 2020 until further orders. These directions, passed by the Apex Court in suo moto proceedings (Suo Moto W.P. (Civil) No. 3 of 2020), are applicable to all courts, tribunals and authorities in India and have understandably brought succor to litigants, lawyers and court administrators and staff alike.

Need for clarity on directions by courts mandating time bound compliance

While the above order dated March 23, 2020 clarifies the position on the limitation period for filing of cases, appeals etc., the fate of court orders and directions mandating time bound compliance requires more clarity. For instance, in a scenario where an order directing handover of immovable property to A by B is required to be complied with by April 13, 2020 (i.e. during the nationwide lockdown) and if on account of the lockdown compliance becomes impossible, it remains to be seen how the courts, especially the subordinate courts across India, will treat such non-compliance in the absence of any clarification. It shall accordingly have to be seen whether the courts will grant extensions for compliance of orders after the lockdown for reasons of impossibility or difficulties attributable to the lockdown.

Although it is expected that the courts may take a lenient view on non-compliances due to lack of clarity and/ or impossibility, it is likely that non-compliances may not be condoned in cases where they have serious repercussions on the rights and interests of parties or the public at large. In urgent cases, an aggrieved party may also approach the relevant court/ forum for relief and compliance, though whether the matter is deemed urgent by the court shall remain to be seen.

Disputes relating to commercial contracts and COVID-19

A common concern of several parties to contractual arrangements has been whether the pandemic and the steps taken to combat it by the government are tantamount to a Force Majeure (FM) event. A significant number of disputes have also arisen pursuant to the issuance of a circular by the Reserve Bank of India (RBI) dated March 27, 2020 (RBI Circular) whereby certain concessionary measures were introduced to mitigate the burden of debt servicing by granting, inter alia, a moratorium and deferment in loan interest payments and repayments of installments falling due between March 1, 2020 and May 31, 2020 (Moratorium Period).

Some recent judgments which indicate the different views and approaches taken by the judiciary in the current circumstances have been set out below:

• In a recent decision in Standard Retail v G.S. Global Corp. 3 the issue of whether the COVID-19 pandemic qualified as a FM event was adjudicated by the Bombay High Court based on the terms of the FM clauses in the contracts between the parties. There, while the FM clauses included epidemics and government orders and regulations within its ambit, the benefit of the clause was given only to the respondent-seller and it was given the discretion to terminate the contracts or delay performance of the contracts for a reasonable period of time in case the performance of its obligations was affected by an FM event. The Court therefore found that the FM clauses could not come to the aid of the petitioners therein.
• The Court also examined whether the pandemic stood and in other facts and circumstances the test of Section 56 of the Indian Contract Act, 1872 (Section 56). The petitioners therein sought to restrain the respondents from inter alia encashment of letters of credit citing the pandemic and a resultant unenforceability and frustration of contract as per Section 56. The contracts between the parties were for supply of steel by the respondent no. 1 therein to the petitioners. The argument with respect to Section 56 was rejected for the reasons, inter alia, that (i) the distribution of steel to be supplied by the respondent no. 1 was an essential service as per government advisories/ notifications and that there was no impediment on its movement; (ii) the respondent no. 1 had complied with its obligations and the fact that the petitioner would not be able to perform its obligations so far as its own purchasers were concerned and/or it would suffer damages, is not a factor which can be considered and held against the respondent no. 1; (iii) the lockdown would be for a limited period and cannot come to the rescue of the petitioners to resile from their contractua obligations.
• The Delhi High Court in Anant Raj v Yes Bank 4 dealt with the issue of whether the account of the petitioner-borrower, which in the ordinary course would have been classified as a non-performing asset (NPA) on March 31, 2020, could be declared as a NPA in light of the 3-month moratorium and consequent repayment schedule granted for all payments falling due during the Moratorium Period under the RBI Circular. The respondent-bank contended that these moratorium guidelines and package were not applicable to the petitioner since that petitioner was already in prior default as on March 1, 2020. However, the learned Judge was prima facie of the view that the account could not have been classified as an NPA on March 31, 2020 as the said date fell within the Moratorium Period. Accordingly, status quo ante was directed and the account classification was restored to its status as on March 1, 2020.
• In Transcon Skycity Pvt Ltd v ICICI Bank Ors., 5 the petitioner-borrower had defaulted in payments due on January 15, 2020 and February 15, 2020 respectively. Non-payment by April 15, 2020 and May 15, 2020 respectively, i.e. within 90 days of the dates of default, would result in the classification of the accounts as NPAs. The Bombay High Court in this case expressed that it had refrained from coming to a categorical finding on whether the computation of the 90-day NPA- declaration period for defaults committed prior to March 1, 2020 comes to a halt during the lockdown and/or the Moratorium Period and instead, was guided by the need to "preserve the parties in status quo ensuring the minimal prejudice to both sides in these unprecedented and exceptionally difficult times". It, however, found that the relief to the petitioners was co-terminus with the lockdown period and not with the declared end of the moratorium as the defaults occurred before March 1, 2020. It was held that the period of lockdown (and not the Moratorium Period) would be excluded from consideration in the computation of the 90-day NPA-declaration period. Accordingly, on the lockdown being completely lifted, the petitioners would cease to be protected and computation of the remainder of the 90-day period would commence. It was, however, clarified that the order was not to serve as a precedent.
• The decision in Ideal Toll & Infrastructure v ICICI Home Finance 6 of the Bombay High Court pertained to a case of a pledge being invoked on account of a default in repayment of a debt. The Court was in agreement that the defendant-bank was entitled to sell the security i.e., the pledged shares, in view of the default committed on January 12, 2020. The Court was also prima facie of the view that for installments due as of January, 2020 i.e., prior to the Moratorium Period, the plaintiff could not draw benefit from the RBI Circular. However, given the willingness of the plaintiff to regularize the account, and citing that both parties’ rights were entitled to be protected and further, that the plaintiffs’ income stream stood seriously depleted on account of the lockdown, the Court, inter alia, set out a re-scheduled repayment plan and restrained the bank from selling the shares that had not yet been sold.
• In Rural Fairprice Wholesale V IDBI Trusteeship Services 7 the plaintiff, by way of an interim application in a suit, sought to restrain a debenture trustee from selling the security, i.e. pledge shares owing to a default under the debenture trust deed. Considering the sharp decline in the price of the pledged shared on account of COVID-19 and the consequent collapse of the share market, the Bombay High Court restrained the sale of the pledged shares.

The spectrum of disputes, and the subject areas and questions of law involved, is expected only to widen. Evidently, the overarching situation appears to be evolving rapidly and stakeholders shall have to be guided by the view taken by the courts on the legal implications of this hitherto unprecedented crisis.

Last, but not the least, a progressive transition towards the use of technology will, in the long run, certainly help in the expeditious delivery of justice, at least in commercial disputes, and would lead to fewer adjournments, greater reliance on written submissions and evidence and succinct arguments; and physical filings may have a longer or never ending wait considering potential risk of spreading the virus (COVID or any other in future) from paper may remain…