LEGAL UPDATE| SUPREME COURT CLARIFICATION ON EXTENSION OF LIMITATION PERIOD

The Supreme Court of India in a recent case of Sagufa Ahmed vs Upper Assam Plywood Products has held that the order passed by them on 23 March 2020 (March Order) extending the period of limitation on account of the Covid-19 pandemic would not be applicable to the time period up to which delay can be condoned under the discretion provided for by a statute.

BACKGROUND OF THE CASE

• The Appellants together claimed to hold 24.89% of the shares of the Upper Assam Plywood Products Private Limited (Respondent Company). The Appellants had moved an application before the National Company Law Tribunal, Guwahati (NCLT) for the winding up of the company. The petition was dismissed by an order dated 25 October 2019 (NCLT Order).
  
  
• The Appellants stated that they had applied for the certified copy of the NCLT Order on the 21 November 2019. The Appellants further stated that they received the certified copy of NCLT Order on 19 December 2019.
  
  
• Pursuant to receiving the certified copy of the NCLT Order on 19 December 2019, the Appellants chose to file the statutory appeal before the National Company Law Appellate Tribunal (NCLAT) on 20 July 2020. The Appeal was filed along with an application for condonation of delay.
  
  
• By an order dated 4 August 2020, the NCLAT dismissed the application of condonation of delay and the appeal on the ground that it was barred by limitation and the NCLAT had no power to condone the delay beyond the prescribed period of 45 days as provided under Section 421(3) of the Companies Act, 2013. This application filed by the Appellants in the NCLAT had been moved in July 2020 but the period of limitation stood lapsed on 18 March 2020. The Appellants herein approached the Supreme Court in an appeal from the decision of the NCLAT dated 4 August 2020.
  

THE SUPREME COURT HELD

• The main contentions before the Supreme Court were that: (a) NCLAT failed to note of the March Order passed by the Supreme Court wherein the period of limitation for filling any proceeding was extended from 15 March 2020 and thereafter until further orders and; (b) that the NCLAT had wrongly calculated the period of limitation from the date of the NCLT order which was contrary to the provisions of Section 421(3) of the Companies Act,2013.
  
  
• Section 421(1) provides for a remedy of an appeal to the NCLAT against the order of the NCLT. Section 421(3) prescribes the period of limitation of 45 days for filing an appeal and the proviso thereunder confers a limited discretion upon the NCLAT to condone the delay.
  
  
• The certified copy of the order of the NCLT was received by the Appellants on 19 December 2019. The Appellants had 45 days to file an appeal which expired on 2 February 2020. By the virtue of the proviso, the NCLAT was empowered to condone the delay up to a period of 45 days. This period started from the 2 February and expired on 18 March 2020. The Appeal was file before the NCLAT on the 20 July 2020. The Appellants relied upon the March Order of the Supreme Court wherein the period of limitation for filling any proceeding was extended until further orders.
  
  
• The Supreme Court clarified that vide its March Order, what was extended was only the prescribed period of limitation and not the period up to which delay can be condoned in exercise conferred by the statute. The order passed by the Supreme Court was intended to benefit vigilant litigants who were prevented due to the pandemic and the lockdown, from initiating proceedings within the period of limitation prescribed by general or special law.
  
  
• Further referring to Section 10 of the General Clauses Act, 1897 and the provisions of the Limitation Act the Supreme Court stated that the expression ‘prescribed period’ appearing in Section 4 could not be construed to mean anything other than the period of limitation. Any period beyond the ‘prescribed period’, during which the Court or Tribunal has the discretion to allow a person to institute the proceedings, cannot be construed to be ‘prescribed period’. Therefore, the Appellants could not have claimed the benefit of the March Order for enlarging, even the period up to which delay can be condoned. Hence the Supreme Court upheld the order of passed by the NCLAT while dismissing the appeal and application for condonation of delay.

MHCO Comment :

This judgment provides further clarification to the interpretation of the term `prescribed period` under the Limitation Act, 1963 and a welcome precedent for all the lower courts who shall be dealing with the issues pertaining to the period of limitation. This judgement shall further provide a much-required clarity to all those cases wherein the blanket benefit of extension of limitation period has been taken on account of orders passed by the Supreme Court extending the period of limitation since lockdown was imposed in the country.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

 CONSUMER PROTECTION ACT | DRAFT GUIDELINE FOR MISLEADING ADVERTISEMENT

The Government of India issued draft Central Consumer Protection Authority (Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements) Guidelines, 2020 (Guidelines) under the Consumer Protection Act, 2019 (Act).This update summarizes and analyses the Guidelines for prevention of misleading advertisements with an aim to protect the consumers.

Scope and Applicability of the Guidelines

• The Guidelines cover all advertising/marketing communications regardless of form, format, or medium.
  
  
• The Guidelines apply to the manufacturer/service providers whose products/services are subject of the advertising/marketing communications, as well as to advertisement agencies and endorsers (wherever applicable) of the product/service.
  

Conditions for a valid Advertisement

• The advertisement must contain truthful and honest representations; and not mislead consumers by exaggerating. The advertisement should not suggest that the claims made in it are universally accepted and must not mislead about the nature or extent of the risk to consumers’ personal security.
  
  
• Advertisements should not be offensive to generally accepted standards of the public.
  
  
• An advertisement should not be similar in terms of layout, slogans, music, visual presentation, etc. and should also be not similar to the previous advertisements that may have been published by another advertiser.

Types of Advertising

• Comparative advertising: It shall be permissible only if it is factual, accurate, and capable of substantiation.
  
  
• Bait advertising: The manufacturers have to ensure that there is an adequate supply of the goods or services to meet the demand that such advertisements generate. If supply is short, the advertisements have to say that the stock is limited. The Guidelines add that advertisements cannot entice customers to buy something without a ``reasonable prospect`` of selling it at the price offered.
  
  
• Surrogate advertising: Advertisements for goods or services whose advertising is otherwise prohibited or restricted by law shall not circumvent such restrictions by purporting to be advertisements for other goods or services, the advertising of which is not prohibited or restricted by law.
  
  
• Puffery: Advertisement can make a claim in the nature of obvious exaggeration, in the nature of a claim that a reasonable consumer is unlikely to take literally.
  
  
• Free claims: An advertisement shall not describe a good or service as `free`, `without charge` or other similar terms if a consumerhas to pay anything other than the unavoidable cost of responding to the advertisement and collecting or paying for the delivery of the item.
  
  
• Advertisement targeted at children: The Guidelines prescribe a long list of rules and guidelines for advertisements that target children. Advertisements targeted at children cannot in any way condone, encourage or emulate behaviour dangerous to children; take advantage of children's inexperience, condone or encourage bullying; feature children for tobacco or alcohol-based products.
  
  
• Prohibited advertisement: Advertisement that is likely to incite persons to commit crime and promotes disorder, violence or intolerance; encourages or propagates the use of products which are banned under any law for the time being in force; or shows, glorifies, or refers to a dangerous practice, or manifests a disregard for safety or encourages negligent behavior are prohibited.

Disclaimers

• Any disclaimer that has a small font size in advertisements and comparative advertising and is not factual, will be considered to be misleading and may carry a penalty with it.

Endorser

• It is stated that the honesty of statements and due diligence is to be made by an endorser in support of the advertisements.
  
  
• This provision is more of a mandatory provision rather than a directive. The draft Guidelines have divided endorsements into three major provisions namely, honest statements by endorsers, personal use of products and consumer endorsement that also includes celebrity endorsement and expert endorsements.

MHCO Comment:

The Guidelines area welcome move by the government. They propose to regulate advertisements and hold manufacturers, service providers, advertising agencies as well as brand endorsers accountable for any misleading claims for misleading advertisements. Further, as these Guidelines cover all formats, including print, television and social media, advertisers and endorsers have to be more careful with what they associate themselves with. These Guidelines shall majorly hold accountable those celebrities who endorse products without much accountability.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.comfor any assistance