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SUPREME COURT OF INDIA
SURYA KANT, K.V. VISWANATHAN, JJ.
K.P. Khemka & Anr. – Appellants
Versus
Haryana State Industrial and Infrastructure Development Corporation Limited & Ors. – Respondents
Civil Appeal No. 6144 of 2024 (@ SLP (C) No. 14213 of 2015)
With
Charanjeet Gaba – Appellant
Versus
State of Haryana & Ors. – Respondents
Civil Appeal No. 6145 of 2024 (@ SLP (C) No. 23041 of 2015)
Decided on : 08-05-2024
Haryana Public Moneys (Recovery of Dues) Act, 1979 – Section 3 read with Section 32-G of State Financial Corporations Act, 1951 – Limitation Act, 1963 – Section 5 – Recovery of time-barred debt – Debt is not the same thing as right of action for its recovery – While debt is right in creditor with correlative duty on debtor right of action for recovery is in nature of a legal power – While process of filing a civil suit may be barred because of statute of limitation, power to recover vested through Section 32-G of State Financial Corporations Act read with Section 2(c) and Section 3 of Recovery of Dues Act is a distinct power which continues notwithstanding that another mode of recovery through a civil suit is barred – Even where statute of limitation does not apply, power has to be exercised within a reasonable time – Authority under Recovery of Dues Act not being a ‘court’, provisions of Limitation Act cannot proprio vigore apply – For a comprehensive consideration and an authoritative pronouncement after taking into account all aspects, including those dealt with hereinabove, matter needs to be placed before Chief Justice of India to constitute an appropriate three-Judge Bench. (Paras 18, 19, 25 and 32)
Result : Matter referred to Three-Judge Bench.
The document indicates that the proceedings under the Recovery of Dues Act and similar statutes are not conducted by civil courts. Specifically, it states that the machinery for recovery under these Acts does not have the trappings of a court and that the provisions of the Limitation Act cannot proprio vigore apply to these recovery mechanisms (!) (!) . Furthermore, it emphasizes that the right of recovery conferred by the statutes is a distinct power, separate from the civil remedy of filing a suit, and that civil courts are generally not vested with jurisdiction to entertain or adjudicate upon cases related to recovery under these Acts (!) .
In addition, the law confers a special mode of recovery that is independent of civil court proceedings, and civil courts are explicitly barred from exercising jurisdiction over such recovery cases (!) (!) . The proceedings for recovery are meant to be swift and are designed to operate outside the traditional civil suit framework, indicating that civil courts are effectively barred from exercising jurisdiction in these recovery matters.
1. Leave granted.
2. The present appeals arise from the judgment of a Division Bench of the High Court of Punjab and Haryana at Chandigarh dated 24.04.2015 in CWP No. 15983 of 2013 and CWP No. 26452 of 2014. By the said judgment, the High Court dismissed the writ petitions and rejected the contention of the appellants herein that if a debt is time-barred under the Limitation Act, 1963, the same cannot be recovered by resorting to the Haryana Public Moneys (Recovery of Dues) Act, 1979 (for short “the Recovery of Dues Act”) read with the State Financial Corporation Act, 1951. In so holding, the Division Bench applied the well established principle that the Limitation Act, which applies to Courts, merely bars the remedy and does not extinguish the debt.
3. The appellants herein had relied upon the judgment of a three-Judge Bench of this Court in State of Kerala and Others vs. V.R. Kalliyanikutty & Anr. (1999) 3 SCC 657 to contend that a time-barred debt under the Limitation Act cannot be recovered under the Recovery of Dues Act. While dealing with this contention, the High Court relied upon the judgment of a Constitution Bench of this Court in Bombay Dyeing and Manufacturing Company Limited vs. The State of Bombay and Ors., 1958 SCR 1122 to reiterate the principle that the Limitation Act merely bars the remedy and does not extinguish the debt. The High Court also distinguished the judgment in V.R. Kalliyanikutty (supra) by holding that the judgments of this Court in Bombay Dyeing and Manufacturing Company Limited (supra) and Tilokchand and Motichand and Others vs. H.B. Munshi and Another, (1969) 1 SCC 110 were not brought to the notice of the Bench deciding V.R. Kalliyanikutty (supra).
4. Facts in Civil Appeal arising out of SLP (C) No. 14213 of 2015 are as follows:
i. Respondent No.3 - M/s Khemka Ispat Limited was a Company engaged in the business of manufacture, production, import, export, sale and distribution of all types of Cold Rolled Strips, steel sockets, pipe and tube products, and other allied goods.
ii. On 07.03.2003, Respondent No.3 had taken a Term Loan under an Equipment Finance Scheme from Respondent No.1 - Haryana State Industrial and Infrastructure Development Corporation Limited (hereinafter referred to as “the HSIDC Ltd.”) for a sum of Rs.105.90 lakhs. In view of the said Term Loan, Respondent No.3 had entered into a Loan Agreement with HSIDC Ltd. along with the personal guarantees of the appellants herein.
iii. On 31.03.2003, the sanctioned loan amount to the tune of Rs.105 lakhs was disbursed to Respondent No.3. On 15.07.2003, further amount of Rs. 2 lakhs was disbursed. The Loan was to be repaid in five years with a moratorium period of six months w.e.f. 01.10.2003.
iv. On 19.08.2004, the First Default Notice was issued to Respondent No.3 by HSIDC Ltd. along with intimation of a right under Section 29 of the State Financial Corporations Act.
v. In the meantime, Respondent No.3 became a Sick Company and reference was made to the Board for Industrial and Financial Reconstruction (for short “the BIFR”). On 31.07.2006, the outstanding as on date to HSIDC Ltd. was Rs.99.32 lakhs.
vi. On 17.08.2006, BIFR declined Respondent No.3’s Reference and the One-Time Settlement request. ING Vysya Bank also informed the BIFR that it had taken over possession of the unit, in accordance with which the BIFR ordered the reference to have abated. Respondent No. 3 informed the said ING Vysya Bank that the latter will not be responsible for the dues of the HSIDC Ltd, and that the machinery is in possesison of the Company. On 01.06.2007, HSIDC Ltd. took possession of the movables.
vii. While proceedings were carrying on against the principal borrower, on 08.08.2007, Respondent No.1 HSIDC Ltd. issued a show cause notice under Section 3(1)(b) of the Recovery of Dues Act to Respondent No.3, which notice was returned back with the remarks “closed/left”.
viii. On 25.09.2007, a winding up petition was filed by one of the creditors of Respondent No.
Debt is not the same thing as right of action for its recovery – While debt is right in creditor with correlative duty on debtor right of action for recovery is in nature of a legal power.
S.3(1)(c) of the Public Moneys (Recovery of Dues) Act, 1965 is unconstitutional for violating Article 14 by allowing arbitrary recovery procedures without guiding standards.
High Court had wrongly applied the principle of “public policy” to restrain recovery of public loan.
Ext.P4 notification enhancing DRT's pecuniary limit to Rs.20 lakhs supersedes previous restrictions on debt recovery actions below this threshold.
Section 3 of the Goa Public Monies Act provides a constitutional mechanism for the recovery of public dues without infringing Article 14 through arbitrary actions.
Point of Law : Loan agreement - Recovery of amounts due to Financial Corporation as an arrear of land revenue - Substantive relief in an application under Section 31 (1) is something akin to an appli....
Article 137 of Limitation Act reads as description of application.
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