Hon’ble Sudhir Agarwal, J.—In this writ petition, an interesting question of application of limitation to recovery proceedings has been raised, which is of wider public implication.

2. Brief facts, giving rise to present case, are that M/s. Rainbow Steel Limited (hereinafter referred to as “Company”) is a Company incorporated and registered under provisions of Companies Act, 1956 (hereinafter after referred to as “Act, 1956”) and petitioners are Directors of aforesaid Company. On 6.8.1990, Company sought financial assistance from Pradeshiya Industrial and Investment Corporation of U.P. Limited (respondent 1) (hereinafter referred to as “PICUP”) under Equipment Refinance Scheme initiated by Industrial Development Bank of India (hereinafter referred to as “IDBI”) for installation of 15 tons continuous casting machine for the plant used in manufacturing of Ingots/Billots. PICUP sanctioned a loan of Rs. 80.60 lacs on 22.8.1990 under aforesaid Scheme. The bond of guarantee was executed on 29.11.1990 between PICUP and petitioners wherein guarantors agreed for repayment of loan in case of default by Borrower, i.e., Company.

3. The agreement stipulates that on demand, guarantors shall pay to PICUP, whole of such principal sum and/or interest and/or other moneys which may be due to PICUP and will indemnify all loss of principal sum/interest or other moneys secured by mortgage and all costs, charges and expenses whatsoever which PICUP may incur by reason of any default on the part of Company.

4. First instalment was released to Company on 31.1.1991. Therefore, repayment schedule as per Deed of Hypothecation commenced on 28.2.1992. Last instalment was payable on 31.8.1995. Company committed default in repayment of loan amount and interest, whereupon PICUP issued notices dated 23.3.1992, 25.5.1992 and 14.10.1992 under Section 29 of State Financial Corporation Act, 1951 (hereinafter referred to as “Act, 1951”). Thereafter, in Company Petition No. 8 of 1994 filed by another person, this Court passed order on 9.3.1995 for winding up. Sale by Official Liquidator, except lot No. 1, was confirmed by Court’s order dated 22.11.1995.

5. A demand notice for the first time was issued to petitioner-1 on 21.3.2001 demanding a sum of Rs. 4,56,19,798.29 in terms of Bond of Guarantee, which was replied by them raising an objection that demand is barred by limitation. PICUP, however, issued recovery certificates whereupon impugned recovery citations dated 2.7.2001 have been issued by Tehsildar and that are under challenge.

6. A counter-affidavit has been filed by PICUP giving details of outstanding dues in para 9 as under:

		(Rupees in Lacks)
(i)	Loan Sanctioned	80.60
(ii)	Loan Disbursed	77.30
(iii)	Loan Overdue and not paid	77.30
(iv)	Interest at the rate of 15 per cent per annum on overdue principal loan (inclusive of penal interest) Period 1.11.2001 to 31.1.2002	3,40,967.12
(v)	Overdue interest (as on 1.11.2001)	4,32,45,621.00
(vi)	Interest on overdue interest Interest on Overdue Principal (iv)+ Overdue Interest (v) + Interest on overdue interest (vi)	19,07,546.57 4,54,94,134.80
	Total Overdue = Rs. 77,30,000.00+ Rs. 4,54,94,134.80	= Rs. 5,32,24,134.80 only

7. It is, however, stated that Company approached Board of Industrial Finance and Reconstruction (hereinafter referred to as “BIFR”) by filing an application for rehabilitation under Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as “Act, 1985”). PICUP also received notice dated 27.5.1994 to appear before BIFR and participate in the proceedings. Reference was ultimately rejected by BIFR on 28.2.1995 as untenable observing that Company is not in a position of rehabilitation. BIFR also