2024 Supreme(Online)(SC) 3973
SUPREME COURT OF INDIA
K.P. KHEMKA – Appellant
Versus
HARYANA STATE INDUSTRIAL AND INFRASTRUCTURE DEVELOPMENT CORPORATION LIMTED AND ORS – Respondent
C.A. No.-006144-006144 - 2024
The Limitation Act bars the remedy for recovery of debts but does not extinguish the debt itself, allowing recovery under specific statutory provisions even for time-barred debts.
Headnote:(A) Limitation Act, 1963 - Haryana Public Moneys (Recovery of Dues) Act, 1979 - State Financial Corporation Act, 1951 - Recovery of time-barred debts - High Court held that Limitation Act bars remedy but does not extinguish debt - Recovery can proceed under Recovery of Dues Act despite limitation - Court distinguished V.R. Kalliyanikutty case, emphasizing that Recovery of Dues Act provides a mechanism for speedy recovery without creating new rights. (Paras 2, 3, 11, 12, 18, 19)
Facts of the case:
The appeals arise from the dismissal of writ petitions challenging recovery notices issued under the Recovery of Dues Act for debts claimed to be time-barred. The appellants argued that the debts could not be recovered due to the Limitation Act.
Findings of Court:
The Division Bench upheld the principle that the Limitation Act only bars the remedy and does not extinguish the debt, allowing recovery under the Recovery of Dues Act.
Issues: The main issues were whether recovery proceedings under the Recovery of Dues Act are barred by limitation and the interpretation of 'amounts due' in the context of time-barred debts.
Ratio Decidendi: The court reasoned that the Recovery of Dues Act does not create new rights but provides a process for recovery, allowing for the recovery of debts even if they are time-barred.
Result: Appeals dismissed.
ORDER1. Leave granted.
Digitally signed by satish kumar yadav Date: 2024.05.08 15:57:29 IST Reason:
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:
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.
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.
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.
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 “close
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