Supreme Court referred the matter to the Chief Justice of India to convene an appropriate three-judge bench for a comprehensive examination and authoritative pronouncement to answer the question of whether the time-barred debts can be recovered through remedies other than civil suits as per special laws.
The Supreme Court Bench comprising Justice Surya Kant and Justice K.V. Viswanathan was hearing appeals on recovery of time-barred debts and held that the Recovery of Dues Act, 1979, and the State Financial Corporation Act, 1951, are the special laws that enable the recovery of dues regardless of whether they are time-barred under the Limitation Act, 1963. Legally recoverable debts, even if time-barred, can be pursued for recovery under these statutes. Thus, the recovery proceedings initiated under the Recovery of Dues Act were deemed valid, aligning with established legal principles.
The Supreme Court, in its order, clarified that the Recovery of Dues Act, 1979, and the State Financial Corporation Act, 1951, provide distinct mechanisms for the recovery of dues, irrespective of whether the debts are time-barred under the Limitation Act, 1963. It emphasized that while the statute of limitation bars the remedy to file a civil suit, it does not extinguish the underlying debt. The Supreme Court reaffirmed that legally recoverable debts, even if time-barred, remain eligible for recovery under specific statutory provisions, serving a public purpose. Therefore, the recovery proceedings initiated under the Recovery of Dues Act were deemed valid, irrespective of the debt's limitation status, in line with established legal principles and precedents.
The Supreme Court granted leave to hear appeals arising from a judgment of the Division Bench of the High Court of Punjab and Haryana at Chandigarh, which dismissed writ petitions contesting the recovery of time-barred debts under the Haryana Public Moneys (Recovery of Dues) Act, 1979, and the State Financial Corporation Act, 1951. The appellants invoked the precedent set in the State of Kerala and Others vs. V.R. Kalliyanikutty & Anr. (1999) 3 SCC 657, arguing against the recovery of such debts. However, the High Court differentiated this judgment, prompting the Supreme Court's intervention.
The appeals involved two distinct cases: one concerning M/s Khemka Ispat Limited and its term loan from HSIDC Ltd., and the other involving a term loan by Haryana Financial Corporation to Cosmo Flex Private Limited. Despite legal proceedings, the recovery efforts persisted, leading to the Supreme Court's scrutiny of the validity of the recovery proceedings under the Recovery of Dues Act in light of the V.R. Kalliyanikutty precedent.
Delving into the legal intricacies, the Supreme Court analyzed the provisions of the Recovery of Dues Act, particularly Sections 2(c) and 3, which define defaulters and outline the recovery procedure. Emphasizing the distinction between a debt and the right of action for its recovery, the court referred to legal principles from Salmond on Jurisprudence. It underscored that while the statute of limitation might preclude civil suits, the power to recover dues under the State Financial Corporations Act remained unaffected, serving a public interest.
Examining the Kerala Revenue Recovery Act, the court noted the applicability of notifications under Section 71, permitting the recovery of dues owed to financial institutions, provided they were legally recoverable. Citing precedents such as Hansraj Gupta v. Dehra Dun-Mussoorie Electric Tramway Co. Ltd. and New Delhi Municipal Committee v. Kalu Ram, the court affirmed that only legally recoverable debts could be pursued under specific statutes.
Further, the court discussed the implications of KGU Trust v. Chief Executive Officer & Anr., asserting that the Limitation Act did not extinguish debts but merely barred the remedy. Highlighting the recent decision in K.C. Ninan v. Kerala State Electricity Board, the court reaffirmed the right to recover dues despite the statute of limitation.
Given the complexity of the legal issues, the Supreme Court referred the matter to the Chief Justice of India to convene an appropriate three-judge bench for a comprehensive examination and authoritative pronouncement.
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Along with the two Acts under consideration, Statutory Corporations at the Central Level such as Small Industries development Bank of India , Exim Bank of India also have their statutes. If the Central statutory Corporations in the field of Lending are also tagged and considered by the Larger Bench, the clarity will emerge and it will also pave way for various consequential measures in their operations
V.Satya venkatarao
Advocate & Former Deputy Managing Director SIDBI