The Supreme Court referred the question of whether time-barred debts can be recovered to a three-judge Bench for consideration. Justices Surya Kant and KV Viswanathan, presiding over the bench, noted the necessity of referring the matter due to conflicting judgments.
NEW DELHI: On Wednesday (May 8th): The Supreme Court referred to a three-judge bench the inquiry into whether debts that are barred by the statute of limitations (meaning civil suits cannot be filed for them) can still be collected using debt-recovery laws. The reference was made while addressing a batch of appeals against a 2015 verdict of the Punjab and Haryana High Court, which had allowed the recovery of time-barred debts through debt-recovery laws.
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Justices Surya Kant and KV Viswanathan, presiding over the bench, noted the necessity of referring the matter due to conflicting judgments.
In order to thoroughly consider the matter and provide an authoritative pronouncement, it is necessary to refer it to the Hon’ble Chief Justice of India for the formation of a suitable three-judge bench
The appellants were represented by advocates Rakesh Kumar, Saurabh Mishra, Preeti Kashyap, Varun Pandit, Shrimay Mishra, Abhimanyu Tewari, Eliza Bar, Siddhant Saroha, Sidhant Awasthy, Manav Bhalla, and Praveer Singh.
Senior Additional Advocate General Lokesh Sinhal, along with advocates Akshay Amritanshu, Nikunj Gupta, Himanshi Shakya, Samyak Jain, Karunakar Mahalik, Manish K Bishnoi, Rajat Navet, Kushagra Pandit, and DS Mahra, appeared for the Haryana State Industrial and Infrastructure Corporation Limited.
Background:
The Punjab and Haryana High Court, in its 2015 judgment, rejected the argument that time-barred debts, as per the Limitation Act of 1963, cannot be recovered through the Haryana Public Moneys (Recovery of Dues) Act, 1979, or the State Financial Corporation Act, 1951. The High Court emphasized that the Limitation Act only bars the remedy of filing a civil suit but does not extinguish the underlying debt itself. Consequently, it held that time-barred debts can indeed be recovered through debt-recovery laws. This verdict was challenged in the Supreme Court through an appeal.
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The appellants relied on a 1999 judgment of the Supreme Court in the case of State of Kerala and Ors v. VR Kalliyanikutty & anr. In this particular case, a three-judge bench ruled that the Kerala Revenue Recovery Act does not create any additional right for creditors to recover outstanding amounts.
It was clarified that amounts due under the Act would only include legally recoverable debts or those that are not time-barred. However, the Punjab and Haryana High Court distinguished this case by citing earlier judgments of the Supreme Court in the Bombay Dyeing case and the case of Tilokchand and Motichand and Others vs. HB Munshi and another. These two judgments were not placed before the bench that delivered the 1999 decision.
In light of this context, the Division Bench of the Supreme Court formulated the following question in its latest order:
“Does the State Financial Corporations Act, 1951, along with the Recovery of Dues Act [of various States], establish a separate entitlement and offer an alternative method for enforcement to recover overdue amounts, even if those amounts are beyond the statute of limitations?”
The Division Bench further noted that in the VR Kalliyanikutty case (which led to the 1999 judgment) was not apprised of this aspect.
“It does seem that there exists an additional entitlement to enforce the claims of financial corporations despite the statute of limitations. The same holds true for the provisions of the Kerala Revenue Recovery Act discussed in V.R. Kalliyanikutty (supra),” the Division Bench added.
Consequently, the Court referred the matter to a three-judge bench for an authoritative decision on the issue.
“The documents, along with this directive, are to be submitted to the Hon’ble Chief Justice of India for appropriate instructions,” the Court instructed.
The Division Bench opined that the power to recover debts under these laws remains distinct and applicable even if a civil suit cannot be filed due to the debt being time-barred. It concluded that financial corporations possess an additional right to enforce their claims, regardless of the limitations prescribed by the Limitation Act. The Bench also noted that this aspect was not brought to the attention of the Bench in the VR Kalliyanikutty case.
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