TaxTMI 
TaxTMI 
2024 (5) TMI 458
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....imitation 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 Com....
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....ing up of Respondent No.3 appears to have been passed on 24.03.2009. ix. When the matter stood thus, on 29.10.2009, Respondent No.1 issued a show cause notice under Section 3(1)(b) of the Recovery of Dues Act to the Appellants and the same was returned with the remarks "left/closed". x. Thereafter, on 10.01.2012, recovery notice sent to the appellants by Respondent No.2, the Additional General Manager of HSIDC Ltd., under Section 3(1)(b) of the Recovery of Dues Act was returned with the remarks "left/closed". The order determining the amount due as Rs. 213.19 lakhs w.e.f 10.01.2012 was passed by the HSIDC Ltd. xi. On 02.02.2012, the HSIDC Ltd. sent a notice under the provisions of the Recovery of Dues Act to the Appellants and the Respondent No. 3 indicating the sum determined to be due from them, which was to the tune of Rs.213.19 lakhs. On 01.03.2012, the appellants filed their reply. This was rejected by the Respondent No. 2, Additional General Manager of HSIDC Ltd., on 15.11.2012. Thereafter, the Respondent No. 2, Additional General Manager of HSIDC Ltd., issued a Final Notice under the provisions of the Recovery of Dues Act dated 15.11.2012 cal....
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.... on 19.08.1999, sent a notice for taking over possession of the Company's assets and thereafter took possession on 31.08.1999. vi. The Haryana Financial Corporation has set-out the time-line of events where multiple recovery notices under the Recovery of Dues Act were issued, leading up to the determination of the sum due from the Appellants herein, in the following terms: "4. ...On continous non-repayment of dues, the possession of the mortgaged properties was taken over under section 29 of the State Financial Corporations Act, 1951. The primary security was disposed of by the Corporation for Rs. 61.00 lakh on 16.12.1999. The Recovery Certificate was issued on 22.09.2000 to the Collectors Gurgaon, Delhi & Srinagar and were returned in the year 2001 on the ground that no immovable/movable properties were available in the names of directors/guarantors and they were not residing at the given addresses. The fresh Recovery Certificate was issued on 10.08.2005 u/s 3 of Haryana Public Moneys (Recovery of Dues) Act, 1979 in the name of Collectors, Sri Nagar, Delhi & Gurgaon through Collector, Gurgaon. The Recovery Certificate pertaining to Collectors, Sri Nagar & Delhi w....
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....fore the Hon'ble High Court as stated above." (emphasis supplied) vii. The appellant challenged the proceedings dated 06.08.2014 by filing CWP No. 26452 of 2014. By the Impugned Order, the Writ Petition was dismissed. viii. In the Special Leave Petition filed before this Court, the case of the Appellant as regards the debt being time-barred is as follows: "A. Because the order/proceedings dated 06.08.2014 passed by Respondent No. 3 under Section 32 (G) of the State Financial Corporation Act for recovery of Rs. 14,55,11,275/- along with pendente lite and future interest could not have been issued as the recovery had already become time barred against the petitioner. Since the recovery on the basis of mortgaged property had already been effected by way of sale dated 16.12.1999 the remaining amount could not be recovered beyond the limited time of three years" Contentions of the Parties 6. Before us, learned counsel for the appellants contend that the judgment in V.R. Kalliyanikutty (supra) directly covers the issue as according to them, in substance, there is no difference between the provisions of the Kerala Revenue Recovery Act, with which ....
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....nikutty (supra) held that the Kerala Recovery Act did not create any new right and that it merely provided a process for speedy recovery. In view of the same, it held that since the Act did not create any right, the person claiming recovery cannot claim recovery of amounts which are not legally recoverable. The Bench thereafter distinguished the judgment in Khadi Gram Udyog Trust v. Ram Chandraji Virajman Mandir, Sarasiya Ghat, Kanpur, (1978) 1 SCC 44 as having no applicability to the interpretation of the Kerala Revenue Recovery Act. It further relied on the judgment of this Court in Director of Industries, U.P. vs. Deep Chand Agarwal (1980) 2 SCC 332 to reinforce its holding on the interpretation of the word 'due' under the Kerala Revenue Recovery Act. The plea that the statute of limitation merely bars the remedy and does not touch upon the right was not accepted by the Court by holding that the rights of the parties are not enlarged by the Kerala Revenue Recovery Act and that unless the Act expressly provided for enlargement of claims extending to the recovery of barred debts, that principle will not apply. Ultimately, the Court held that under the provisions of the Kerala Reve....
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....utstanding amounts due. 14. The real question that arises is do the State Financial Corporations Act, 1951 and the Recovery of Dues Act create a distinct right and provided an alternative mechanism of enforcement to reover the amount due, even if the amounts due were time barred? To answer this question, we need to examine the relevant statutory provisions. 15. The objects and reasons of the State Financial Corporations Act are relevant for the purposes of the present case. They read as under: "The intention is that the State Corporations will confine their activities to financing medium and small scale industrial and will, as far as possible, consider only such cases as are outside the scope of the Industrial Finance Corporation. The State Governments also consider that the State Corporations should be established under a special Statute in order to make it possible to incorporate in the Constitution necessary provisions in regard to majority control by Government, guaranteed by the State Government in regard to the repayment of principal, and payment of a minimum rate of dividend on the shares, restriction on distribution of profits and special powers for the enfor....
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....ce or any instalment thereof or, having become liable under the conditions of the grant to refund the grant or any portion thereof, makes any default in the refund of such grant or portion or any instalment thereof or otherwise fails to comply with the terms of the agreement; 3. Recovery of certain dues as arrears of land revenue (1) Where any sum is recoverable from a defaulter - (a) by the State Governemnt, such officer as it may, by notificaitaon, appoint in this behalf; (b) by a Corporation or a Government company, the Managing Director thereof, shall determine the sum due from the defaulter. (2) The Officer or the Managing Director, as the case may be, referred to in sub-section (1), shall send a certificate to the Collector mentioning the sum due from the defaulter and requesting that such sum together with the cost of proceedings be recovered as if it were an arrear of land revenue. (3) A certificate sent under sub-section (2) shall be conclusive proof of the matters stated therein and the Collector, on receipt of such certificate, shall proceed to recover the amount stated therein as an arrear of land revenue. (....
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....utive authority...The correlative of power is a liability. This connotes the presence of a power vested in someone else, as against the person with the liability. It is the position of one whose legal rights (in the wide sense) may be altered by the exercise of a power...the most important form of liability is that which corresponds to the various powers of action and prosecution. Such liability is independent of the question whether the particular action or prosecution will be successful, and is therefore independent of (say) the duty to pay damages for a civil wrong" (emphasis supplied) As would be clear from the passage above, a debt is not the same thing as the right of action for its recovery. While the debt is the right in the creditor with the corelative duty on the debtor the right of action for recovery is in the nature of a legal power. While the process of filing a civil suit may be barred because of the statute of limitation, the power to recover vested through Section 32-G of the State Financial Corporations Act read with Section 2(c) and Section 3 of the Recovery of Dues Act is a distinct power which continues notwithstanding that another mode of recovery ....
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....able for speedy recovery of loans given by a bank for agricultural purposes as well as for speedy recovery of loans given by the Kerala Financial Corporation. The overall scheme of the Act, therefore, is to provide for speedy recovery, not merely of public revenue but also of certain other kinds of loans which are required to be recovered speedily in public interest. 5. Explaining analogous provisions of the U.P. Public Moneys (Recovery of Dues) Act, 1965, this Court in Director of Industries, U.P. v. Deep Chand Agarwal [(1980) 2 SCC 332 : AIR 1980 SC 801] held that the said Act is passed with the object of providing a speedier remedy to the State Government to realise the loans advanced by it or by the Uttar Pradesh Financial Corporation. Explaining the need for speedy recovery, it says that the State Government while advancing loans does not act as an ordinary banker with a view to earning interest. Ordinarily it advances loans in order to assist the people financially in establishing an industry in the State or for the development of agriculture, animal husbandry or for such other purposes which would advance the economic well-being of the people. Moneys so advanced hav....
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....a) was not drawn to the powers envisaged under the State Financial Corporations Act which were also applicable to the recovery of debts in Kerala. As noticed above, the statement of objects and reasons of the State Financial Corporations Act refers to providing State Financial Corporations with 'special privileges in the matter of enforcement of claims against borrowers'. This is reflected through Section 32-G of the State Financial Corporations Act which we have set-out hereinabove. 22. This Court in V.R. Kallliyanikutty (supra) held that the words 'amounts due' occuring in the Kerala Revenue Recovery Act would only include legally recoverable debts i.e. debts which are not time-barred. For this purpose, it may be apposite to refer to the relevant portions from the decision in V.R. Kalliyanikutty (supra): "9. In the case of Hansraj Gupta v. Dehra Dun-Mussoorie Electric Tramway Co. Ltd. [AIR 1933 PC 63 : 60 IA 13] the Privy Council was required to interpret the words "money due" under Section 186 of the Companies Act, 1913. Section 186 dealt with the recovery of any money due to the company from a contributory. Interpreting the words "money due", the Privy Council said ....
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....f this right simply by making a recovery under the said Act unless there is anything in the Act which expressly brings about such a result. Provisions of the said Act, however, indicate to the contrary. Moreover, such a wide interpretation of "amount due" which destroys an important defence available to a debtor in a suit against him by the creditor, may attract Article 14 against the Act. It would be ironic if an Act for speedy recovery is held as enabling a creditor who has delayed recovery beyond the period of limitation to recover such delayed claims. 12. In the case of New Delhi Municipal Committee v. Kalu Ram [(1976) 3 SCC 407] relying on the Privy Council decision in Hansraj Gupta v. Dehra Dun-Mussoorie Electric Tramway Co. Ltd. [AIR 1933 PC 63 : 60 IA 13] this Court interpreted Section 7 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1958 in a similar way. Under that section where any person is in arrears of rent payable in respect of any public premises, the Estate Officer may, by order, require that person to pay the same within such time and in such instalments as may be specified in the order. While considering the meaning of the words "arrear....
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....lliyanikutty (supra) relies upon three decisions. First is the decision of the Privy Council in Hansraj Gupta (supra), second is the decision of the this Court in New Delhi Municipal Committee vs. Kalu Ram, (1976) 3 SCC 407 and third, is the decision of this Court Deep Chand (supra). 24. The decision in Hansraj Gupta (supra) was in the context of an application filed by the Official Liquidator praying that the Appellants therein, in their capacity as contributories, must be ordered to pay a debt owed by them to the Company. This Application was made under Section 186(1) of the Indian Companies Act, which provides as follows: "Court may, at any time after making a winding-up Order, make an order on any contributory for the time being settled on the list of contributories to pay, in manner directed by the order, any money due from him or from the estate of the person whom he represents to the company exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act." The decision in Hansraj Gupta (supra) involved interpretation of the words 'any money due' occurring in Section 186(1) of the Indian Companies Act. The Privy Council, while....
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....e-barred claims, the Court in KGU Trust (supra) specifically noted the decision in Bombay Dyeing (supra) and the principle that the Limitation Act only bars the remedy and does not extinguish the debt. The Court also noted Halsbury's Laws of England where it is stated that the Limitation Act would only take away the remedy while leaving the right untouched, and that 'if a creditor whose debt is statute-barred has any means of enforcing his claim other than by action or set-off, the Limitation Act does not prevent him from recovering by those means'. [Paragraph 4, 5 of KGU Trust (supra)] 28. Deep Chand (supra) was a case where there was a challenge to the constitutionality of Section 3 of the U.P Public Moneys (Recovery of Dues) Act, 1965. The argument was that Section 3 provided two remedies to the Government - one being a suit and another being a remedy under the Act - and that the latter remedy was more onerous and without any guidelines in law. [Paragraph 2 of Deep Chand (supra)] In upholding the Constitutionality of the U.P Act, the Court noted that the object of the U.P Act was to enable speedy recovery of money and that therefore, the classification was valid. [Para 6 of D....