KP KHEMKA AND ANR VS HARYANA STATE INDUSTRIAL AND INFRASTRUCTURE CORPORATION LIMITED 2024 (SC) 357
FACTS: Respondent No. 3, M/s Khemka Ispat Limited, a company engaged in manufacturing and distribution of various steel products, availed a Term Loan under an Equipment Finance Scheme from Respondent No. 1, Haryana State Industrial and Infrastructure Development Corporation Limited (HSIDC Ltd.), amounting to Rs. 105.90 lakhs on 07.03.2003. The loan, with personal guarantees from the appellants, was disbursed in two installments: Rs. 105 lakhs on 31.03.2003 and Rs. 2 lakhs on 15.07.2003. The repayment term was five years with a moratorium starting from 01.10.2003. HSIDC Ltd. issued the first Default Notice on 19.08.2004, under Section 29 of the State Financial Corporations Act, after which Respondent No. 3 was referred to the Board for Industrial and Financial Reconstruction (BIFR) as a sick company.
On 31.07.2006, the outstanding amount owed to HSIDC Ltd. was Rs. 99.32 lakhs. Despite BIFR's rejection of the reference and a One-Time Settlement request on 17.08.2006, ING Vysya Bank took possession of the company's assets, prompting HSIDC Ltd. to seize movable assets on 01.06.2007.
Legal proceedings ensued, including a winding-up petition filed by another creditor in the Delhi High Court, resulting in a final winding-up order on 24.03.2009. Subsequently, HSIDC Ltd. issued show cause notices and recovery notices to the appellants under the Recovery of Dues Act.
ISSUE: Whether debts that are time-barred under the Limitation Act, 1963 can be recovered under the Recovery of Dues Act, 1979 read with the State Financial Corporations Act, 1951.
OBSERVATION: The appeal before the Supreme Court challenged a decision of the Punjab and Haryana High Court which upheld the recovery of time-barred debts under the Recovery of Dues Act, 1979 in conjunction with the State Financial Corporations Act, 1951. The Supreme Court noted the necessity for a definitive ruling on whether these Acts establish distinct rights and alternative enforcement mechanisms allowing recovery of debts even if they are time-barred under the Limitation Act, 1963.
