SC Refers Time-Barred Debt Recovery Dispute Under SFC Act to Larger Bench

K.P. Khemka & Anr. Vs Haryana State Industrial and Infrastructure Development Corporation Limited & Ors. (Supreme Court of India)

The Supreme Court granted leave in appeals challenging a Punjab and Haryana High Court judgment which had upheld recovery proceedings initiated under the Haryana Public Moneys (Recovery of Dues) Act, 1979 read with the State Financial Corporations Act, 1951, holding that a debt barred by limitation could still be recovered because the Limitation Act bars the remedy but does not extinguish the debt. The appellants contended that the recovery proceedings were time-barred and relied upon State of Kerala v. V.R. Kalliyanikutty (1999) 3 SCC 657, while the High Court had relied upon Bombay Dyeing and Manufacturing Company Limited v. State of Bombay and distinguished V.R. Kalliyanikutty.

The Court examined the facts of both appeals, the recovery proceedings initiated by the Haryana State Industrial and Infrastructure Development Corporation Limited and the Haryana Financial Corporation, the statutory provisions including Section 32-G of the State Financial Corporations Act, 1951, and Sections 2(c) and 3 of the Haryana Public Moneys (Recovery of Dues) Act, 1979. It also analysed the reasoning in V.R. Kalliyanikutty, the scope of the Recovery of Dues Act, the distinction between a debt and the power of recovery, the effect of limitation, the Statement of Objects and Reasons of the State Financial Corporations Act, and the concepts of “right” and “power” discussed in Salmond on Jurisprudence. The Court further examined decisions including Bombay Dyeing, Tilokchand and Motichand, Hansraj Gupta, New Delhi Municipal Committee v. Kalu Ram, Director of Industries, U.P. v. Deep Chand Agarwal, Khadi Gram Udyog Trust v. Ram Chandraji Virajman Mandir, and K.C. Ninan v. Kerala State Electricity Board.