Punjab National Bank and Ors vs. Surendra Prasad Sinha - Expiry of Limitation

Hon’ble SCI (20.04.1992) Punjab National Bank And Ors vs Surendra Prasad Sinha (Criminal Appeal No. 254 of 1992.) held that;  

• The rules of limitation are not meant to destroy  the rights of the parties.  Section 3 of  the Limitation Act only bars the remedy, but does not destroy the right which the remedy relates to.

Excerpts of the order;

• "The rules of limitation are not meant to destroy the rights of the parties. Section 3 of the Limitation Act 36 of 1963, for short "the Act" only bars the remedy, but does not destroy the right which the remedy relates to. 

• The right to the debt continues to exist notwithstanding the remedy is barred by the limitation. Only exception in which the remedy also becomes barred by limitation is that right itself is destroyed. For example under s.27 of the Act a suit for possession of any property becoming barred by limitation, the right to property itself is destroyed. Except in such cases which are specially provided under the right to which remedy relates in other case the right subsists. 

• Though the right to enforce the debt by judicial process is barred under s.3 read with the relevant Article in the schedule, the right to debt remains. The time barred debt does not cease to exist by reasons of s.3. That right can be exercised in any other manner than by means of a suit. 

• The debt is not extinguished, but the remedy to enforce the liability is destroyed. What s.3 refers is only to the remedy but not to the right of the creditors. Such debt continues to subsists so long as it is not paid. It is not obligatory to file a suit to recover the debt. 

• It is settled law that the creditor would be entitled to adjust, from the payment of a sum by a debtor, towards the time barred debt. It is also equally settled law that the creditor when he is in possession of an adequate security, the debt due could be adjusted from the security in his possession and custody".

 

ii). SCI (11.10.2018) in B.K. Educational Services Private Limited Vs. Parag Gupta and Associates [Civil Appeal  No.23988 of 2017] observed as under;

• # 19. Shri Dholakia also referred to and relied upon Section 60 and 61 of the Contract Act which are set out hereunder:

• “60. Application of payment where debt to be discharged is not indicated.—Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits. 

• 61. Application of payment where neither party appropriates.—Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionably.”

• These Sections also recognize the fact that limitation bars the remedy but not the right. In the context in which Section 60 appears, it is interesting to note that Section 60 uses the phrase “actually due and payable to him….” whether its recovery is or is not barred by the limitation law. The expression “actually” makes it clear that in fact a debt must be due and payable notwithstanding the law of limitation. From this, it is very difficult to infer that in the context of the Contract Act, the expression “due and payable” by itself would connote an amount that may be due even though it is time-barred, for otherwise, it would be unnecessary for Section 60 to contain the word “actually” together with the later words, “whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits”.

Note ;- These judgements have important bearing on verification of claims of Creditors, during CIRP. Time and again Hon’ble SCI has maintained that application under section 7 of the Code is not a suit for recovery.

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The learned author U.N.Mitra, in his “Law of Limitation and Prescription”, 15th Edition, Lexis Nexis, in page No.11, comments thus :

• “9. Limitation generally bars remedy only :- The law of limitation is in fact a kind of imperfect prescription as it does not in all cases destroy the primary or substantive right itself but puts an end only to the accessory right of action. The judicial remedy is barred but the substantive right itself survives and continues to be available in other ways. The rules of limitation are not meant to destroy the rights of parties. Section 3 of the Act only bars the remedy, but does not destroy the right which the remedy relates to. Though the right to enforce the debt by judicial process is barred under S.3 read with relevant article in the schedule, the right to debt remains. The time barred debt does not cease to exist by reason of S.3. Only exception in which the remedy also becomes barred by limitation is that the right itself is destroyed. For example under S.27 of the Act a suit for possession of any property becoming barred by limitation leads to the right to property itself to be destroyed. Except in such cases, which are specifically provided under the right to which the remedy relates, in other cases the right subsist so long as the debt is not paid. That right can be unraised in any manner than by means of a suit. It is not obligatory to file a suit to recover the debt. Rules of limitation are not meant to destroy the rights.”

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