Non Payment Of Debt After Issuance Of Recovery Certificate Not A ‘Continuing Wrong’: Orders SC

INTRODUCTION:

The Hon’ble Supreme Court of India pronounced that the non-payment of debt after the issuance of recovery certificate cannot be made as a continuing wrong and to give rise to a cause of action under the prescribed Limitation Act.

The Bench which comprises of Justices R F Nariman and Surya Kant declared, while allowing an appeal against an order of NCLAT which allowed the admission of an insolvency petition with respect to a financial debt. An amount of Rs 6.7 crores found to be an NPA by the Abhyudaya Cooperative Bank Limited on 23.12.1999. A recovery certificate was provided with respect to the loan which was issued on 24.12.2001.

APPEAL BY NCLT:

In the year of 2017, the National Company Law Tribunal (NCLT) allowed the admission of petition which was filed under Section 7 of the Insolvency and Bankruptcy Code. While rejecting the argument that the claim was time barred, the NCLT told that since the default continued, it was a continuing offence.

The appeal which was filed against the NCLT order was dismissed by NCLAT.

On considering an appeal against the NCLAT order, the SC held that the default cannot be regarded as the continuing wrong and to invite the application of Section 23 of the Limitation Act. with this regard, the bench further referred to the decision in Balkrishna Savalram Pujari and Others v.  Shree Dnyaneshwar Maharaj Sansthan & Others.., (1959) Supp., (2) S.C.R. 476,  which explained the concept of ‘Continuing Wrong’.

PRINCIPLE APPLICABLE:

‘If the act which is wrongful causes an injury which is complete, then there is no continuing wrong even though the damage which is resulting from the act may continue. If there is a possibility of a wrongful act with such a character then that injury caused by it continues to act which constitutes a continuing wrong. It is necessary to draw a distinction between the injury caused by the wrongful act and what may be described as the effect of the prescribed injury.

In this regard to the acts which can be made properly, characterized as continuing wrongs that Section 23 can be invoked’ which was declared by the Hon’ble Supreme Court of India.

On applying this principle, the Court declared that the default cannot be regarded as a continuing wrong.

CONCLUSION:

It is clear that when the Recovery Certificate which was dated on 24.12.2001 was issued and the certificate injured effectively and completely the appellant rights as a result of the limitation would have been begun ticking.

In the case, and the claim in the present suit being time barred, there is no doubt that it will be made in due and payable in law and also the Court of Law interrupted that, it will allow the appeal and set aside the orders of the NCLT and NCLAT.

– Vijayalakshmi Raju

Student Reporter, INBA