2015 (10) TMI 90 - HC - Companies Law

Recovery of debts - period of limitation Petitioner contends that it registered its claim against the Respondent with the BIFR alongwith the other creditors, secured and unsecured Petitioner further sends a legal notice calling upon the Respondent to pay the Debt Respondent objects that the claim is grossly time barred and the Petitioner has not been diligently pursuing its remedy to recover the amount - No communication or demand for return of the amount after the application was filed with the BIFR has been made by the Petitioner Held That - Petition is found barred by thirteen years of somnolence - Petition is barred by limitation by more than five years - Petitioner failed to prosecute its civil and company law rights with due care and diligence - Petition accordingly would stand dismissed Decided in favour of the Respondent.

Summary

Issues:
1. Limitation period for filing Company Petition.
2. Knowledge of proceedings before BIFR.
3. Bonafide belief and good faith.
4. Bar of limitation and diligence in pursuing remedy.
5. Dismissal of the Company Petition.

Analysis:

1. Limitation period for filing Company Petition:
The High Court found that the Company Petition was time-barred, as the claim made by the Petitioner was belated, being filed 13 years after the debt became due. Even considering the date when the Respondent Company came out of BIFR in 2005, the petition filed in 2010 was delayed by 5 years, exceeding the 3-year limitation period under Article 137 of the Limitation Act, 1963.

2. Knowledge of proceedings before BIFR:
The Petitioner had knowledge of the proceedings before BIFR, as evidenced by the Petitioner's claim registration with BIFR and communication with the agency. The court noted that the Petitioner was aware of the termination of proceedings, contrary to the claim made in the Company Petition about not receiving information about the BIFR order.

3. Bonafide belief and good faith:
The court observed that the Petitioner's claim of not receiving the BIFR order and being under a bonafide belief about the proceedings being pending was not sustained. The lack of material details indicating bonafide belief or good faith in the Company Petition undermined the Petitioner's argument.

4. Bar of limitation and diligence in pursuing remedy:
The court highlighted the lack of diligence on the part of the Petitioner in pursuing the recovery of the debt within the limitation period. Despite having knowledge of the Respondent Company's status post-BIFR, the Petitioner failed to take timely action, leading to the claim being time-barred. The court emphasized that the Petitioner should have been diligent in recovering the debt.

5. Dismissal of the Company Petition:
Considering the time-barred nature of the claim and the lack of diligence on the part of the Petitioner, the High Court dismissed the Company Petition. The court emphasized that equity could not aid a party that had not diligently pursued its legal rights and that the law prevailed over equity in such situations.

In conclusion, the High Court dismissed the Company Petition due to the claim being time-barred, lack of diligence in pursuing the remedy, and the Petitioner's failure to demonstrate bonafide belief or good faith in their actions.