The Supreme Court has held that non-payment of debt after the issuance of recovery certificate cannot be regarded as a continuing wrong so as to give rise to a continuing cause of action under the Limitation Act.
The bench of Justices R F Nariman and Surya Kant held so 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 was found to be an NPA by Abhyudaya Cooperative Bank Limited on 23.12.1999. A recovery certificate with respect to the loan was issued on 24.12.2001.
In 2017, the NCLT allowed the admission of petition filed under Section 7 of the Insolvency and Bankruptcy Code. Rejecting the argument that the claim was time barred, the NCLT said that since the default continued, it was a continuing offence.
The appeal filed against the NCLT order was dismissed by NCLAT.
Considering the appeal against the NCLAT order, the SC held that the default cannot be regarded as a continuing wrong so as to invite the application of Section 23 of the Limitation Act. In this regard, the bench referred to the decision in Balkrishna Savalram Pujari and Others vs. Shree Dnyaneshwar Maharaj Sansthan & Others,  Supp. (2) S.C.R. 476, which explained the concept of 'continuing wrong'.
"If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues then the act constitutes a continuing wrong. In this connection 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 said injury. It is only in regard to acts which can be properly characterised as continuing wrongs that s.23 can be invoked", the SC had held in that case.
Applying this principle, the Court held that the default cannot beegarded as a continuing wrong.
"it is clear that when the Recovery Certificate dated 24.12.2001 was issued, this Certificate injured effectively and completely the appellant's rights as a result of which limitation would have begun ticking.
This being the case, and the claim in the present suit being time barred, there is no doubt that is due and payable in law. We allow the appeal and set aside the orders of the NCLT and NCLAT.", held the Court.
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