Court Finds Recovery Suit Within Limitation; Decrees Amount Against Legal Heirs

A bench of Justice Anil Khetarpal and Justice Amit Mahajan heard an appeal against a Commercial Court judgment that had dismissed a bank’s recovery suit for Rs.10,91,115 as time‑barred and had expressed reservations about the evidentiary value of the bank’s statement of account, the authorization of its representative and the absence of a death certificate of the borrower.

The Court allowed the appeal, set aside the impugned order and decreed the recovery suit for Rs.10,91,115 with pendente lite and future interest at the agreed rate of 13.25% per annum, while clarifying that liability of the legal heirs was limited to the estate inherited by them. The Court found that the trial court erred in computing limitation solely from the expiry of the original sanction period and in disregarding admitted part‑payments and the period during which proceedings were prosecuted before the DRT. The Court, in its reasoning, observed: “The Commercial Court has itself recorded that part‑payments were made till September 2016, yet declined to extend the benefit thereof while computing limitation. Such an approach is legally unsustainable. Once part‑payments within limitation are admitted or established from the record, the consequence under Section 19 of the Limitation Act follows as a matter of law, and the Court is bound to compute limitation afresh from the date of the last such payment.” The Court also emphasised that “the liability of the Respondents, being legal heirs of the deceased borrower, shall be limited to the extent of the estate of late Mr. B.M. Bajaj inherited by them and shall not extend to their personal assets.”

Background The bank sanctioned a cash credit facility of Rs.15,00,000 to a proprietary concern on 20.02.2010. The account was classified as NPA on 08.02.2016. The bank produced a statement of account showing part‑payments made during the original limitation period and thereafter, including payments on 31.07.2014, 06.08.2014, 29.03.2016, 13.06.2016 and in September 2016. The bank filed O.A. No.545/2018 before the DRT on 23.05.2018; that Original Application was returned on 18.12.2020 following enhancement of the DRT’s pecuniary jurisdiction, with liberty to file before a competent court. The bank instituted CS(COMM) No.349/2021 in September 2021; the respondents, impleaded as legal heirs, remained ex parte.

The Commercial Court dismissed the suit on the ground that the sanctioned facility was available only till 20.08.2012 and that limitation ran from that date; it also recorded doubts about the statement of account, the absence of the borrower’s death certificate and an alleged defect in the authorization of the bank’s representative. On appeal the bank argued that part‑payments revived limitation under Section 19 of the Limitation Act and that time spent prosecuting proceedings before the DRT was excluded under Section 14. The Court reproduced the legal position and noted that “In terms of Section 19 of the Limitation Act, any payment made towards a debt before the expiration of the prescribed period results in commencement of a fresh period of limitation from the date of such payment.” The Court held that the statement of account was duly certified under Section 65B of the Evidence Act, remained unchallenged in ex parte proceedings and thus could not be discarded on technical grounds. It further held that the absence of a death certificate and details of devolution of estate were not fatal where respondents did not contest their legal‑heirship. The appeal was allowed, the impugned order set aside and the suit was decreed with stated interest; the Court clarified the heirs’ liability was limited to the estate inherited by them.

Case Details: Case No.: RFA(COMM) 136/2023 Case Title: FEDERAL BANK LTD. v. B M BAJAJ THROUGH LRS & ORS. Appearances: For the Petitioner(s): Mr. Joby P. Varghese & Ms. Rashi, Advocates For the Respondent(s): No counsel appeared / No appearance recorded