Limitation Period For Filing Suit For Recovery By Bank To Be Computed From Date Of Issuance Of Loan Recall Notice: Delhi HC
The Delhi High Court observed that the limitation for filing a suit by a bank would be computed from the date of issuance of a Loan Recall Notice (LRN).
ICICI Bank Limited (the Bank) filed a suit seeking recovery of an amount along with interest against a car company for a loan granted for purchasing a vehicle. The Bank had, however, not taken any steps for pre-institution mediation and filed the suit along with an urgent application for the appointment of a receiver ex-parte.
A Division Bench of Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed, “We are unable to accept that the period of limitation would commence from the date of the first default in payment of an EMI. At best, the claims in respect of EMIs that fell due three years prior to the date of filing the application to implead the appellant may be barred by limitation. In any view of the matter, the suit filed by the Bank was within limitation”
Advocate Ashwani Garg represented the appellant, while Advocate Hemant Gupta appeared for the respondents.
The loan, secured by the vehicle, was to be repaid in equated monthly instalments (EMIs). When the Bank was not able to recover the vehicle, an application to implead the appellant as a party was filed alleging that he was a co-applicant for the loan.
The said application was allowed by the commercial court.
The appellant challenged the decision of the commercial court claiming that the suit was barred by limitation. The Bank on the other hand argued that the suit was within the limitation period and pointed out that the appellant was not a guarantor but a co-borrower.
According to the Bank, the Company and the appellant had failed and neglected to repay the loan pursuant to the demand by the bank through a Loan Recall Notice (LRN). Therefore, the Court stated that “the cause of action for filing the suit was required to be reckoned from the said date.”
The Court observed, “The fact that the bank was secured by hypothecation of the vehicle does not disentitle it to claim the amount outstanding from the borrowers. A borrower cannot avoid its liability on the ground that the lender has not enforced its security interest. The contention that a creditor is required to enforce its security before proceeding to recover the claim, is without merit.”
Accordingly, the High Court dismissed the appeal.
Cause Title: Kulbhushan Sachdev v. ICICI Bank Limited & Anr. (Neutral Citation: 2024:DHC:2165-DB)
Appearance:
Appellant: Advocates Ashwani Garg and Sameer Garg
Respondents: Advocates Hemant Gupta, Shivang Jain, Payal Gupta, Nitikaa Guptha and Alpana Singh