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The jurisprudence around the doctrine of continuing cause of action and the relating back theory has been evolving—but inconsistently—across forums such as the NCLT, DRT, High Courts, and occasionally even the Supreme Court. Yet, the National Company Law Appellate Tribunal (NCLAT), in several relevant decisions, has opened a slender but potent window of relief for debtors—especially when faced with repeated legal notices issued by Indian banks as a form of psychological warfare.
Banks, it seems, have developed a habit of issuing multiple Section 13(2) notices under the SARFAESI Act without proceeding with enforcement under Section 13(4) or filing recovery actions before the DRT. These notices, while legally valid in appearance, often serve more as tools of intimidation than as genuine steps toward recovery. The result is a legal limbo where banks maintain a façade of “action” while borrowers are left grappling with uncertainty and reputational damage.
Enter the doctrine of relating back to the first breach. In cases such as Vashdeo R. Bhojwani v. Abhyudaya Cooperative Bank Ltd. (SC, 2019), the apex court underscored that limitation under the IBC runs not from the last communication or notice—but from the date of default. This has been further affirmed by NCLAT in cases like Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Pvt. Ltd. where the tribunal observed that multiple notices or one-time settlements (OTS) do not reset limitation unless accompanied by an express acknowledgment of debt under Section 18 of the Limitation Act.
This principle has become a double-edged sword for banks. On the one hand, it prevents frivolous or stale claims under the IBC; on the other, it exposes the habitual practice of issuing repeated notices without concrete legal follow-through.
The doctrine of continuing cause of action has similarly been misused or misinterpreted. While valid in cases of ongoing breach (such as monthly defaults on EMIs), courts have clarified that where the breach is crystallized in a single instance—say, the declaration of an account as NPA—the clock begins to tick from that point, not from each subsequent reminder.
The banking sector’s over-reliance on SARFAESI, particularly Section 9, has also come under increasing scrutiny. Section 13(4) empowers banks to take possession of secured assets without court intervention, a provision that has led to heavy-handed enforcement actions and has drawn judicial ire when done mechanically or without proportionality. Several High Courts have intervened in writ jurisdiction, cautioning against the routine invocation of draconian powers without due process or fair hearing.
Amidst this legal clutter, erstwhile winding-up petitions under the Companies Act, 1956 continue to linger in High Courts, causing forum-shopping, procedural confusion, and jurisdictional overlaps. The Supreme Court in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics clarified that once a winding-up petition is admitted, the matter must be dealt with by the High Court—not transferred to NCLT. But clarity remains elusive in execution.
This chaotic overlap of forums—DRT, NCLT, High Courts, SARFAESI tribunals—has ironically created a fertile battlefield where skilled lawyers can mount a robust defense. By challenging limitation periods, questioning procedural lapses, invoking res judicata, and using the constitutional courts for stay orders, lawyers are increasingly able to tilt the scales in favour of distressed borrowers.
For many of us practicing on the debtor side, this fragmented ecosystem of laws and forums is not a bug—it’s a feature. It allows room to breathe, strategize, and resist unjust and premature enforcement. After all, while banks may claim public interest and fiduciary responsibility, they are not above the rule of law—and certainly not immune to strategic legal resistance.
If anything, this moment in Indian commercial jurisprudence is a reminder that enforcement should not come at the cost of equity. That the law is not simply an instrument of recovery, but also a shield for the vulnerable. In the hands of competent counsel, even draconian statutes can be navigated—and fairness can be reclaimed.
Mohan Murti
Advocate & International Industry Arbitrator, Former United Nations Investment Promotion Advisor in Europe; Retired Managing Director – Reliance Industries Europe;
These pieces are being published as they have been received – they have not been edited/fact-checked by ThePrint.