Certificate of recovery constitutes fresh cause of action

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Certificate of recovery constitutes fresh cause of action
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The Supreme Court, in its judgment dated 4 August in the matter of Dena Bank (now Bank of Baroda) v C Shivkumar Reddy and Anr, has held that a certificate of recovery, if not satisfied, will constitute a fresh cause of action for recovery of debt, and an application filed under section 7 of the Insolvency and Bankruptcy Code, 2016, is maintainable.

The court held that a judgment and/or decree for money in favour of the financial creditor, passed by the debt recovery tribunal or any other tribunal or court, or the issuance of a certificate of recovery in favour of the financial creditor, would give rise to a fresh cause of action for the financial creditor to initiate proceedings under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).

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The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai.

The authors can be contacted at support@numenlaw.com.

Readers should not act on the basis of this information without seeking professional legal advice.

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