Case BriefsSupreme Court

Supreme Court: A Division Bench of Indira Banerjee and V. Ramasubramanian, JJ. held that there is no bar in law to amendment of pleadings in an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 or to filing of additional documents apart from those initially filed, at any time until a final order either admitting or dismissing the application has been passed.

The Court also held that an application under Section 7 for imitation of corporate insolvency resolution process against a corporate debtor is not be barred by limitation if there is an acknowledgement of the debt by the corporate debtor before expiry of the limitation period. Such acknowledgment can be by way of statement of accounts, balance sheets, financial statements and offer of one time settlement.

Moreover, a final judgment and/or decree of any court or tribunal or any arbitral award for payment of money, if not satisfied, would fall within the ambit of a financial debt, enabling the creditor to initiate proceedings under Section 7.

Factual Matrix and Timeline

In 2011, Dena Bank sanctioned a term loan of to the Corporate Debtor, which was to be repaid in 24 quarterly installments. The Corporate Debtor defaulted in repayment and their account was declared Non Performing Asset (“NPA”) in December 2013. In 2014, the Bank sent a letter to the Corporate Debtor to repay the outstanding dues. However, no payment was made.

In 2015, the Bank initiated proceedings before the Debts Recovery Tribunal (“DRT”) for recovery of outstanding dues from the Corporate Debtor. By a letter dated 5 January 2015, the Corporate Debtor requested the Bank to restructure the loan. Again, on 3 March 2017, while proceedings were pending before DRT, the Corporate Debtor gave an offer for one time settlement of the term loan account, which  was rejected by the Bank. On 27 March 2017, DRT passed an order against the Corporate Debtor for recovery of outstanding dues to the Bank. In May 2017, DRT issued a Recovery Certificate in favour of the Bank. Thereafter in June 2017, the Corporate Debtor once again gave the Bank a proposal for one time settlement to mutually settle the loan amount.

In October 2018, the Bank sought initiation of corporate insolvency resolution process against the Corporate Debtor. It filed a petition under Section 7 of the Insolvency and Bankruptcy Code (“IBC”) before the National Company Law Tribunal, Bengaluru. Thereafter, twice in 2019, the Bank filed applications for permission to place additional documents on record. Both these applications were allowed by NCLT. In March 2019, NCLT passed an order to admit the Section 7 petition filed by the Bank.

Appeal

The Corporate Debtor challenged the order of NCLT in an appeal under Section 61 IBC before the National Company Law Appellate Tribunal. The NCLAT allowed the appeal reversed the order of NCLT. Aggrieved, the Bank approached the Supreme Court.

Issues

Three questions arose for consideration of the Court:

(i) Whether a petition under Section 7 IBC would be barred by limitation, on the sole ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, even though the Corporate Debtor might subsequently have acknowledged its liability to the appellant Bank, within a period of three years prior to the date of filing of the Section 7 petition, by making a proposal for a one time settlement, or by acknowledging the debt in its statutory balance sheets and books of accounts.

(ii) Whether a final judgment and decree of DRT in favour of financial creditor, or the issuance of a Certificate of Recovery in favour of financial creditor, would give rise to a fresh cause of action to financial creditor to initiate proceedings under Section 7 IBC within three years from the date of the final judgment and decree, and/or within three years from the date of issuance of the Certificate of Recovery.

(iii) Whether there is any bar in law to the amendment of pleadings, in a petition under Section 7 IBC, or to the filing of additional documents, apart from those filed initially, along with the Section 7 petition in Form-1 given in the Annexure to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (“2016 Adjudicating Authority Rules”).

Analysis and Observations

Interpretation of the Code

Discussing the object of IBC, the Court observed that it is imperative that provisions of IBC and Rules and Regulations framed thereunder be construed liberally, in a purposive manner to further the objects of enactment of the statute, and not be given a narrow, pedantic interpretation which defeats its purposes.

Permissibility of amending Section 7 petition for filing additional documents

On a careful reading of IBC provisions and in particular the provisions of Section 7(2) to (5) read with the 2016 Adjudicating Authority Rules, the Court reached a conclusion that there is no bar to the filing of documents at any time until a final order either admitting or dismissing the application has been passed.

The Court noted that under Section 7(2) IBC, a financial creditor is required to apply for initiation of corporate insolvency resolution process against a corporate debtor in the prescribed Form-1 under the 2016 Adjudicating Authority Rules. Since a financial creditor is required to apply under Section 7 IBC in statutory Form-1, the financial creditor can only fill in particulars as specified in the various columns of the Form. There is no scope for elaborate pleadings. The Court observed:

An application to the Adjudicating Authority (NCLT) under Section 7 of the IBC in the prescribed form, cannot therefore, be compared with the plaint in a suit. Such application cannot be judged by the same standards, as a plaint in a suit, or any other pleadings in a Court of law.

The Court summed up the discussion on this point by mentioning that there is no bar in law to amendment of pleadings in an application under Section 7 IBC, or to filing of additional documents, apart from those initially filed along with application under Section 7 in Form-1. It was observed:

In the absence of any express provision which either prohibits or sets a time limit for filing of additional documents, it cannot be said that NCLT committed any illegality or error in permitting the Bank to file additional documents.

However, the Court added that depending on the facts and circumstances of the case, when there is inordinate delay, the adjudicating authority might, at its discretion, decline the request of an applicant to file additional pleadings and/or documents, and proceed to pass a final order.

Lastly, it was clarified that Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1 is not an authority for the proposition that there can be no amendment of pleadings at the fag end of NCLT proceedings. Moreover, in the instant case, the amendments were not made at the fag end of the proceedings but within 2/3 months of their initiation, before admission of the petition under Section 7 IBC.

Limitation and effect of acknowledgment of debt

Under the scheme of IBC, the insolvency resolution process begins when a default takes place, in the sense that a debt becomes due and is not paid. Before considering the main point, the Court noted that there can be no dispute with the proposition that in terms of Article 137 of Limitation Act, 1963, the period of limitation for making an application under Section 7 IBC is three years from the date of accrual of the right to sue, that is, the date of default.

However, as per Section 18 of Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing a fresh period of limitation from the date on which the acknowledgement is signed. The acknowledgement must be made before the relevant period of limitation has expired. Relying on Sesh Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd., 2021 SCC Online SC 244 and Laxmi Pat Surana v. Union Bank of India, 2021 SCC Online SC 267, the Court reiterated that there is no reason to exclude the effect of Section 18 of the Limitation Act to proceedings initiated under IBC.

Relying further on Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal, 2021 SCC Online SC 321, the Court noted that:

It is well settled that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment under Section 18 of the Limitation Act.

In view of such law, the Court concluded that NCLAT’s finding that there was nothing on record to suggest that the Corporate Debtor acknowledged the debt within three years and agreed to pay debt, was not sustainable in law in view of the statement of accounts/balance sheets/financial statements for the years 2016-2017 and 2017-2018 and the offer of one time settlement including in particular the offer of one time settlement made on 3 March 2017.

In the instant case, Rs 1.11 crore had been paid towards outstanding interest on 28 March 2014 and the offer of one time settlement was within three years thereafter. In any case, NCLAT overlooked the fact that a Certificate of Recovery was issued by DRT in favour of the Bank on 25 May 2017. The Corporate Debtor did not pay dues in terms of the Certificate of Recovery. The Court held:

The Certificate of Recovery in itself gives a fresh cause of action to the Appellant Bank to institute a petition under Section 7 of IBC. The petition under Section 7 IBC was well within three years from 28th March 2014.

The Court relied on Jignesh Shah v. Union of India, (2019) 10 SCC 750 for concluding that a final judgment and/or decree of any court or tribunal or any arbitral award for payment of money, if not satisfied, would fall within the ambit of a financial debt, enabling the creditor to initiate proceedings under Section 7 IBC.

Before concluding, the Court considered that when the petition under Section 7 IBC was filed, the date of default was mentioned as 30 September 2013 and the date of declaration of term loan account of the Corporate Debtor as NPA was stated as 31 December 2013. However, according to the Court, it was not correct to say that there was no averment in the petition of any acknowledgment of debt. Such averments were duly incorporated by way of amendment, and NCLT rightly looked into the amended pleadings to admit the petition of Bank. The Court reiterated:

Even assuming that documents were brought on record at a later stage … the Adjudicating Authority was not precluded from considering the same. The documents were brought on record before any final decision was taken in the petition under Section 7 of IBC.

Decision

For the reasons discussed above, the Supreme Court held that the Section 7 IBC petition filed by Dena Bank was admissible. The impugned judgment of NCLAT was unsustainable which was set aside. [Dena Bank v. C. Shivakumar Reddy, 2021 SCC OnLine SC 543, decided on 4-8-2021]


Tejaswi Pandit, Senior Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: The bench of Ashok Bhushan and R. Subhash Reddy*, JJ has held that the Limitation Act, 1963 is applicable to the arbitration proceedings under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006.

Here are the key points highlighted by the Court while reaching the aforementioned conclusion:

  • As per Section 15 of the said Act, where supplier supplies any goods or renders any services to any buyer, the buyer shall make payment on or before the agreed date between the parties in writing or where there is no agreement, before the appointed day.
  • Section 16 deals with date from which and rate of interest payable in the event of not making the payment.
  • The recovery mechanism for the amount due is covered by Sections 17 and 18 of the said Act.
  • If any party has a dispute with regard to amount due under Section 17, a reference is required to be made to the Micro and Small Enterprises Facilitation Council.
  • On such reference, the Council is empowered to conduct conciliation in the matter or seek assistance of any institution or centre providing alternate dispute resolution services by making a reference to such institution for conducting conciliation.
  • If the conciliation is not successful, as contemplated under Section 18(2) of the said Act, same stands terminated under Section 18(3) of the said Act.
  • Thereafter, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of Arbitration and Conciliation Act, 1996 are made applicable as if the arbitration was in pursuance of arbitration agreement between the parties, under sub-section (1) of Section 7 of the 1996 Act. Applicability of Limitation Act, 1963 to the arbitrations is covered by Section 43 of the 1996 Act.
  • A reading of Section 43 itself makes it clear that the Limitation Act, 1963 shall apply to the arbitrations, as it applies to proceedings in court.
  • When the settlement with regard to a dispute between the parties is not arrived at under Section 18 of the 2006 Act, necessarily, the Micro and Small Enterprises Facilitation Council shall take up the dispute for arbitration under Section 18(3) of the 2006 Act or it may refer to institution or centre to provide alternate dispute resolution services and provisions of Arbitration and Conciliation Act 1996 are made applicable as if there was an agreement between the parties under sub-section (1) of Section 7 of the 1996 Act.

The Court, hence, concluded:

“In view of the express provision applying the provisions of the Limitation Act, 1963 to arbitrations as per Section 43 of the Arbitration and Conciliation Act, 1996, the Limitation Act, 1963 is applicable to the arbitration proceedings under Section 18(3) of the 2006 Act.”

[Silpi Industries v. Kerala State Road Transport Corporation, 2021 SCC OnLine SC 439, decided on 29.06.2021]

For appellants: Senior Advocates V. Giri, P.B. Suresh

For Kerala State Road Transport Corporation: Aishwarya Bhati, ASG

For Respondent: Basava Prabhu Patil

Case BriefsHigh Courts

Delhi High Court: The Division Bench of Manmohan and Asha Menon, JJ., remarked that the present case reflected the bane of the Indian Judicial System, namely, that there is no finality attached to any judicial proceeding.

Instant appeal was filed challenging the judgment and decree dated 18-11-2013 passed by a Single Judge of this Court accompanied by an application seeking condonation of delay under Section 14 of the Limitation Act.

As per the appellant the Single judge had failed to consider that the appellant was not a party to the compromise on the basis of which the civil suit was decreed and thus the finding of the Court that ‘the parties have settled the matter on the following terms’ did not apply to the appellant.

Further, it was added that the handwritten statements on the Index of the Compromise Application stating that ‘This is a joint application by all parties. They are duly served’ were false, as at no juncture, a copy of the said application had been served on the appellant and therefore, on this short score, the impugned judgment was liable to be set aside.

Single Judge had failed to consider that an application for compromise under Order XXIII Rule 3 of the Code of Civil Procedure, 1908 without the signatures/consent of all parties to the lis could not be allowed against all parties to the lis and be converted into a decree of the Court.

Lastly, the appellant contended that the Single Judge had failed to appreciate that it is settled law that a self-acquired property could not be partitioned during the lifetime of the owner. He contended that the Trial Court had failed to consider that the plaint was a collusive action filed by the respondents in order to lay a concocted claim whereby the plaintiff and his brothers allocated lion’s share of the said property to each other.

High Court’s reasoning

A consent decree is a contract with the imprimatur of the courts superadded.  ‘Lawful Compromise’ means that the agreement or compromise must not be unlawful by the nature of its terms or on the face of it.

‘Consent decree’ is something more than a mere contract and has elements of both command and contract. ‘Lawful Compromise’ would be unlawful if the consideration or the object of the agreement is forbidden by law or is of such a nature that if permitted it would defeat the provision of any law, or is fraudulent or the court regards it as immoral or opposed to the public policy as provided by Section 23 of the Contract Act.

High Court found that the present appeal had been preferred after a delay of over two thousand three hundred and thirty-one days. Appellant voluntarily chose not to enter appearance and therefore she was proceeded ex-parte. Consequently, the limitation for filing the present appeal shall commence from the date of the impugned judgment and order and not from the date of alleged knowledge of the judgment and decree.

Court stated that the appellant would not be entitled to the benefit of Section 14 of the Limitation Act as even the prior proceeding initiated by the appellant had not been filed within limitation and also the said prior proceeding had not been filed due to defect of jurisdiction or other cause of like nature.

No prejudice had been caused to the appellant by the impugned judgment and decree dated 18th November, 2013 as the said decree recognises her share in the suit property as accepted by her in the Family Settlement dated 23rd December, 1999, especially in the absence of any challenge to the said family settlement.

 No prejudice was caused to the appellant.

Further, the submission of the counsel for the appellant that a self-acquired property could not be partitioned during the lifetime of the owner, in view of the Family Settlement dated 23rd December, 1999 duly executed and signed by the appellant is a mixed question of fact and law and it required the appellant to lead evidence.

On the basis of a bald averment in the appeal, the suit filed by the respondent cannot be held to be ex-facie barred in law.

The only remedy to the appellant in the present matter was to prefer an application under Order IX Rule 13, or under Section 114 CPC.

Not even a ‘modicum of explanation’ was offered during the hearing as to why the ex-parte order be recalled or set aside.

High Court expressed that the Additional District Judge had given a clear finding, which order had not been challenged in the present proceedings.

 Adding to the above, High Court elaborated that

There is no law which stipulates that a court is bound to serve any compromise application on a party who had willingly allowed it to be proceeded ex-parte.

To accept the submission of the appellant would amount to reading into the Statue a duty upon the Court to ‘run after a litigant’ who had voluntarily turned to its back to the legal system – a duty which is not provided in any statute.

A bare perusal of the Family Settlement reflects that the appellant had signed on each page of it and the same was based on mutual consent and agreement. In fact, the mutation was also carried out with respect to this 1/6th portion in accordance with the said Family Settlement.

Concluding the matter, Bench held that to now recall or vary the decree at the instance of the appellant who was negligent in defending her rights would amount to placing premium on ‘callousness’ and would place the parties who diligently pursued the litigation at all stages at a serious disadvantage.

Therefore, Court stated that any judicial system which does not provide finality to disputes, can never earn the trust, confidence and goodwill of the society.

Hence, present appeal was dismissed both as barred by limitation as well as on merits. [Deepshree Singh v. Rishi Pratap Singh, 2021 SCC OnLine Del 2348, decided on 20-05-2021]


Advocates before the Court:

For the appellant: Ankur Mahindro, Advocate with Rohan Taneja, Advocate.

For the Respondents: Kritika Bhardwaj, Advocate for R-1 to3 & 5 to 8.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): A Division Bench of Justice Venugopal M. (Judicial Member) and V.P. Singh (Technical Member) dismissed an appeal filed against the order of the National Company Law Tribunal, Hyderabad (“NCLT”), whereby the NCLT had admitted an application filed by the Financial Creditor−Punjab National Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) for initiation the Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor−Saptarishi Hotels (P) Ltd. The appellant was the promoter/suspended director of Saptrishi Hotels (P) Ltd.

The Corporate Debtor is a ”special purpose vehicle” incorporated to undertake a certain public-private partnership project with Government of Telangana. The Corporate Debtor availed of a loan facility from a ‘consortium’ which included Punjab National Bank (“PNB”). Having defaulted in repaying the loan amount within time, PNB filed a Section 7 IBC application which was admitted by the NCLT.

Corporate Debtor’s Argument

The Corporate Debtor raised the issue of limitation. It was contended that the NCLT erred in admitting the application since it was barred by limitation. The Corporate Debtor took a stand that the ‘date of default’ for all facilities extended by PNB was 30-3-2016, whereas the Section 7 application was filed by PNB only on or after 18-7-2019. According to the Corporate Debtor, the period of limitation (3 years) for filing the Section 7 application expired on 29-6-2019. Therefore, PNB’s application, having been filed beyond the 3 years’ period of limitation, was liable to be rejected.

Financial Creditor’s Argument

The Punjab National Bank refuted Corporate Debtor’s argument by stating that the Corporate Debtor has not filed two a vital documents, viz. ‘Balance and Security Confirmation Letter’ dated 20-2-2018 executed by the Corporate Debtor, which amount to an ‘acknowledgment of debt’ as contemplated under Sections 18 and 19 of the Limitation Act, 1963.

Discussion

Insolvency and Bankruptcy Code, 2016

For deciding the appeal, the Appellate Tribunal referred to certain provisions of IBC, including:

(i) Section 3(6)(a), which defines “claim” meaning a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured.

(ii) Section 3(8), which defines “Corporate Debtor” meaning a Corporate person who owes a debt to any person.

(iii) Section 3(10), which defines “Creditor” meaning any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder.

(iv) Section 3(11), which defines “debt” meaning ‘a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.

(v) Section 3(12), which defines “default” meaning non-payment of debt when whole or any part or installment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be.

Acknowledgment − Limitation Act, 1963

The Appellate Tribunal noted that Section 18 (Effect of acknowledgment in writing) of the Limitation Act does not enjoin that an ‘acknowledgement’ has to be in any particular form or to be express. The Appellate Tribunal further said that it must be borne in mind that an ‘acknowledgement’ is to be examined resting upon the attendant circumstances by an admission that the writer owes a ‘debt’. No wonder, an ‘unconditional acknowledgement’ implies a promise to pay because that is the natural inference if there is no other contrary material.

Further, to treat the writing signed by an individual as an ‘acknowledgement’, the person acknowledging must be conscious of his liability and the commitment ought to be made in respect of that liability.

Decision

After a careful consideration of respective contentions projected on either side, the Appellate Tribunal held that considering the prime fact that the ‘guarantors’ in respect of the Corporate Debtor had executed a Balance and Security Confirmation Letter (confirming the correctness of debit balance) and keeping in mind yet another fact that a certain part payment was made by the Corporate Debtor on 15-10-2018 towards its liability to Punjab National Bank, the irresistible conclusion was that there was an acknowledgment of debt as per Sections 18 and 19 of the Limitation Act in respect of the loan account of the Corporate Debtor.

Therefore, the Appellate Tribunal dismissed the appeal filed by the Corporate Debtor holding that the NCLT rightly admitted the Section 7 application filed by the Financial Creditor. [Lakshmi Narayan Sharma v. Punjab National Bank, 2021 SCC OnLine NCLAT 155, decided on 12-5-2021]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of RF Nariman, BR Gavai and Hrishikesh Roy, JJ has held that an entry made in the books of accounts, including the balance sheet, can amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, 1963.

The Court referred to a number of authorities and in particular the decision in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128, wherein it was held that though the filing of a balance sheet is by compulsion of law, the acknowledgement of a debt is not necessarily so. In fact, it is not uncommon to have an entry in a balance sheet with notes annexed to or forming part of such balance sheet, or in the auditor’s report, which must be read along with the balance sheet, indicating that such entry would not amount to an acknowledgement of debt for reasons given in the said note.

The bench explained that the filing of a balance sheet in accordance with the provisions of the Companies Act, 2013 is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7) of the Companies Act, 2013. Under Section 134, financial statements are to be approved by the Board of Directors before they are signed, and the auditor’s report, as well as a report by the Board of Directors, is to be attached to each financial statement. Equally, the auditor’s report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet.

The Court, hence, held that,

“… it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act.”

[Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal, 2021 SCC OnLine SC 321, decided on 15.04.2021]


*Judgment by: Justice RF Nariman

Know Thy Judge| Justice Rohinton F. Nariman

Appearances before the Court by

For appellant: Senior Advocate Ramji Srinivasan, learned Senior Advocate appearing on behalf of the appellant,

For respondent: Advocate Abhijeet Sinha

Case BriefsHigh Courts

Kerala High Court: A. Hariprasad J., while hearing a revision petition, set aside the order passed by the Rent Control Appellate Authority, Kozhikode on the application filed under Section 5 of the Limitation Act and remitted the matter to be considered on merits as expeditiously as possible.

Revision petitioner (tenant) was sought to be evicted in RCP No. 80 of 2014 before the Rent Control Court, Kozhikode. The tenant was set ex parte in the proceedings. He filed an application for setting aside the ex parte order of eviction with a petition under Section 5 of the Limitation Act to condone delay of 145 days. The said application was dismissed by the Rent Control Court, finding that there is no sufficient cause to condone the delay. Thereafter, the tenant approached the Rent Control Court Appellate Authority, Kozhikode, with RCA No. 146 of 2017. The Rent Control Appellate Authority referring to some precedents, held that the Rent Control Court has no power to condone the delay by invoking Section 5 of the Limitation Act.

The Court herein referred to the judgment pronounced by the Full Bench in Faisal v. Vikas Chacko, 2020(6) KLT 722, wherein it was found that the Rent Control Court is having power under Section 5 of the Limitation Act to condone delay, if sufficient cause was shown. Placing reliance on the same, Court set aside the order by the appellate authority and directed for time-bound disposal.[K.K. Hamsa v. Athikottu, 2021 SCC OnLine Ker 383, decided on 22-01-2021]


Sakshi Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Chhattisgarh High Court: Sanjay K Agrawal J., allowed the appeal and condoned the delay while setting aside the impugned order.

The facts of the case are that the plaintiffs filed a civil suit for declaration of title and for permanent injunction in respect of the land. The Trial Court dismissed the suit of the plaintiffs, against which the plaintiffs preferred an appeal under Section 96 of the Civil Procedure Code i.e. CPC before the first appellate court which was barred by limitation, an application under Section 5 of the Limitation Act was also filed stating that the plaintiffs preferred an application under Order 43 Rule 1(U) of the CPC before the High Court that has been dismissed. Thereafter appeal was preferred before the first appellate court which was rejected being devoid of merits. Aggrieved by this second appeal was filed under Section 100 of CPC.

Counsel for the appellants submitted that first appellate Court is absolutely unjustified in not condoning the delay of 72 days as the plaintiffs are entitled to the benefit of Section 14 of the Limitation Act, as such, the application for condonation of delay ought to have been allowed by the first appellate Court.

The Court relied on judgment N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123 wherein it was held

“11. Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. the object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time.

  1. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumptions that delay in approaching the court is always deliberate. This Court has held that the words “sufficient cause” under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice

The Court thus observed that the meaning of “sufficient cause” under Section 5 of the Limitation Act, 1963 held that the Courts should adopt a liberal and justice-oriented approach and condoned the delay of four days in filing appeal, under Section 5 of the Limitation Act, 1963.

The Court thus held that “it is quite vivid that plaintiffs’ suit for declaration of title and for permanent injunction was dismissed against which plaintiffs filed an appeal along with an application for condonation of delay for condoning the delay of 72 days in filing the appeal offering an explanation that they filed MA before this Court which was dismissed as withdrawn on 08.5.2008. It is not disputed that against the judgment and decree of the trial Court, an appeal under Section 96 of CPC before the first appellate Court would lie and appeal under Order 43 Rule 1(U) of CPC would not lie, therefore, the appellants/plaintiffs were entitled for the benefit of Section 14 of the Limitation Actas such, in the considered opinion of this Court, sufficient cause has been shown by the plaintiffs for the delay of 72 days in filing the appeal.”

In view of the above, impugned order was set aside and appeal allowed.[Ramvriksha Gond v. Babulal Gond, 2021 SCC OnLine Chh 39, decided on 14-01-2021]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Chhattisgarh High Court: Sanjay K Agrawal J., dismissed the petition being devoid of merits.

The facts of the case are such that the respondent 1 / accused was discharged on 6-6-2011 against which the petitioner filed application for grant of leave to appeal with a delay of approximately 2 years, but that application was dismissed as withdrawn with liberty to file appropriate petition, on 26-8-2013 against which the petitioner preferred revision on 12-11-2013 with an application for condonation of delay under Section 5 read with Section 14 of the Limitation Act, 1963 which has been dismissed by the revisional Court finding that the application for grant of leave to appeal was filed before this Court with a delay of approximately 2 years and Section 14 of the Limitation Act, 1963 has no application. Hence the instant petition was filed challenging the impugned order dated 18-7-2014 passed by the 2nd Additional Sessions Judge, Raipur in an unregistered criminal revision matter.

Counsel for the petitioners submitted that the revisional Court is absolutely unjustified in not condoning the delay by taking liberal view of the matter and also went wrong in not extending the benefit of Section 14 of the Limitation Act, 1963.

Counsel for the respondents submitted that application of Section 14 of the Limitation Act, 1963 is restricted only to a civil proceeding and that principle can be applied to appeal or revision arising from civil proceeding, but in no case, it can be extended to the criminal proceeding, as such, the application for condonation of delay has rightly been rejected.

Section 14 (1) and (2) of the Limitation Act, 1963 provides as under: –

“14. Exclusion of time of proceeding bona fide in court without jurisdiction. — (1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.”

The Court relied on judgment J. Kumaradasan Nair v. IRIC Sohan, (2009) 12 SCC 175 wherein it was observed that “Section 14(1) of the Limitation Act, 1963 is applicable only in suits in view of the definition of suit contained in Section 2(l) of the Limitation Act, 1963, but the principle thereof would be applicable for the purpose of condonation of delay in filing revision application in terms of Section 5 thereof.”

The Court thus observed that Section 14(1) of the Limitation Act, 1963, is only applicable to suits and by virtue of the principle of law laid down in J. Kumaradasan Nair (supra), it has been made applicable to revision or appeal arising out of the said proceeding, but its application is restricted only to civil proceeding, it does not apply to the criminal proceeding stretching beyond the civil proceeding and by virtue of Section 14(1), appeal or revision (civil), by virtue of the decision of the Supreme Court in J. Kumaradasan Nair (supra), it would be stretching too much to hold that it should also be applicable in criminal proceeding. However, Section 470(1) of the Code of Criminal Procedure, 1973 provides that in computing the period of limitation, the time during which any person has been prosecuting with due diligence another prosecution, whether in a Court of first instance or in a Court of appeal or revision, against the offender, shall be excluded.

The Court thus held that in the instant case there is delay of approximately two years from 6-6-2011 to 2-5-2013 in filing the application for grant of leave to appeal before this Court filed under Section 378(4) of the Code of Criminal Procedure, 1973 for which there is no satisfactory explanation offered before the revisional Court in revision and secondly, the provisions of Section 14 of the Limitation Act, 1963 are not applicable to a criminal proceeding like revision and the provision contained in Section 470(1) of the CrPC would be applicable.

In view of the above, petition was dismissed.[Devmati Khemka v. Raju Yadav, Criminal Misc. Petition No.744 of 2014, decided on 19-11-2020]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Kerala High Court: A Full Bench of A.M. Shaffique, Sunil Thomas and Gopinath, JJ., held that there is no limitation period for wife/divorced wife to claim her property entrusted to husband/in-laws given in the form of dowry or otherwise.

Questions involved was:

Whether trust created by a wife entrusting her property to her husband gets extinguished after the dissolution of marriage and whether she can initiate proceedings invoking Section 10 of the Limitation Act, 1963 without any limitation of time?

For the above-stated question, reference was made to the decision of Bindu K.P. v. Surendran C.K., [2018 (2) KHC 1] wherein it was held that claim of the wife or ex-wife for a dowry is not barred by any length of time.

Counsel for the appellant Sri S.K. Balachandran placed the following decision before the Court:

    • Swapna v. Thankavelu, 1990 SCC OnLine Ker 168: – In the above case, a Single Judge of this Court held that when valuable articles are entrusted by the wife to the husband for safe custody, the husband remains in the position as a trustee who is bound to account to the wife all her properties at any time when she demands. The aforesaid judgment was delivered following the Supreme Court judgment in Pratibha Rani v. Surajkumar, (1985) 2 SCC 370. It was further held that if the husband is a trustee, the wife is entitled to follow the property in the possession of the trustee, and Section 10 of the Limitation Act would apply.
  • Chacko v. Annamma, (1985) 2 SCC 370: – In this case, the Division Bench of this Court approved Swapna’s case stated above. In the above case, on a detailed analysis of the relevant provisions including Section 10 of the Limitation Act and the provisions of the Trusts Act, overruling an earlier judgment in Annamma v. Thressiamma, 1971 SCC OnLine Ker 86, it was held that there is a creation of trust in respect of stridhanam property and therefore Section 10 applies.
  • In Bhatacharjee v. Sarathi Choudhury, 1993 SCC OnLine Ker 13, while considering the impact of Section 12 of the Protection of Women from Domestic Violence Act, 2005, the Supreme Court held that as long as the status of the aggrieved person remains, and the stridhanam remains in the custody of the husband, the wife can put forth a claim under Section 12 of the Act.

Question involved in the above reference was the following:

When there is a change in circumstances between the spouses, especially when there is a dissolution of marriage and substantial time had elapsed, whether the trust created between them would be extinguished?

Section 10 of the Limitation Act states as follows:

“10. Suits against trustees and their representatives- Notwithstanding anything contained in the foregoing provisions of this Act, no suit against a person in whom property has become vested in trust for any specific purpose, or against his legal representatives or assigns (not being assigns for valuable consideration), for the purpose of following in his or their hands such property, or the proceeds thereof, or for an account of such property or proceeds, shall be barred by any length of time.

Explanation.-For the purposes of this section any property comprised in a Hindu, Muslim or Buddhist religious or charitable endowment shall be deemed to be property vested in trust for a specific purpose and the manager of the property shall be deemed to be the trustee thereof.”

In view of the decisions referred above, it is settled that,

when the wife entrusts with the husband any property belonging to her, a trust is created and the husband is bound to return the same to his wife. If the same is not returned, the wife has a right to demand the same by filing a suit or as in the present case, file an application before the Family Court or take other necessary steps under the relevant statutes in force.

When Section 10 of the Limitation Act indicates that there is no limitation for initiating any such action, in the absence of any other statute providing for a limitation, the trustee cannot take a contention that he shall not return the trust property on account of any period of limitation. The question posed is, when the relationship between the parties gets deranged and results in divorce, whether the trust gets extinguished and the divorced wife would be entitled to invoke Section 10 of the Limitation Act and file a suit at her will and pleasure at any point in time. In such an event, the questions to be considered are (i) whether a trust had been created at any point of time, (ii) if a trust has been created and the husband remains in the position of a trustee, whether it gets extinguished on the dissolution of marriage or under any other circumstances.

Under Section 77 of the Indian Trusts Act, 1882, a trust gets extinguished only under certain circumstances. Section 77 reads as under:

“77. Trust how extinguished.— A trust is extinguished—
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful; or
(c) when the fulfilment of its purpose becomes impossible by the destruction of the trust-property or otherwise; or
(d) when the trust, being revocable, is expressly revoked.”

Hence, unless any of the above-stated eventualities as mentioned take place, which is a question of fact to be decided on a case to case basis and once a trust is created, it continues to operate, even though marriage is dissolved. However, in an instance where there is an agreement between the parties settling the obligations arising from the trust, it gets fulfilled in terms of Section 77(a).

As per the Dowry Prohibition Act, 1961, when a statutory trust is created in respect of dowry, the principle aforestated shall apply.

Further, the Court added that, in the case of ornaments which are given in the form of dowry, definitely, a statutory trust is created. Even otherwise, if the ornaments owned by the wife do not form part of the dowry and if there is an entrustment of gold ornaments by the wife to the husband or his parents, a trust gets created, in which event, the trustee or trustees, as the case may be, are liable to return the same and there is no limitation for claiming the same by the wife/divorced wife.

In light of the above, the Court agreed with the law laid down in Chacko v. Annamma, (1993) 1 KLT 675 and upheld the view expressed in Bindu K.P. v. Surendran C.K., [2018 (2) KHC 1]. [Sheela K.K. v. N.G. Suresh, 2020 SCC OnLine Ker 4240, decided on 24-09-2020]

Case BriefsHigh Courts

Karnataka High Court: S. G. Pandit J., rejected the petition on the ground of delay and latches.

The facts of the case are such that the father of the petitioners are the owners/ landlords of the property situated at Unachageri of Ron Taluk, Gadag district. The lands were inam land and on abolition of inam saranjam and in view of Inam Abolition Act, the name of the father of the petitioners was removed and the name of the Government was entered which was rectified later pursuant to filing of an application under Rule 6(1) of Inam Resumption Rules by the father of the petitioners. The grievance of the petitioners is that on 26-08-1974 the husband of respondent 2 filed form No. 7 seeking occupancy rights on grounds being that he was cultivating or tenant of the said land which was ex parte granted by the Special Tahsildar, Land Reforms. Challenging the said order, petitioners have preferred this petition under Articles 226 and 227 of the Constitution of India to quash the impugned order.

The Court observed that the petitioners have approached this Court belatedly and there is an inordinate delay of more than 40 years in preferring this writ petition challenging the order dated 28-03-1977 without any explanation to the effect.

The Court relied on Santhosh V. Rai v. Legory Saldhana 2015 (1) Kar. L.J. 429 and observed

“10. That apart, the impugned order in the instant case is of the year 1981. Petitioner has assailed the impugned order after a lapse of 32 years. It is difficult to believe that the petitioner or his father were unaware of the impugned order. They are residents of Attavar Village. In fact, residents of villages would be aware with regard to occupation, possession and cultivation of agricultural lands, particularly when Tribunal has granted occupancy rights. Therefore, the petitioner cannot contend that the impugned order is a nullity as it is in violation of principles of natural justice as there is no service of notice on the legal representatives of the petitioners mother Ramaramba. Therefore the writ petition would have to be dismissed on the ground of delay and latches and as being a speculative exercise.”

 The Court further relied on Municipal Council, Ahmednagar v. Shah Hyder Beig, (2000) 2 SCC 48 and observed that

 “The real test for sound exercise of discretion by High Court in this regard is not the physical running of time such but the test is whether by reason of delay, there is such negligence on the part pf the p[petitioner so as to infer that he has given up his claim or whether the petitioner has moved the Writ court, the rights of the third parties have come into being which should not be allowed to disturb unless there is reasonable explanation for the delay.”

The Court in S.S. Balu v. State of Kerala, (2009) 2 SCC 479 held that Delay defeats equity and that relief can be denied on the ground of delay alone even though relief is granted to other similarly situated persons who approach the Courts in time.

The Court held that it is well-settled position cannot be unsettled after decades.

In view of the above, petition stands rejected.[Shiddanagouda v. Special Tahsildar, WP No. 105092 of 2017, decided on 10-01-2020]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Karnataka High Court: M.I. Arun, J. allowed the writ petition and declared the show cause notice or any subsequent proceeding as null and void.

According to the brief facts of the case, the petitioners were granted the impugned land in 1975 for non-agricultural purposes and had since been in peaceful possession.

The petitioners contended that the respondents had been issuing show-cause notices and had been pursuing proceedings against them since 2016 alleging that the said land was allotted to them, not in accordance with law. The petitioners had been defending themselves since the very inception of the dispute in 2016, and finally filing the present writ petition against the latest notice issued in August 2020. Further, the petitioners also sought the order passed by the respondent Commissioner cancelling their land grant to be quashed as it had been passed while the present appeal was still being adjudicated upon.

The Court held that since the land was granted to the petitioner in the year 1975 and the show cause notice has been issued in 2020, thus a lapse or delay of 45 years is not reasonable or just. The Court further pointed out that Article 112 of the Limitation Act prescribes 30 years limitation period for suits by or on behalf of the central or state government.

Furthermore, fraud may vitiate everything, but the respondents failed in indicating fraudulent acts by the petitioners in the notice. Thus the incessant delay in issuing the notice was held to be bad in law.[G. Chitra Poornima v. State of Karnataka, 2020 SCC OnLine Kar 1393, decided on 10-09-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): Full Bench of Justice Bansi Lal Bhat (Acting Chairperson) and Justice Anant Bijay Singh (Member, judicial) and Dr Ashok Kumar Mishra (Member, Technical), made an observation in determining

Whether the provisions of the Limitation Act, 1963 vide Section 238A of the I&B Code, 2016 will be applicable to all NPA cases or not?

Appellant, suspended Managing Director of the Sarda Agro Oils Limited filed the present appeal under Section 61 read with Section 7 of the Insolvency and Bankruptcy Code, 2016 and Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against the impugned order passed by NCLT, Hyderabad.

By the present appeal, the appellant sought setting aside the ex-parte order of NCLT, Hyderabad apart from the stay of Insolvency Proceeding against the Corporate Debtor, etc.

Appellant has attached the Companies list of Debtors and receivable alongwith action for its recovery. A look at the ‘Balance Sheet’ reveals that the Company has started making losses from the ‘Financial Year’ 2014-15. 

Appellant failed to appear before the adjudicating authority after repeated notice.

Further, the adjudicating authority admitted the case based on some payments made by the appellant-corporate debtor into the current account of the respondent bank inspite of Non-Performing Asset on 30-09-2015.

Respondent-Bank made an observation that when this Appellate Authority was hearing the matter on 07-02-2020, it had already observed: “the only issue that deserves consideration in this matter is whether the Application under Section 7 of the I&B Code, 2016 filed by the Respondent Bank was within the period of limitation”.

Bench stated that the determining factor is the three years period from the date of default/NPA. Appellate Tribunal had also observed in Rajendra Kumar Tekriwal v. Bank of Baroda in Company Appeal (AT) (Ins) No. 225 of 2020 dated 13-08-2020 that the period of three years from the date of the Account of Corporate Debtor is classified as NPA then it becomes impermissible to proceed with Section 7 Application as observed in the para 11 of the Judgment.

Further, the tribunal reiterated that the provisions of the Limitation Act, 1963 vide Section 238A of the I&B Code, 2016 will be applicable to all NPA cases provided they meet the criteria of Article 37 of the Schedule to The Limitation Act, 1963.

Extension for the period of limitation can only be done by way of application of Section 5 of The Limitation Act, 1963 if any case for the condonation of delay is made out.

Therefore, in view of the above, the present appeal was allowed and the impugned order was set aside. Consequently, orders passed by the Adjudicating Authority appointing IRP/RP, declaring moratorium, freezing of account, etc. and all consequential action was taken by IRP/RP including advertisement publication, etc. all such orders and actions are declared illegal and set aside.

Adding to the above, tribunal also stated that the Adjudicating Authority will now close the CIRP proceedings and fix the fee of IRP/RP and the Corporate Debtor will pay the fees of IRP/RP and other costs incurred by him. [Jagdish Prasad Sarada v. Allahabad Bank, 2020 SCC OnLine NCLAT 621, decided on 28-08-2020]

Op EdsOP. ED.

Introduction

The Limitation Act, 1963 (“the Act”) was enacted as an Act to consolidate and amend the law for the limitation of suits and other proceedings and for purposes connected therewith.

One of the fundamental principles when applying the law of limitation is that subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence[1].

In fact the law goes so far as to say that it is the duty of the Court to consider limitation even if not set up as a defence as held in Noharlal Verma v. Distt. Coop. Central Bank Ltd.[2]:

“32. Now, limitation goes to the root of the matter. If a suit, appeal or application is barred by limitation, a court or an adjudicating authority has no jurisdiction, power or authority to entertain such suit, appeal or application and to decide it on merits.

33. Sub-section (1) of Section 3 of the Limitation Act, 1963 reads as under:

3. Bar of limitation.—(1) Subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence.”

(emphasis supplied)

Bare reading of the aforesaid provision leaves no room for doubt that if a suit is instituted, appeal is preferred or application is made after the prescribed period, it has to be dismissed even though no such plea has been raised or defence has been set up. In other words, even in absence of such plea by the defendant, respondent or opponent, the court or authority must dismiss such suit, appeal or application, if it is satisfied that the suit, appeal or application is barred by limitation.”

The Act provides for specified periods of limitation for suits, applications and appeals and the specific periods of limitation are provided for in the Schedule to the Act[3].

Under the Act when time runs it continues to run and is not interdicted except as provided in the Act[4].

There are several sections providing for exclusion of periods of limitation; however, amongst the most common exclusions that we come by are the exclusions which resort to Sections 14, 18 and 19 of the Act.

The present article is a brief discussion and analysis of the ingredients of these sections and some relevant law relating thereto.

Before delving into the sections the first principle to bear in mind with regard to limitation is that it must be looked at dispassionately for there is no equity when it comes to limitation. If an action is barred it is so and one has to face the consequences. It is not open to a Court or authority to carve out any fresh period or exclusion otherwise than as provided in the Act. This has been the settled proposition in the judgements cited hereafter.

In  Siraj-Ul-Haq Khan . v. The Sunni Central Board of Waqf, U.P. [5] it was held that equitable considerations are not material:

“The next question which calls for our decision is whether the Appellant’s Suit is saved by virtue of the provisions of Section 15 of the Limitation Act. That is the only provision … it is true that rules of limitation are to some extent arbitrary and may frequently lead to hardship; but there can be no doubt, in construing provision of limitation, equitable consideration are immaterial and irrelevant and in applying them effect must be given to the strict grammatical meanings of the words used.

In Amar Nath v. Mul Raj[6] a Full Bench of the  Punjab & Haryana High Court held:

“20. Limitation is a matter of statute and unless the decree-holders could bring their case under any definite provision of the Limitation Act, equitable consideration that they are being deprived of the fruits of the decree cannot be allowed to prevail and the utmost which may be said is that they are unlucky to suffer the disadvantage, but the default in that respect lies on them as they had not been diligent in taking out execution of the decree within the time prescribed by Section 48 of the Code.

A Full Bench of the  Kerala High Court also emphasised the same proposition in Abdul Hameed v. Government of India[7]:

“22 In our view in construing the provisions of the Limitation Act equitable consideration is out of place. The fixation of period of limitation in the Limitation Act, to some extent, may result in hardship. Even then the Limitation Act is to be construed by a court of law as the language of the statute in its plain meaning imparts. While dealing with the provisions of the Limitation Act the courts should not be concerned with the policy of the Legislature or with the result, however injurious it may be, in giving effect to the language used; nor it is the function of the court, where the meaning is clear, not to give effect to it merely because it would lead to hardship. Therefore, in our opinion a Judge cannot on equitable grounds extend the time allowed by the law of limitation or postpone its operation or introduce extension not recognised by the statute of limitation. The court should not also take into extraneous consideration, such as hardship in construing the provisions of the Limitation Act, in construing a statutory provision. There is no scope for adopting a liberal approach in the matter of condonation of delay.”                                           

(emphasis supplied)

Thus, equity of the case is not relevant for the purposes of deciding the issue whether the plaintiff’s case for recovery is within limitation or not. No sympathetic or liberal view can be taken to extend limitation if the time has run out on the footing that the claimant otherwise might succeed on merits. The merits or justice of a case or sympathy for the litigant etc. are considerations which would arise only when considering condonation of delay, where applicable.

I now proceed with analysing the necessary law with regard to Sections 14, 18 and 19 of the Act which are frequently used as the basis for saving limitation.

Exclusion of time for proceedings Bona Fide in a Court without Jurisdiction 

Section 14[8] of the Act provides that in computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with diligence another civil proceeding, shall be excluded, where the proceedings relate to the same matter in issue and is prosecuted in good faith in a Court which from defect of jurisdiction or other cause of like nature is unable to entertain it.

The section comprises of the following cumulative ingredients:

  1. prosecuting civil proceedings with due diligence;
  2. the former proceeding was being prosecuted in good faith in a Court which, from defect of jurisdiction or other cause of like nature, is unable to entertain it;
  3. earlier proceedings relate to the same mater in issue or are for the same relief.

This section is easily applied (in respect of the aforesaid three ingredients i.e. (i) to (iii) above) when saving limitation in cases where a prior suit is filed (between the same parties for the same relief) in a wrong court as in a court not having jurisdiction ie territorial or pecuniary. However, even then it must be shown that there was diligence in filing the prior suit in a wrong Court as for instance when it is possible that two courts have possible jurisdiction over the same dispute between the same parties. If then in such a case there is a finding to the effect that the prior suit is filed in the wrong court bona fide or the plaintiff satisfies the court in the subsequent suit that the prior suit was bona fide filed in a wrong court and then the plaint was returned, the section would apply.

In Globe Transport Corpn. v. Triveni Engg. Works[9] time taken in contesting a litigation in a wrong Court was excluded by resort to Section14:

“4. …We accordingly allow the appeal, set aside the judgment of the High Court as also the order passed by the Civil Judge, Allahabad and taking the view that the Court of the Civil Judge, Allahabad has no jurisdiction to entertain the suit, we direct that the plaint may be returned to the respondents for presentation to the appropriate court in Jaipur City. We may make it clear that since the respondents have in good faith pursued their claim before the Court of Civil Judge, Allahabad which was found to have no jurisdiction by reason of Clause 17 of the Contract of Carriage the period during which they prosecuted their suit before the Court of Civil Judge, Allahabad, would be liable to be excluded in computing the period of limitation for filing the suit in the appropriate court in Jaipur City.”                                                                    

(emphasis supplied)

In Mohinder Singh v. Paramjit Singh[10] it was held:

“22…The purport of Section 14 of the 1963 Act has been delineated in Union of India v. West Coast Paper Mills Ltd.  …. this Court observed thus: … to attract the applicability of Section 14 of the Limitation Act, the following requirements must be specified: (SCC p. 25, para 6)

‘6. (1) both the prior and subsequent proceedings are civil proceedings prosecuted by the same party;

(2) the prior proceedings had been prosecuted with due diligence and in good faith;

(3) the failure of the prior proceedings was due to a defect of jurisdiction or other cause of a like nature;

(4) both the proceedings are proceedings in a court.’…….. Any circumstance, legal or factual, which inhibits entertainment or consideration by the court of the dispute on the merits comes within the scope of the section and a liberal touch must inform the interpretation of the Limitation Act which deprives the remedy of one who has a right.”

“28. … While considering the provisions of Section 14 and its application, this Court observed that a proper approach will have to be adopted and the provisions will have to be interpreted so as to advance cause of action rather than abort the proceedings, inasmuch as the section is intended to provide relief against bar of limitation in cases of mistaken remedy or selection of a wrong forum.”                                                                                  

(emphasis supplied)

In a recent decision of the Supreme Court (delivered by Rohinton Fali Nariman, J.) in M.P. Steel Corpn. v. CCE[12] the provision was explained and it was stated a liberal approach is required:

“49. The language of Section 14, construed in the light of the object for which the provision has been made, lends itself to such an interpretation. The object of Section 14 is that if its conditions are otherwise met, the plaintiff-applicant should be put in the same position as he was when he started an abortive proceeding. What is necessary is the absence of negligence or inaction. So long as the plaintiff or applicant is bona fide pursuing a legal remedy which turns out to be abortive….”… This example also goes to show that the expression “the time during which the plaintiff has been prosecuting with due diligence another civil proceeding” needs to be construed in a manner which advances the object sought to be achieved, thereby advancing the cause of justice.”                                                                                       

(emphasis supplied)

Following the decision in M.P. Steel Corpn. v. CCE (supra) the  Supreme Court in Suryachakra Power Corpn. Ltd. v. Electricity Deptt.[13]  held:

“7. That the principles under Section 14 of the Limitation Act, 1963 can be applied even when Section 5 of the Act is not applicable, is no more res integra, in view of M.P. Steel Corpn. v. CCE[14] .

8. The two main ingredients required for attracting the principles under Section 14 of the Limitation Act, 1963 are that the party should be prosecuting another civil proceedings with due diligence and that the prosecution should be in good faith. It is not enough that one part is satisfied. Both due diligence and good faith must be established.                                                   

(emphasis supplied)

It is therefore clear that judicial decisions have taken a view to apply the provision to advance the cause of justice and in a liberal manner.

An important aspect while applying Section 14 is often overlooked i.e. that the proceeding taken earlier of which exclusion is sought must relate to the same matter in issue. It is however not uncommon that a resort to Section 14 of the Act is taken, especially in cases where a suit has been filed for recovery of money subsequent to the filing and disposal of the winding up proceedings. However, the following judgments have held that the time that was spent in prosecuting a company petition cannot be excluded while computing the period of limitation.

Ajab Enterprises v. Jayant Vegoiles and Chemicals Pvt. Ltd.[15]

This judgment holds that for application of Section 14 it is necessary to show that the civil proceedings, which were taken earlier by the plaintiff, were relating to the same matter in issue and that the said matter was prosecuted in good faith in a Court which, from defect of jurisdiction or other cause of a like nature, was unable to entertain it. It also holds that if there are two possible remedies

“11. …According to the defendants, for application of Section 14(1) it is necessary to show that the civil proceedings, which were taken earlier by the plaintiffs, were relating to the same matter in issue and that the said matter was prosecuted in good faith in a Court which, from defect of jurisdiction or other cause of a like nature, was unable to entertain it. It was contended that in a company petition what was sought was the winding up of the Company and though it could be said that ultimately if the winding up of the Company was ordered, some pro rata amount due to the plaintiffs could have been recovered in the said proceedings it does not necessarily mean that the matter in issue in the company petition was the same as in the present suit. …. When a suit is dismissed not because the Court had no jurisdiction to entertain it, or for any other cause of a like nature, but because it was misconceived or because the proceeding or the suit was not one recognised by law as legal in its initiation, then clearly Section 14 of the Limitation Act is not attracted to such a suit. Where the suit was dismissed because the proceedings according to the trial court were not recognised by law as legal in their initiation, then Section 14 has no applicability. In the present case, the petition under the Companies Act filed by the plaintiffs earlier was entertained and, therefore, it cannot be said that the said petition was not entertained by the Court or the Court was unable to entertain the same due to the defect of jurisdiction or other cause of a like nature.

12. …In the present matter also it could be that there are two remedies available to the plaintiffs; one of filing a company petition seeking winding up of the Company and the other of a suit for recovery of the amount due. Now, therefore, merely because the proceedings of winding up could not be granted for some reason or the other and the plaintiffs were directed to file a suit for recovery of the debts, it would not mean that the case would be covered by the provisions of Section 14 of the Limitation Act. Apart from this, as stated earlier, even if other conditions of Section 14(1) are satisfied, for giving benefit of the said Section 14(1) the Court must not have been able to entertain the proceeding for the reason of defect in jurisdiction or cause of a like nature. Supreme Court in (1977) 1 SCC 791[16] held that for proper interpretation of words “or cause of a like nature” the said words or clause would be required to be considered ejusdem generis with earlier words “of defect in jurisdiction” and therefore where the Court had jurisdiction to entertain the company petition, but for some other reason it does not do so, it cannot be said that the Court did not grant the application due to defect similar to the want of jurisdiction. In the result, Section 14 of the Limitation Act has no application to the facts of the present case and, therefore, the time that was spent in prosecuting the company petition by the plaintiffs cannot be excluded while computing the period of limitation. Even if the plaintiffs were pursuing a remedy of winding up proceeding under the Company Law, they ought to have filed suit for recovery of the amount due to them within the period of limitation”

Hassan Chand and Sons v. H.H. Maharaja Shri Gaj Singh[17]

This judgment holds that where it is open to a litigant to adopt concurrent remedies, and he adopts one of those remedies, and fails on the merits, then when he later chooses to adopt the second remedy, he cannot be held entitled (save in the exceptional case of a review where such an application would properly lie) to the exclusion or condonation of time which has been spent by him on the prosecution of the first remedy, the ratio being that it was perfectly open to him to pursue the second remedy while he was prosecuting the other one.

9. The broad principle, that is deducible from the discussion made above, by pre-ponderence of judicial opinion in our country is, that where it is open to a litigant to adopt concurrent remedies, and he adopts one of those remedies, and fails on the merits, then when he later chooses to adopt the second remedy, he cannot be held entitled (save in the exceptional case of a review where such an application would properly lie) to the exclusion or condonation of time which has been spent by him on the prosecution of the first remedy, the ratio being that it was perfectly open to him to pursue the second remedy while he was prosecuting the other one, and that any other view would be productive of unnecessary delay in the administration of justice and lead to needless protraction of litigation. And on a balance of all the relevant considerations we respectfully agree with this view.”

Niyogi Offset Printing Press Ltd. v. Doctor Morepen Ltd.[18]

This judgment holds that a company petition for winding up in which ultimately the petitioner may get the amount due to him or some amount on pro rata basis does not necessarily mean that the matter in issue will be the same as in a suit for recovery of amount, had it been filed.

“18. One of the conditions required to be satisfied is that the proceedings taken earlier must be of same relief as claimed in the present proceedings as contemplated under Section 14(2) of the Act. …What is to be considered is whether the period of limitation to recover the amount shall be extended by filing a petition under Section 433 of the Companies Act, 1963.

19. For application of Section 14(1) it is necessary to show that the civil proceedings which were taken earlier by the petitioner were relating to the same matter in issue and the said matter was prosecuted in good faith in a Court which for the defect of jurisdiction or other cause of a like nature was unable to entertain it. A company petition for winding up in which ultimately the petitioner may get the amount due to him or some amount on pro rata basis does not necessarily mean that the matter in issue will be the same as in a suit for recovery of amount, had it been filed. In order to ascertain whether the claim of the petitioner is barred by time or not, what is to be considered is whether the petitioner can institute the suit for recovery of the amount claimed to be due from the respondent to the petitioner.

20.  In Narayan Ambaji Chavan v. Hari Ganesh Navare[19],the High Court had refused to interfere on the ground that there was another remedy by way of suit in that matter and, therefore, it was held that in such a matter the condition necessary under Section 14 of the Limitation Act, 1963 were not satisfied. In the present matter it is apparent that two remedies are available to the petitioner. One was to file a civil suit for recovery of amount allegedly due to the petitioner and the other to file a winding up petition. No limitation is provided for winding up petition under Section 433 of the Companies Act, 1956 but filing a winding up petition will not save the limitation for filing the suit in the facts and circumstances if the claim of the petitioner for recovery has become barred by time.

I must however draw attention to the fact that in Maharashtra State Farming Corporation Ltd. v. Belapur Sugar and Allied Industries L[20] and Pavan Om Prakash Kejriwal v. M/s Partap Steel Rolling Mills (1935) Ltd.[21] exclusion of time under Section 14 was granted in the case of a winding up petition while permitting the filing of a suit on withdrawal of the Petition..

However in my humble view the decisions in the cases of Maharashtra State Farming Corporation Limited and Pavan Om Prakash Kejriwal (supra) cannot be considered a precedent, particularly under Section 14 of the Act, as they do not lay down any ratio nor even discuss how the ingredients of Section 14 are applicable while permitting the filing of a suit and excluding time taken in the Petition. These decisions did not consider the judgements referred to above.

Effect of an acknowledgment in writing 

Section 18[22] provides that a fresh period of limitation shall be computed when before the expiration of the prescribed period of limitation an acknowledgment has been made in writing signed by the person[23]. The word signed means signed either personally or by an agent duly authorised in this behalf[24].

The section applies to both cases where there are clear admissions of liability and promises to pay and also those cases where the correspondence discloses some ambiguity in the words used. To exclude time under this section the crucial ingredients of Section 18 are:

  • The acknowledgement must be such as to establish a debtor and creditor jural relationship which can be seen from the document sought to be treated as an acknowledgment;
  • the acknowledgement must be made in writing within the prescribed period of limitation; and
  • such an acknowledgement must be in writing signed by the person himself.

If the correspondence or documents gleaned show the above ingredients are satisfied cumulatively the provision kicks in and will apply to extend limitation.

The position cannot be more clearly stated than in Food Corpn. of India v. Assam State Coop. Marketing & Consumer Federation Ltd.[25] where it is held:

“14. According to Section 18 of the Limitation Act, an acknowledgement of liability made in writing in respect of any right claimed by the opposite party and signed by the party against whom such right is claimed made before the expiration of the prescribed period for a suit in respect of such right has the effect of commencing a fresh period of limitation from the date on which the acknowledgement was so signed. It is well settled that to amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, it need not be accompanied by a promise to pay either expressly or even by implication.

15. The statement providing foundation for a plea of acknowledgement must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. The words used in the acknowledgement must indicate the existence of jural relationship between the parties such as that of debtor and creditor. The intention to attempt such jural relationship must be apparent. However, such intention can be inferred by implication from the nature of the admission and need not be expressed in words. A clear statement containing acknowledgement of liability can imply the intention to admit jural relationship of debtor and creditor. Though oral evidence in lieu of or making a departure from the statement sought to be relied on as acknowledgement is excluded but surrounding circumstances can always be considered. Courts generally lean in favour of a liberal construction of such statements though an acknowledgement shall not be inferred where there is no admission so as to fasten liability on the maker of the statement by an involved or far-fetched process of reasoning. (See Khan Bahadur Shapoor Freedom Mazda v. Durga Prosad Chamaria[26]  and Lakshmirattan Cotton Mills Co. Ltd. v. Aluminium Corpn. of India Ltd.[27] ) So long as the statement amounts to an admission, acknowledging the jural relationship and existence of liability, it is immaterial that the admission is accompanied by an assertion that nothing would be found due from the person making the admission or that on an account being taken something may be found due and payable to the person making the acknowledgement by the person to whom the statement is made.”

                (emphasis supplied)

Once a jural relationship is expressed in the document sought to be treated as an acknowledgement the law will treat it as an acknowledgement and extend time from the date of the acknowledgement. In absence of this no amount of writing by a person to his creditor will take the matter any further.

In Hansa Industries (P) Ltd. v. MMTC Ltd.[28] the necessary tests were well set out:

“15. In  Shapoor Freedom Mazda v. Durga Prosad Chamaria[29] ,the Supreme Court while interpreting corresponding Section 19 of Limitation Act, 1908 which was identically worded, held that the relevant essential requirement of valid acknowledgment are: (a) It must be before the relevant period of limitation has expired, (b) it must be in regard to the liability and respect of the right in question and (c) it must be in writing and must be signed by the party against whom such right is claimed.”

The following ingredients of the section have been elucidated in decisions hereafter:

  1. it must be prior to expiration of limitation.
  2. the acknowledgement must be expressed in writing and not orally;
  3. it must be by the person who is liable to pay the amount or someone authorised on his behalf.

Valliama Champaka Pillai v. Sivathanu Pillai[30]

19 Under Section 18, Limitation Act, one of the essential requirements for a valid “acknowledgement” is that the writing concerned must contain an admission of a subsisting liability. A mere admission of a past liability is not sufficient to constitute such an “acknowledgement. Hence a mere recital in a document as to the existence of a past liability, coupled with a statement of its discharge, does not constitute an “acknowledgement” within this section.”

    (emphasis supplied)

Sampuran Singh v. Niranjan Kaur[31]

9Thus, the acknowledgment, if any, has to be prior to the expiration of the prescribed period for filing the suit, in other words, if the limitation has already expired, it would not revive under this section. It is only during subsistence of a period of limitation, if any, such document is executed, that the limitation would be revived afresh from the said date of acknowledgment.”

                (emphasis supplied)

Ashwini Satish Bhatt v. Jeevan Diwakar[32]

6… The contention of learned advocate for the appellant is that this cheque dated 19th July 1996 itself is an acknowledgement of debt and, as such, there is no merit in the submission of the defence that the liability under dishonoured cheque is not account of legally enforceable debt. Insofar as the dishonoured cheque is concerned, the stand taken by the respondent is that the cheque was not written by him and it is not in his handwriting and that he had, in fact, issued a blank cheque in favour of the appellant for certain purpose. This stand was specifically taken by the Respondent in the course of the trial and, as such, it was necessary for the complainant to have sought the opinion of handwriting expert in case her case was that the cheque in question was in the handwriting of the respondent, so as to rebut the theory of blank cheque taken by the respondent.   It is in these circumstances that the Magistrate had come to the conclusion that the dishonoured cheque in question cannot be treated as acknowledgment under Section 18 of the Limitation Act, since the acknowledgement should be before the period of limitation is over and that it should be in writing.   In view of this position, the Magistrate was right in coming to the conclusion that it had not been proved that the dishonoured cheque was in relation to a legally enforceable debt or liability in law.   The dishonoured cheque admittedly was issued after 5 years of the said Agreement dated 13th June 1991.         

(emphasis supplied)

Rajendra Valechav. Satpal[33]

“9. A bare perusal of the aforesaid provision reflect that the acknowledgment should be executed before the expiry of prescribed period for a suit in respect of any property or right and such acknowledgment of liability in respect of such property or right should be in writing signed by the party against whom such property or right is claimed. If both these requirements are met then a fresh period of limitation shall be computed from time when the acknowledgment was so signed. The  Supreme Court in J.C. Budh Raja v. Chairman Orissa Mining Corporation Ltd.[34]  has held that acknowledgment of liability under Section 18 of the Limitation Act must be made prior to the expiry of the period of limitation of suit.”                                                             

(emphasis supplied)

Another question which may often arise now with the use of emails as a means of communication is whether an acknowledgment by an email (as opposed to written communications) would amount to an acknowledgment as envisaged under Section 18 of the Act.

The issue stands covered by the decision in Sudarshan Cargo Pvt. Ltd. v. Techvac Engineering Pvt. Ltd.[35] :

“8. Having heard the learned advocates appearing for the parties and on perusal of annexures appended to the company petition as well as examination of the plea put forward by respondent counsel, I am of the considered view that following point would arise for my consideration:

Whether e-mail/s acknowledging the debt would constitute a valid and legal acknowledgement of debt though not signed as required under Section 18 of the Limitation Act?”

*                           *                        *

15. However, the Information Technology Act, 2000 (hereinafter referred to as ‘IT Act, 2000’ for brevity) provides for legal recognition for transactions carried out by means of electronic data/electronic communication which involve the use of alternatives to paper based methods of communication and storage of information…Section 4 of The IT Act, 2000 provides that if information or any other matter is to be in writing or in the typewritten or printed form, then, not withstanding anything contained in such law, the requirement is deemed to have been satisfied if such information or matter is rendered or made available in an ‘electronic form’ and same is accessible to be used for a subsequent reference.

                      *                               *                                         *

21. A harmonious reading of Section 4 together with definition clauses as extracted hereinabove would indicate that on account of digital and new communication systems having taken giant steps and the business community as well as individuals are undisputedly using computers to create, transmit and store information in the electronic form rather than using the traditional paper documents and as such the information so generated, transmitted and received are to be construed as meeting the requirement of Section 18 of the Limitation Act, particularly in view of the fact that Section 4 contains a non obstante clause.

Part Payment on Account of Debt 

Section 19[36] of the Act provides that a fresh period of limitation will commence when before the expiration of the prescribed period payment on account of debt is made by the person liable to make it or an authorised agent of such a person and that acknowledgment of the payment is made in the handwriting or writing signed by the person making the payment[37].

The section poses no difficulty in application when a payment is made as for example by a covering letter enclosing a cheque sent prior to expiry of limitation. However, as is discussed subsequently when there is only a payment made within limitation expiring and there is no evidence of an acknowledgment of the payment by the person owing the debt there would be difficulty in claiming extension of time on the basis of mere payments. The crucial ingredients required to invoke Section 19 of the Limitation Act are:

  • the payment must be made within the prescribed period of limitation; and
  • an acknowledgment of the payment appears must be in the handwriting of or in a writing signed by the person making payment.

What is required is two aspects, one the payment within limitation followed by the evidence of such payment (in writing) which though necessary need not be shown to be within the expiry of limitation. It is also necessary that there must be a writing acknowledging the payment is a part payment in the handwriting of or in a writing signed by the person making payment.

The aforesaid is elaborated in Sant Lal Mahton v. Kamala Prasad[38]:

“8. Admittedly in the case before us, none of the payments specified above were endorsed on the bond itself and there was no acknowledgment either in the handwriting of or sighed by, the debtor prior to the institution of the suit. What the Subordinate Judge relied upon, is the admission contained in para 15 of the written statement filed on behalf of Defendants 1 to 3 in the present suit where the defendants admitted not only that the payments specified in the plaint were actually made on the respective dates but asserted that there were other payments besides these, which reduced the debt still further and for which the plaintiffs did not give any credit to the defendants. In the opinion of the Subordinate Judge as the written statement was signed by these defendants, it would fulfil all the requirements of a sighed acknowledgment as is contemplated by the proviso to Section 20. The short point for our consideration is : whether the view taken by the Subordinate Judge is correct ?

9. It would be clear, we think, from the language of Section 20 of the Limitation Act that to attract its operation two conditions are essential : first, the payment must be made within the prescribed period of limitation and secondly, it must be acknowledged by some form of writing either in the handwriting of the payer himself or signed by him. We agree with the Subordinate Judge that it is the payment which really extends the period of limitation under Section 20 of the Limitation Act; but the payment has got to be proved in a particular way and for reason of policy the legislature insists on a written or signed acknowledgment as the only proof of payment and excludes oral testimony. Unless, therefore, there is acknowledgment in the required form, the payment by itself is of no avail. The Subordinate Judge, however, is right in holding that while the section requires that the payment should be made within the period of limitation, it does not require that the acknowledgment should also be made within that period. To interpret the proviso in that way would be to import into it certain works which do not occur there. This is the view taken by almost all the High Courts in India and to us it seems to be a proper view to take (see Md. Moizuddin v. Nalini Bala,  Lal Singh v. Gulab Rai[40], Venkata Subbhu v. Appa Sundaram[41], Ram Prasad v. Mohan Lal[42], Viswanath v. Mahadeo[43]).

10. But while it is not necessary that the written acknowledgment should be made prior to the expiry of the period of limitation, it is, in our opinion, essential that such acknowledgment, whether made before or after the period of limitation, must be in existence prior to the institution of the suit… To claim exemption under Section 20 of the Limitation Act the plaintiff must be in a position to allege and prove not only that there was payment of interest on a debt or part payment of the principal, but that such payment had been acknowledged in writing in the manner contemplated by that section. The ground of exemption is not complete without this second element, and unless both these elements are proved to exist at the date of the filing of the plaint the suit would be held to be time-barred. In the plaint as it was originally filed in this case, the prayer was only for a mortgage decree in the usual form. After the hearing was closed, the plaintiffs, it seems, were apprehensive that the court might not hold the bond to be properly attested. In these circumstances, they prayed for an amendment of the plaint which was allowed by the court. By the amended plaint the cause of action was stated to arise from the different payments made on different dates as were stated in Para 7 of the plaint and at the end of paragraph the following words were added :

The suit is saved from limitation so far as the personal remedy is concerned and the payments were made by the defendants on different dates as mentioned Schedule A below.

11. These amendments must be deemed in the eye of law to be a part of the original plaint, and obviously there is neither any averment nor proof that any of these payments was acknowledgment in writing prior to the institution of the suit. This being the position, the suit treated as one for obtaining a money decree against the defendants must be held to be barred by limitation at the date on which it was instituted and the courts below consequently were not justified in giving the plaintiffs a money decree in this suit.”             

(emphasis supplied)

Again in Maiz Uddin Miya v. Nalini Bala Debee[44] the above ingredients are restated.

In a recent decision of the Supreme Court in Shanti Conductors (P) Ltd. v. Assam SEB[45] the aforesaid view was reiterated:

16. We may notice the judgment of this Court dealing with Section 20 of the Limitation Act, 1908, which was akin to present Section 19 of the Limitation Act, 1963. In Sant Lal Mahton v. Kamla Prasad  , this Court held that for applicability of Section 20 of the Limitation Act, 1908, two conditions were essential that the payment must be made within the prescribed period of limitation and it must be acknowledged by some form of writing either in the handwriting of the payer himself or signed by him. This Court further held that for claiming benefit of exemption under Section 20, there has to be pleading and proof.”

The following are cases where the Courts, after analysing the provisions of Section 19, have regarded mere payments as not amounting to payments which extend limitation under Section 19 of the Act.

Rajendra Valecha v. Satpal[47]

In this case payment made in cash did not and was not found to be in writing and was made beyond the expiration of limitation.

12. Having considered the facts of the present appeal in the light of the statutory provisions and judgment of the  Supreme Court in J.C. Budh Raj case (supra), it is to be noted that after acknowledgment dated 25.02.2009, the alleged payment of Rs. 1 lakh and Rs. lakhs of 06.04.2010 and 13.02.2015 were made by cash by the respondents to the appellants and Rs. 3 lakhs by cheque dated 25.12.2015. Admittedly, the limitation of three years for filing the suit for recovery from the last acknowledgment dated 25.02.2009 had expired on 25.02.2012. There is no written acknowledgment of the cash payment of Rs. 1 lakh on 06.04.2010 before expiry of limitation i.e. 25.02.2012. Therefore, benefit of Section 19 cannot be extended to the appellants on account of alleged payment made on 06.04.2010. The admitted payment of Rs. 3 lakhs made on 13.12.2015 is after expiry of 3 years from acknowledgement dated 25.02.2009 and therefore it is of no help to the appellant in getting period of limitation extended. The payment of Rs. 3 lakhs by cheque dated 25.12.2015 is also after expiry of three years from 25.02.2009. Therefore, these payments do not fulfil the requirement of Sections 18 and 19 of the Limitation Act, 1963.

K.C.Pangunni v. Official Liquidator, Wandoor Jupiter Chits Pvt. Ltd.[48]

In this case the Court reemphasised the requirement that the payment to amount to a valid part payment must be in the handwriting or writing signed by the person making it.

“2… Under Section 19 of the Limitation Act it is not every part payment that would save limitation but only payment the acknowledgment of which appears in the handwriting of, or in a writing signed by the person making the payment.  There is no case that any of the payments were of that nature. Therefore, section 19 of the Limitation Act would not operate.”

Dalichand Jugraj Jain v. Madhu Wool Spinning Mills[49]

Here the fact that the part payments being made alone is not sufficient to extend limitation is re-stated.

“5.   Section 19 of the Limitation Act is as below:…It is clear that in case an acknowledgment of payment appears in the handwriting of or in a writing signed by the person claiming payment then alone the said payment can be pleaded for the purpose of extension of period of limitation. Mere making payment before the expiration of the prescribed period is not sufficient. In this case there is no pleading that the acknowledgment of payment was obtained in the handwriting of the defendants or any person authorised by them. It is also clear from Ext. H. In view of this the learned counsel for the plaintiff was not in a position to point out as to how by mere payment the period of limitation got extended.”

Mamta Ghosh v. Tapas Kumar Ghosh[50]

The Court held that in absence of the signed acknowledgement, the requirement of Section 19 is not met.

“11. The proviso ordains that an acknowledgement of the payment must appear either in the handwriting of the person making the payment or in a writing signed by such person to extend the period of limitation to be computed from the date the payment is made. Sant Lal Mahton (supra) requires that the said signed acknowledgement must exist on the date the suit is instituted; even acknowledgement of payment in the written statement would not be sufficient to extend limitation.”

Municipal Council v. Muhammad Shaban[51]

In this case the Court held that mere payments made without the prescribed writing as required in Section 19 do not extend limitation.

“5. The main question for consideration in this appeal is whether or not the suit was within time. … This contention of the learned counsel for the appellant cannot be accepted inasmuch as mere payments made by the defendant would not save limitation unless it is shown that there was an acknowledgment of the payments in the hand writing of the defendant or under a writing signed by him.

It is argued that applications were made by the defendant from time to time acknowledging payments and seeking further concessions from the plaintiff and that the recitals in these applications amounted to acknowledgment of the debt due, which, according to Section 20 of the Limitation Act, saved limitation. We do not see any force in this contention. It may be mentioned here that no evidence has been adduced by the plaintiff to prove these applications, nor has it been proved that the defendant had acknowledged the payments made by him in his hand writing, or in a writing signed by him.Under these circumstances it cannot be said that the payments made by the defendant in the year 2005 and 2006 amounted to acknowledgment of debt within the meaning of Section 20 of the Limitation Act.”


* Advocate, High Court, Bombay. Assisted by Mayur Agarwal, Arjun Prabhu and Sheetal Parkash. Author can be contacted at karlshroff@gmail.com

[1] Section 3

[2] (2008) 14 SCC 445 

[3] Section 2(j) “period of limitation” means the period of limitation prescribed for any suit, appeal or application by the Schedule, and “prescribed period” means the period of limitation computed in accordance with the provisions of this Act.

[4] Section 9. Continuous running of time.—Where once time has begun to run, no subsequent disability or inability to institute a suit or make an application stop it.

[5] 1959 SCR 1287 

[6] 1975 SCC OnLine P&H 42

[7] 1999 SCC OnLine Ker 655

[8] 14. Exclusion of time of proceeding bona fide in court without jurisdiction.–

(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(3) Notwithstanding anything contained in Rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under Rule 1 of that Order, where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature.

Explanation.—For the purposes of this section,—

(a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted;

(b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding;

(c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction.

[9] (1983) 4 SCC 707

[10] (2018) 5 SCC 698

[11] (2004) 3 SCC 458

[12] (2015) 7 SCC 58

[13] (2016) 16 SCC 152

[14] (2015) 7 SCC 58

[15] 1990 SCC OnLine Bom 28

[16] Gurdit Singh v. Munsha Singh, (1977) 1 SCC 791

[17] 1961 SCC OnLine Raj 125

[18] 2007 SCC OnLine Del 358

[19] 1930 SCC OnLine Bom 129 

[20] 2004 SCC OnLine Bom 136 

[21] 1992 SCC OnLine P&H 802 

[22] 18 Effect of Acknowledgement in writing.–

(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

Explanation.—For the purposes of this section,—

(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,

(b) the word “signed” means signed either personally or by an agent duly authorised in this behalf, and

(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.

[23] Section 18(1), Limitation Act

[24] Section 18 Explanation (b)

[25] (2004) 12 SCC 360 

[26] (1962) 1 SCR 140 

[27] (1971) 1 SCC 67

[28] 2004 SCC OnLine Del 551

[29] (1962) 1 SCR 140

[30] (1979) 4 SCC 429 

[31] (1999) 2 SCC 679

[32] 1999 SCC OnLine Bom 69 

[33] 2018 SCC Online Del 6936 

[34] (2008) 2 SCC 444

[35] 2013 SCC OnLine Kar 5063

[36] 19. Effect of payment on account of debt or of interest on legacy.-

Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:

Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment.

Explanation.—For the purposes of this section,—

(a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment.

(b) “debt” does not include money payable under a decree or order of a court.

[37] Section 19

[38] 1952 SCR 116

[39] 1937 SCC OnLine Cal 20

[40] 1932 SCC OnLine All 265

[41] ILR (1894) 17 Mad 92

[42] 1922 SCC OnLine MP 10

[43] Vishwanath Raghunath Kale v. Mahadeo Rajaram Saraf, 1933 SCC OnLine Bom 3 

[44] 1937 SCC OnLine Cal 329 

[45] (2020) 2 SCC 677

[46] 1952 SCR 116

[47] 2018 SCC Online Del 6936

[48] 1980 SCC OnLine Ker 296  

[49] 2000 SCC OnLine Bom 92 

[50] 2011 SCC OnLine Cal 990 

[51] 1961 SCC OnLine J&K 16 

Case BriefsHigh Courts

Rajasthan High Court: A Division Bench of Sangeet Lodha and P.K. Lohra, JJ. allowed an application for restoration and condoned the delay in filing of the application.

In the present case, in a peremptory order dated 26-04-2011 the Rajasthan High Court had dismissed an application of Special Appeal in D.B. Special Appeal (W) 1133 of 2011. The petitioner has therefore filed a restoration application for restoration of the dismissed application. The present Bench decided on considering the matter on its merits despite the restoration application being barred by limitation.

The Counsel representing the appellants, R.S. Saluja submitted that according to the peremptory order the appellants were required to file notices within a stipulated time period, which were complied by the appellants as well. The Counsel submitted that the case file of the special appeal was missing and thus, the same could not be attached to the notices. The Counsel also brought to the notice of the present bench an office report which revealed that the missing was found after a period of seven years thus there was no delay on the part of the appellants in the filing.

The Court upon perusal of the office report and various other documents stated that the notices were filed by the appellants within the stipulated time period and the Court erred while dismissing the same in terms of peremptory order. Thus, the Court allowed the restoration application to its original number and condoned the delay.[Shaitana Ram v. State of Rajasthan, 2019 SCC OnLine Raj 2498, decided on 29-08-2019]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ has held that the Article 65 of Limitation Act, 1963 not only enables a person to set up a plea of adverse possession as a shield as a defendant but also allows a plaintiff to use it as a sword to protect the possession of immovable property or to recover it in case of dispossession.

The Court held that a person in possession cannot be ousted by another person except by due procedure of law and once 12 years’ period of adverse possession is over, even owner’s right to eject him is lost and the possessory owner acquires right, title and interest possessed by the outgoing person/owner as the case may be against whom he has prescribed. By perfection of title on extinguishment of the owner’s title, a person cannot be remediless.

“In case he has been dispossessed by the owner after having lost the right by adverse possession, he can be evicted by the plaintiff by taking the plea of adverse possession. Similarly, any other person who might have dispossessed the plaintiff having perfected title by way of adverse possession can also be evicted until and unless such other person has perfected title against such a plaintiff by adverse possession.”

Rejecting the contention that there is no conferral of right by adverse possession, the Court held that there is the acquisition of title in favour of plaintiff though it is negative conferral of right on extinguishment of the right of an owner of the property. The right ripened by prescription by his   adverse possession is absolute and on dispossession, he can sue based on ‘title’ as envisaged in the opening part under Article 65 of Act. The Court, hence, held that

“the plea of acquisition of title by adverse possession can be taken by plaintiff under Article 65 of the Limitation Act and there is no bar under the Limitation Act, 1963 to sue on aforesaid basis in case of infringement of any rights of a plaintiff.”

[Ravinder Kaur Grewal v. Manjit Kaur, 2019 SCC OnLine SC 975, decided on 07.08.2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai: The Bench of Bhaskara Pantula Mohan, Member (Judicial) and V. Nallasenapathy, Member (Technical) allowed a petition filed by TJSB Sahakari Bank (“the Bankfor admission of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

The Bank was a member of the “SVC Bank Consortium” that sanctioned credit facilities to the Unimetal Castings Ltd. (“Corporate Debtor”) on 25-2-2013. The Bank sought initiation of Insolvency Resolution Process against the Corporate Debtor under Section 7 on the ground of default in repayment of the loan to the extent of more than Rs 6.38 crores.

Aditya Pimple, Advocate instructed by MAG Legal representing the Corporate Debtor raised various contentions to oppose the application of the Bank. One of the contentions related to applicability of Limitation Act, 1963 was that the claim of the Bank was barred under Article 137. For this, he relied on a recent judgment in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, 2018 SCC OnLine SC 1921 wherein the Supreme Court clarified that the Limitation Act, 1963 is applicable to Insolvency and Bankruptcy Code, 2016. It was submitted that the date of alleged default was 30-06-2015 (the date on which Corporate Debtor’s account was declared a Non-Performing Asset). Furthermore, since the petition was filed on 23-8-2018, i.e., after more than 3 years of the date on which the cause of action arose (and also the right to apply accrued), therefore it was barred by limitation.

Per contra, Nausher Kohli, Advocate instructed by DSK Legal who appeared for the Bank, submitted that the Bank’s name and loan was shown in the balance sheet of the Corporate Debtor for the Financial Year ending 2017. This according to hi was an acknowledgement of liability. And therefore, it was contended that the debt was not barred by limitation even when the insolvency application was filed after 3 years from the date of default.

The tribunal noted that the Corporate Debtor did not dispute the fact the loan was shown as a liability in its balance sheet. It was observed, ” when the liability is shown in the balance sheet, that is a clear acknowledgement of debt by the Corporate debtor. There are umpteen numbers of judgments to say that the debt shown in the balance sheet is an acknowledgement of liability.” In such a view, the Tribunal held that the contention of the Corporate Debtor would not hold water. Having been satisfied that the Corporate debtor defaulted in making a payment towards its liability to the Bank, the Tribunal allowed the petition and admitted the bank’s application filed under Section 7 IBC. [TJSB Sahakari Bank Ltd. v. Unimetal Castings Ltd., CP (IB)-3622/I&BP/MB/2108 dated 25-01-2019]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Vinod Goel, J. dismissed a petition against the order of District and Sessions Judge, Rohin Courts whereby he has dismissed petitioner’s application under Order 7 Rule 11 CPC.

The petitioner was the defendant in a suit for recovery filed by the respondent. The respondent had transferred Rs 5,00,000 in the account of petitioner on 16-3-2015. The petitioner filed an application under Order 7 Rule 11 for rejection of plaint on the ground that the suit being filed on 16-03-2018 was beyond the period limitation of 3 years prescribed under Article 19 of the Schedule to Limitation Act, 1963 and thus barred in law.

The High Court held the petition to be without merit. It referred to Section 12(1) of the Act which makes amply clear that in computing period of limitation for any suit/appeal/application, the date from which such period is to reckoned shall be excluded. In the present case, the amount was transferred on 16-03-2015 which day was to be excluded while computing the period of limitation. After so excluding, the suit was within 3 years and hence was well within time. Therefore, the petition was dismissed. [Brijesh Yadav v. Bijender Kumar Kaushik, 2018 SCC OnLine Del 13225, Order dated 19-12-2018]

Case BriefsHigh Courts

Gujarat High Court: A Single Judge Bench comprising of S.H. Vora, J. allowed the condonation of delay as the sufficient cause stands justified.

The petitioner has filed an application under Section 5 of the Limitation Act, 1963 for condonation of delay of 350 days caused in filing the criminal appeal against the judgment passed in the POCSO Act.

The Court observed, the words “Sufficient cause for not making application within the period of limitation” should be applied in a reasonable and liberal manner depending upon the facts and circumstances of the case following which substantial justice shall be advanced when the delay has not been due to the negligence on the part of the applicant. In nutshell, the decisive factor for condonation of delay is not the length of delay but sufficiency and satisfactory explanation.

Thus there was nothing on record which could deprive substantial justice to the applicant by way of statutory appeal as the explanation for delay does not smack mala fide as a resultant the condonation was allowed. [Dineshbhai Rameshbhai Minama v. State of Gujarat, 2018 SCC OnLine Guj 2610, Order dated 01-10-2018]

Case BriefsHigh Courts

Orissa High Court: A Single Judge Bench of Dr A.K. Rath, J., dismissed a writ petition challenging the order passed by the Additional District Judge, whereby the Appellate Court had dismissed the application under Section 5 of the Limitation Act for condonation of delay. 

The petitioners were aggrieved by this order and their counsel Mr Prasanna Ku. Parhi, contended that the delay was justified and the petitioners were prevented by sufficient cause in not filing the appeal on time and the Appellate Court had dismissed the same on an untenable and unsupportable ground. 

The seminal question that hinged for consideration was that whether an order rejecting a memorandum of appeal or dismissing an appeal following rejection of an application under Section 5 of the Limitation Act for condonation of delay in preferring the appeal was a decree or order. 

The Court placing reliance on the case of Fakira Mishra v. Biswanath Mishra, 2015 SCC OnLine Ori 313, held that an appeal filed along with an application for condonation of delay in filing that appeal when dismissed on refusal to condone the delay is a decree within the meaning of Section 2(2) of the Code of Civil Procedure. [Jitendra Naik v. Radhyashyam Naik, 2018 SCC OnLine Ori 432, dated 10-12-2018]

Case BriefsHigh Courts

Patna High Court: A Single Judge Bench comprising of Prabhat Kumar Jha, J. while hearing a civil writ petition held that in an application for probate of will, cause of action accrues from the date when hindrance is put to legatee in the management of property bequeathed by will and not immediately after the death of propounder of will.

Petitioner’s case is that the respondent was given in adoption by his father to his father’s eldest brother. After the demise of petitioner’s father, respondent filed a probate case and thereafter petitioner filed a petition under Order VII Rule 11 (d) of CPC and Article 137 of the Limitation Act, 1963 which was dismissed by the lower court holding that respondent’s probate case was not barred as limitation would not start from the date of death of testator. Being aggrieved, the instant petition was filed.

The sole question for determination was as to whether filing of probate case three years after the death of testator was barred under Article 137 of the Limitation Act.

The Court observed that under Article 137 of Limitation Act, the period of limitation is three years from the date and the said period begins to run when the right to apply accrues. Relying on the dictum of  Supreme Court in Kunvarjeet Singh Khandpur v. Kirandeep Kaur, (2008) 8 SCC 463 it was held that an application for probate of will is for the court’s permission to perform a legal duty created by a will and is a continuous right which can be exercised any time after the death of deceased, as long as the right to do so survives. As such, the probate case of respondent was maintainable.

In view of the above, the petition was dismissed.[Arun Kumar Agrawal v. Anil Agrawal, 2018 SCC OnLine Pat 2070, decided on 28-09-2018]