Law of Limitation in a Nutshell

Shekhar K. Agrawal

Law of limitation means the time limit prescribed in law within which a person should approach the Court for redress or justice i.e. filing of suits, appeals or applications. Thereafter, such right to take action would get extinguished in as much as claim becomes unenforceable. If such proceedings are filed after the specified period, they would be dismissed as ‘time barred’, even though the limitation is not raised as a defence.

Laws of limitation are based on public policy aimed at preventing delay and latches, as long dormant claims have more of cruelty than justice in them. Further, rights and obligations should not be in a state of constant uncertainty, doubt and suspense. The law is intended to run against those who are neglectful of their rights, and who fail to use reasonable and proper diligence in the enforcement thereof.

The law relating to Limitation in India is the Limitation Act, 1963 which came into force from 1st of January, 1964. It applies to every type of court and arbitration proceedings, be it suit for recovery of money or property. It also applies to initiating criminal proceedings; time limits for those have been laid down in Criminal Procedure Code.

Time limits prescribed for important type of matters have been listed in schedule annexed to the Limitation Act, some of which are covered herein below:

• Price of goods sold or work done, where no credit period is agreed: 3 years from goods supplied or work done

• Price of goods sold or work done, where credit period is agreed: 3 years from date when credit period expirees

• For balance in open and mutual account: 3 years from close of year when last entry is made

• Principal against agent for recovery of movable property: 3 years from termination or when demand made is refused

• For recovery of loan amount (no repayment date agreed): 3 years when loan was made. If repayment date is agreed, then 3 years from that date. For interest amount, 3 years when interest payment becomes due.

• Mortgager - to redeem or recover possession of mortgaged immovable property: 3 years when right to redeem or recover possession accrues

• Mortgagee- Foreclosure: 3 years when money secured by mortgage becomes due

• For possession of property , based on previous possession (not on title): 12 years from date of dispossession

• Municipal or local authority for recovery possession of public road or street: 30 years from the date of knowledge

• Any suit for recovery by Central or State Government ( Not in supreme court): 30 years from the date when amounts became due and payable.

• Filing Appeal against Court order: 30 days ( 90 days for SLP in Supreme Court)

• Execution proceeding: 12 years from date decree become enforceable

• Any suit for which no specific period of limitation has been provided: 3 years, when right to sue accrues.

Where Suit or application is to be filed by a person under legal disability, such as a minor or insane, he may institute the suit or make the application within the same period after the disability has ceased, as would otherwise have been allowed from the time specified in the Schedule.

It is highlighted that any claim by way of a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted when it is filed in Court. However, for set off, it will be considered claimed on same date as original suit in which set off is pleaded. Provision is also made for situation when time limit expires on date when court is closed. In such cases, suit or application may be instituted on the day when the court re-opens. Similarly, for Court Appeals, time take in supplying certified copy of the order ie from the date one applies till it is ready, is excluded. Period during which injunction on execution of decree is granted by court is also excluded.

Claims made beyond the limitation period cannot be allowed even in writ petition. Writ court has to exercise jurisdiction consistent with provision of limitation act. Similarly, law of limitation applies to arbitration proceedings also as specifically provided in the Act.

In case of Insolvency and Bankruptcy Code, after initial conflicting decisions of NCLT and NCLAT, specific provision as Section 238A was added by amendment in 2018. Further, Hon’ble Supreme Court in B. K. Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates decided in Oct 2018 held that the Limitation Act was applicable from the inception and hence applicable retrospectively and any application filed under the Code after 3 years from the date of default would be time-barred under Article 137 of the Act.

For criminal cases also, different time limits based on gravity of offence / maximum permissible punishment, have been prescribed after which, Courts shall not take cognizance. It could be six months, where only fine is payable and unlimited where death penalty is there. Further, some legislations have laid down specific time limits for certain proceedings like Negotiable Instruments Act for cheque dishonour case and various time limits for Insolvency matters under Insolvency and Bankruptcy Code. These time limits under special acts need to be adhered.

The law of limitation has also provided for Court’s discretion in admitting the Appeal and other proceedings after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period. However, same does not apply to original cause of action, such as filing suit for recovery of money. It was held in by Hon’ble Supreme Court in N. Balakrishnan vs M. Krishnamurthy (AIR 1998 SC 3222) that Rules of limitation are not meant to destroy the rights of the parties, but meant for parties do not resort to dilatory tactics and seek remedy promptly. ‘Sufficient cause’ under sec 5 should be liberally construed by courts and if reasons are satisfactory, length of time does not matter

Further, where before the expiration of the prescribed period for a suit or application, defendant has made an acknowledgment of liability in writing; a fresh period of limitation shall be computed from the date of acknowledgment. In Sampuran Singh & Ors Vs Smt Niranjan Kaur & Ors (1999 AIR SCW), Hon’ble Supreme Court reiterated the legal provision that acknowledgement of debt should be made before expiry of limitation period. Acknowledgement after limitation sets in will not revive the claim. Further, in commercially important decision, several High Courts have held that as balance Sheet is required to be signed by at least 2 Directors, it is valid ‘acknowledgement’ u/s 18 of Limitation Act (AIR 1963 All 284, AIR 958 Punjab 341, AIR 1962 Cal 115)

The issue of limitation is very important in as much as Legal right, not asserted within specified time may get lapsed. It is settled law that when it becomes apparent that suit is barred by limitation, then it is the duty of the Court to decide limitation at the outset – even in absence of plea. Decision thereof should be of Court, not dependent on submission made by the parties as it affects the jurisdiction of the Court.