Wednesday, 29 August 2012


(This topic is not dealt in detail in the class. A mention of time-barred debt is made in The Contract Act. At that stage, the context and its significance will be referred to. For a lawyer who earns his bread and butter at the courts, this may be the most important act. For a student of of Business Management it serves as information)

The 'Law of Limitation' prescribes the time-limit for different suits within, which an aggrieved person can approach the court for redress or justice.  The suit, if filed after the exploration of time-limit, is struck by the law of limitation.

It's basically meant to indirectly punish persons who go into a long slumber over their rights. The statutory law was established in stages. The very first Limitation Act was enacted for all courts in India in 1859. And finally took the form of Limitation Act in 1963.


Limitation period:

In computing the limitation for any suit, the date from which such period is to be reckoned shall be excluded. The suit can be filed on the anniversary day. The limitation in respect debts is as follows:

Loan payable in instalments
3 years from date on which the relative instalment falls due.

Money repayable by the mortgagor
On demand and on instalment repayments are agreed to - 12 years from date of mortgage deed.
In case of default of an instalment or principal or interest on a mortgage
The whole of mortgage amount becoming due - 12 years from date of default.

Personal liability of the borrower
3 years from date of acknowledgement of debt/demand promissory note.

Others including where the lender has given a cheque
3 years from the time, the cheque is paid.

Acknowledgement of debt
Impliedly includes the acknowledgement of security for the debt. An acknowledgement signed by one of the joint borrowers or partners does not bind the others unless it can be established by evidence that the person signing was authorised expressly or impliedly to sign.

Part payment

If the debtor makes a part payment before the expiry of the limitation period, either by himself or by his agent duly authorised on his behalf or in the handwriting of himself or such agent, fresh period of limitation starts from date of such part payment.
A credit entry by itself does not save limitation.
Pay in slip signed by the borrower or his duly authorised agent amounts to part-payment.
A pay in slip signed by an employee of a partnership firm or a company does not save limitation.
It needs to be noted that acknowledgement of debt and part payment should be obtained before the expiry of limitation period as they cannot revive the limitation if already expired.

Fresh promise to pay

Even after the expiry of limitation, the liability can be enforced if there is a fresh promise to pay the outstanding debt already barred by limitation, because u/s 25(3) of the Contract Act, a time barred debt is a valid consideration for a fresh promise to pay.

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