The Single Judge bench of the Justice Gurvinder Singh Gill of the Punjab and Haryana High court in the case of Sumit Singla V. Kala Mandir sarees and Jewellers held that the provisions of Section 25 of Contract Act having been insulated, its application in appropriate circumstances will have the effect of renewing limitation.
BRIEF FACTS
The factual matrix of the case is that the respondent issued the complaint against the petitioner wherein it was stated that the respondent, upon being requested by the accused to advance loan. When the cheques were presented in the bank, they were returned back unpaid with remarks ‘account closed.’ After that, the respondent issued a notice, and no payment was made by the accused despite providing notice, the respondent issued the complaint against the accused.
The learned counsel appearing on behalf of the petitioner contended that the loan was issued in 2011 and the same was being time-barred after 3 years and since the cheque was issued after the period of 6 years, therefore, the same cannot be said to have been issued for the discharge of liability so as to attract the provisions under section 138 of the negotiable instrument act. Also, the word “legally enforceable” has to be seen in the context of the availability of a civil remedy for the recovery of debt which is subject matter to the rules of limitation. At last, it was also contended that mere issuance of the cheque cannot be treated to be an ‘acknowledgment’ of debt in terms of section 18 of the limitation act, 1983.
The counsel relied on the judgments titled, ‘Prajan Kumar Jain vs. Ravi Malhotra’ and ‘M/s Vijay Polymers Pvt. Ltd. vs. M/s Vinnay Aggarwal’.
COURT’S OBSERVATION
The Hon’ble court examined section 18 of the limitation act, 1963, and section 25(3) of the Indian contract act, 1872 and stated that section 18 of the limitation act leaves no manner of doubt that it is only if an acknowledgment of liability or debt is made during the subsistence of limitation for filing suit that fresh period of limitation will be computed from the date of such acknowledgment.
It is very important to understand the difference between an acknowledgment under Section 18 of the Limitation Act of 1963 and a "promise" as defined by Section 25(3) of the Contract Act. A "promise" under Section 25(3) of the Contract Act to pay a debt even though it is forbidden by limitation would renew the limitation, whereas both have the same effect of setting a new starting point for the restriction and must be made before the period of limitation expires under the Limitation Act.
In any instance, the two aforementioned provisions emphasize that the remedy is what expires, not the lender's or borrower's right to payment or obligation to repay. However, in certain situations, this treatment can find new life. Due to a promise made by the debtor to pay off the debt or liability, Section 25(3) of the Indian Contract revives a time-barred remedy to collect payment through litigation. If a lawsuit might be used to collect the payment, it still qualifies as a legally enforceable obligation under the provisions of Section 138 of the Act's "Explanation."
The court further relied on the judgments titled, ‘Dr. K.K. Ramakrishnan v. Dr. K.K. Parthasarthy,’ ‘P.N. Gopinathan Vs. Sivadasan and another’ ‘Sultan Singh vs. Tej Partap’ ‘Shapoor Freedom Mazda v. Durga Prosad Chamaria,’ and ‘Adivelu Vs. Narayanachari’
The court held that the contention submitted by the counsel appearing on behalf of the petitioner regarding debt being time-barred and that dishonor of a cheque issued after more than 6 years of advancement of loan would not attract provisions of Section 138 of the Act, having been issued qua a debt not enforceable by law, cannot be accepted and the cheque was issued by the petitioner for paying off the debt was issued in acknowledgment of a debt, and upon its dishonor would make the drawer liable to be proceeded against under section 138 of the act.
CASE NAME- Sumit Singla V. Kala Mandir sarees and Jewellers
CITATION- CRM-M-34617-2022 (O&M)
CORUM- Justice Gurvinder Singh Gill
DATED- 17.08.2022
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