The Supreme Court recently dismissed a civil appeal, wherein the firm sought benefit of the extended limitation period under Section 18 of the Limitation Act, 1963, for its entire claim arising out of contractual work.
The appellant had executed certain works for the respondent, which were purportedly completed on 7 February 1991. Subsequently, on 14 March 1992, the appellant issued a legal notice demanding ₹3,07,115.85 for the said work. In response, the respondent, through counsel, contended that the contract value itself was limited to ₹1,55,223, and a sum of ₹1,00,000 had already been paid after necessary deductions. However, it did acknowledge ₹27,874.10 as the outstanding amount, offering to settle the same without prejudice.
Thereafter, the appellant instituted a civil suit before the District Judge, Durg, in 1995, seeking recovery of ₹3,07,115.85 along with interest at 18% per annum, aggregating to ₹5,28,238.89. Although the trial court held the appellant entitled to the principal amount with interest, it dismissed the suit on the ground of limitation.
In appeal, the Chhattisgarh High Court extended the benefit of Section 18 of the Limitation Act to the appellant but restricted the relief to only ₹27,874.10, the sum specifically acknowledged by the respondent, along with 12% interest per annum from 1 April 1991.
Challenging this partial relief, the appellant approached the Apex Court, arguing that the entire claim should be saved by limitation in view of the acknowledgment issued by the respondent.
The central legal issue before the Apex Court was whether the acknowledgment in the respondent’s legal reply dated 21 May 1992 could extend the limitation period for the entire claim under Section 18 of the Limitation Act.
The Court, referring to Section 18, reiterated that an acknowledgment must pertain to a subsisting liability in respect of a specific property or right. Citing Food Corporation of India v. Assam State Cooperative Marketing & Consumer Federation Ltd. and J.C. Budhraja v. Orissa Mining Corporation Ltd. , the Bench clarified that only the portion of the liability expressly acknowledged in writing can attract the benefit of an extended limitation period. A fresh or additional claim not acknowledged at the time cannot be revived through such acknowledgment.
Applying this principle, the Court found that the respondent had only acknowledged a limited sum of ₹27,874.10 and expressly denied the larger claim. Hence, the benefit of Section 18 could not be invoked for the full amount of ₹3,07,115.85.
Concluding that there was no error in the High Court’s approach, the Top Court affirmed the impugned judgment and dismissed the appeal, holding it to be devoid of merit. All pending applications were disposed of accordingly.
Case Title: Airen And Associates vs. Sanmar Engineering Services Ltd.
Case No: Civil Appeal No. 654/2015
Coram: Justice Sanjay Kumar, Justice Satish Chandra Sharma
Advocate for Petitioner: Adv. Atul Shanker Mathur, Sarvapriya Makkar, Ghanistha Mishra, M/s. Khaitan & Co. (AOR)
Advocate for Respondent: Advs. K.V. Mohan (AOR), K.V. Balakrishnan, Devesh Khanduri
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