When does the clock of limitation start for suits falling under Article 113 of Limitation Act, 1963?

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Brief Introduction

The law of limitation as given under Limitation act is a procedural or adjective law[1]. The function of adjective law is to facilitate justice and further its ends.[2]The rules of procedure are intended to be a handmaid to the administration of justice. They must, therefore, be construed in such a manner as to render enforcement of substantive rights effective.[3] Let us discuss Article 113 of Limitation act.

The law of limitation is a statute of repose, peace, and justice. The law is founded on public policy with aim of securing peace, to suppress fraud and perjury, to quicken diligence and to prevent oppression.[4] The statute rests on two well-known legal maxims.

  1. The interest of the state requires that there should be an end to litigation[5]
  2. The law assists the vigilant and not one who sleeps over his rights[6]

The intention behind the statute is to prevent disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a person’s own inaction, negligence, or laches.[7]

The Halsbury Laws of England expounds three cogent reasons in support of the law[8].

  1. Long dormant claims have more cruelty than justice in them
  2. A defendant might have lost the evidence to rebut the stated claim
  3. Persons with good cause of action should pursue them with reasonable diligence

In Balkrishnan V. M.A. Krishnamurthy, the Hon’ble Supreme Court observed that the principle is established on public policy fixing a life span for legal remedy for the purpose of general welfare. Withal, the rules are not meant to destroy the rights of the parties but are meant to espy that the parties do not resort to dilatory tactics but seek remedy promptly. Likewise, in B.B. & D. Mfg. Co. V. ESI Corpn.[9], the Hon’ble Supreme Court observed that the statute endeavours to compel a person to exercise his right of action within a reasonable time, in addition, to discouraging stale, fake, or fraudulent claims. 

History behind the act: There was no uniform law on limitation under the British rule. The presidency towns of Calcutta, Madras, and Bombay followed the English law and it the Mufassil’s the courts administered the law as laid by the regulations which were passed from time to time.

In 1859 for the first time a law on the subject of limitation was passed by Act XIV of 1859 which came into operation in 1862. The act was made applicable to the whole of India which was replaced by the acts of 1871, 1877, and 1908. The act of 1908 weathered the test of time, however, a need was felt for a more comprehensive legislation. The Law Commission in its Third Report[10] (Limitation Act, 1908) dated July 27, 1956 made several recommendations. On these recommendations a bill was (re)*[11] introduced in the Lok Sabha in 1962. Thereupon, the bill received the assent of the President and came on the statute book as the Limitation Act, 1963. The act seeks to consolidate and amend the law for the limitation of suits and other proceedings and for purposes connected therewith. Hence, the act is a complete code and exhaustive in respect of all matters expressly dealt with it.[12] The provisions of the act cannot be extended, either by analogy or by reference to matters which do not specifically fall under the act.[13]

In Trilokchand Motichand V. H.B. Munshi[14], the Hon’ble Supreme Court held that the statute of limitation is not unconstitutional since it applies to right of action in future. It is a shield and not a weapon of offence. Furthermore, in New India Assurance Co. Ltd. V. Shanti Misra[15], the Apex Court held although law of limitation is a procedural law, it can neither provide a longer period by reviving a dead remedy nor can it extinguish vested right of action by providing a shorter period. Therefore, the law of limitation which is in vogue on the commencement of action would govern it.

Limitation bars remedy not right: In Bharat Barrel & Drum Mfg. Co. Ltd. V. ESI Corpn.[16], the Hon’ble Supreme Court asserted that the law of limitation, being a procedural law, merely bars the remedy, not the substantive right accrued in favour of a party. Albeit, the judicial remedy available for enforcement of such right is barred, but the substantive right survives and continues to be available if there are other means at one’s disposal for enforcing it. Similarly, the law of limitation bars an action and not a defence. Thus, a defendant is permitted to set up a plea in defence in a suit which he may not be able to by filing a suit.[17]

What is the starting point of limitation?

Section 2(j) of the act describes period of limitation and prescribed period. Period of limitation means the period prescribed for any suit, appeal or application by the Schedule, and prescribed period means the period of limitation computedin accordance with the provisions of the act.

Limitation starts running from the date the right to sue accrues in favour of a party. In Phool Rani V. Naubat Rai Ahluwalia[18], the Hon’ble Supreme Court avouched that the right to sue means right to seek relief or the right to approach a court of law. Thus, there can be no right to sue until there is an accrual of right asserted in the suit, appeal or proceedings.[19]Therefore, the right to sue implies that the person serving has a substantive and exclusive right to the claim asserted by him and there is an invasion of or threat to that right.

Article 113 of Limitation Act, 1963

The statute of limitation was intended to provide a time-limit for all suits conceivable. This article is refereed as the omnibus or residuary article of the act. This article provides for all suits for which no period of limitation is provided elsewhere in the Schedule.

Description of SuitPeriod of limitationTime from which period begins to run
    113.Any suit for which no period is provided elsewhere in this Schedule.    Three years    When the right to sue accrues.

In State of Punjab V. Gurudev Singh[20], the Hon’ble Supreme Court discerned that right to sue ordinarily means the right to seeks relief by means of legal proceedings. Often, the right to sue accrues only when the cause of action arises. The suit must be instituted when the right asserted in the suit is infringed or when there is clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted.

In State of Punjab V. Ajit Singh[21], the Honourable High Court of Punjab & Haryana held that if an action is taken or order made by an authority is illegal ultra vires or void, the law of limitation does not apply to it, and a suit for declaration or for setting aside such order can be filed at any time. However, in Union Carbide Corp. V. UOI[22], the Apex Court ruled that even if an act is ultra vires or void, the aggrieved party must approach the Court within the prescribed period of limitation. Where no period is prescribed specifically, the residuary provision accessible under Article 113 of the act shall apply. Thence, a suit must be filed within three years from the time when the right to sue accrues, i.e. from the date such order is passed or action is taken.

Just like there is a residuary provision for suits, likewise there exists one for applications under Article 137 of Schedule I of third division (Part II) of the act.  In Mela Ram V. Dharam Chand Amrit Lal[23], the then Federal Court held that that in Article 137 the legislature makes provisions not for one definite types of cases, but for an unknown number of cases of all kinds. The provision which makes it specific as regards the period of limitation but as regards the terminus a quo (earliest possible date for something) it is contended to state, in general language and quite simply, the fundamental principle for purposes of any particular application time is to run from the moment of which the applicant first had the right to make it.

Shakti Bhog Food Industries V. The Central Bank of India & Anr.[24]

Facts of the case[25]: The Respondent bank/Defendant had extended financial facility to the Appellant/Plaintiff with effect from April 1, 1997 till October, 2007. However, somewhere in the month of July, 2000, the Appellant observed that the Respondent Bank was unilaterally charging interest/commission at the rate ₹4 per thousand rupees on local cheques and drafts in an arbitrary manner in violation of the assurance given to the Appellant. Thereafter, upon detection of the aforementioned overcharging, the Appellant wrote to the Respondent Bank vide letter dated July 21, 2000 complaining about the overcharging.  Thenceforth, the interest/commission was charged as per given affirmation.

However, the amount overcharged as commission/interest was not refunded to the Appellant. Thenceforward, the Appellant sent several letters to the General Manager and Senior Manager of the Bank for a refund and requested a clarification regarding as to how the commission was calculated and deducted.

That on July 9, 2001, the Assistant General Manager of the regional branch office of the Respondent Bank informed the Appellant that the comments of the Respondent bank were invited and the matter was decided expeditiously. Consequently, the progress made was at naught and the Appellant submitted a letter to the Hon’ble Finance Minister on October 31, 2001.

Thereafter, on May 8, 2002, the Senior Manager of the Respondent Bank informed the Appellant that the cheques were being purchased at the prevailing rates; which plea, according to the Appellant was sent to sidetrack the real issue. Subsequently, the Appellant sent several formal communications along with details of the estimated excess amount charges and requested the same to be refunded to him at the onset. Thenceforth, the Senior Manager of the Respondent Bank informed that everything was being done according to the rules, and no further correspondence was necessary. In sanguine hopes of a favourable resolution from the regional branch office, the Respondent sent a legal notice on November 28, 2003 to which the Respondent Bank responded on December 23, 2003. Reckoning these dates, the Appellant filed a plaint for the rendition of true accounts on February 23, 2005 deeming it be well within the limitation period. However, the same was contested by the Respondent bank and they filed an application under Order VII Rule 11(d)CPC for rejection of the plaint.

The judgement of the Trial Court[26]:Since the statute does not provide any specific article with regard to the time period within which accounts can be sought by a party from its bank, Article 113 will apply. Since the right to sue accrued to the Appellant in October 2000, the plaint was rejected by the trial court under Order VII Rule 11(d) as it was filed beyond the period of three years. Furthermore, the trial court relied on C.P. Kapur V. The Chairman & Ors.[27], wherein it was held that the exchange of correspondence between the parties could not extend the limitation period for the institution of a suit.

The judgement of the Appellate Court and High Court: Both the Appellate Court and the High Court rejected the plaint under Order VII Rule 11(d). Aggrieved by this, the Appellant files a Special Leave Petition (SLP) before the Hon’ble Supreme Court.

The issue before the Hon’ble Supreme Court: The issue for consideration was whether the present suit was liable to rejected under Order VII Rule 11(d) as barred by limitation?[28]

Findings of the Hon’ble Supreme Court: At the outset, the Hon’ble Supreme Court reiterated that while deciding an application under Order VII Rule 11, only the plaint as a whole could be looked into. The Court asserted that the expression used in Article 113 is distinct from other articles in the first division dealing with such suits such as Article 58, Article 59, and Article 104.

 Description of SuitPeriod of LimitationTime from which period begins to run
  58.To obtain any other declaration.  Three yearsWhen the right to sue first accrues
      59 .  To cancel or set aside an instrumental or decree or for the recession of a contract.      Three yearsWhen the facts entitling the plaintiff to have the instrument or decree cancelled or set aside or the contract rescinded first become known to him.
  104.To establish a periodically recurring right.  Three yearsWhen the plaintiff first refused the enjoyment of the right.

Article 113 does not specify any event as the starting point of computation of limitation. The view taken by the Trial Court would inevitably entail in reading the expression in Article 113 as when the right to sue ‘first’ accrues. This would purport to re-writing the provision and vanquishing the intent of the Parliament. The Court placed reliance on UOI & Ors. V. West Coast Paper Mills Ltd. & Anr.[29] and asserted that the Parliament was conscious of the distinction between the other aforementioned provisions and advisedly used a generic expression ‘when the right to sue accrues’.

Likewise, in Khatri Hotels Pvt. Ltd. & Anr. V. UOI & Anr.[30],the Court considered the expression used in Article 58 in contradistinction to Article 120 of the former Limitation Act, 1908. Under Article 120 of the 1908 Act, the period of limitation commenced when the right to sue accrues. As against this, the period prescribed under Article 58 begins to run when the right to sue first accrues. In Bolo V Koklan[31], the Apex Court held that there could be no right to sue until there is an accrual of the right asserted in the suit and its infringement, or at least a clear and unequivocal threat to infringe the right, by the defendant against whom the suit is instituted. In Rukhmabai V. Lala Laxminarayan [32], the legal position was summed up as the right to sue under Article 120 accrues when the defendant has clearly or unequivocally threatened to infringe the right asserted by the plaintiff in the suit.

Conspicuously, the expression used in Article 113 is similar to that in Article 120 (Old act), namely, ‘when the right to sue accrues. Hence, the principle underlying this dictum must apply proprio vigore (By its own force) to Article 113. The Appellant staunchly believed that his claim was being processed by the regional branch office.  However, upon receiving communication from Senior Manager of the Respondent Bank vide May 8, 2002, followed by another letter vide September 2002 to the effect that the action taken by the Respondent Bank was in accordance with the rules and the Appellant need not correspond further. This firm response triggered the right of the Appellant to sue the Respondent Bank. The legal notices sent to the Respondent Bank on November 28, 2003, and January 7, 2005, further concreted the stand that the plaint was filed well within the limitation period.

Judgement: The Hon’ble Supreme Court allowed the appeal and set aside the decisions of the Trial Court, the First Appellate Court, and the plaint is restored to the files of the Trial Court to be disposed of accordingly.

Conclusion

Recently, the High Court of Calcutta, vide a judgement dated June 11, 2002, passed in Goods of: Hanuman Prasad Agarwal & Suresh Agarwal V. Satyanarain Agarwal & Ors.[33] arrived at a similar finding in relation to Article 137 of the Limitation Act, 1963. The Hon’ble Judge relied on the decision passed in Shakti Bhog case and held that Article 113 and 137, both being residuary sections have wide coverage. Their period of limitation starts to run only when there is a clear and unequivocal thereat to one’s right and not merely when the breach occurred. The Apex Court made it indubitably clear that a court cannot act mechanically in regard to residuary provisions under the Limitation Act, 1963.

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[1] A.S.K. Krishnappa Chettiar V. S.V.V. Somiah AIR 1964 SC 227

[2] C.K. Takwani, Civil Procedure with Limitation Act, 1963, 8th Edn., 2017, at p. 767

[3] Sangram Singh V. Election Tribunal AIR 1955 SC 425

[4] Baswaraj V. Land Acquistion Officer (2013) 14 SCC 81

[5] Moti Chand V. Munshi AIR 1970 SC 989

[6] Nav Rattanmal V. State of Rajasthan AIR 1961 SC 1704

[7] Rajendra Singh V. Santa Singh AIR 1973 SC 2537

[8] Halsbury’s Laws of England (4th Edn.), Vol. 28, para. 605 at p. 266

[9]B.B. & D. Mfg. Co. V. ESI Corpn. AIR 1972 SC 1935

[10] Law Commission of India, Third Report (Limitation Act, 1908) available at https://www.latestlaws.com/library/law-commission-of-india-reports/law-commission-report-no-3-limitation-act/ (Accessed on 21/07/2020)

[11] It was initially introduced in the Lok Sabha on December 23, 1960 but it lapsed on account of dissolution of the Lower House. 

[12]Ibid., See 3.

[13] Hukam Chand Boid V. Kamalanand Singh ILR (1906) 22 Cal 927

[14]Trilokchand Motichand V. H.B. Munshi AIR 1970 SC 898

[15]New India Assurance Co. Ltd. V. Shanti Misra (1975) 2 SCC 840

[16]Bharat Barrel & Drum Mfg. Co. Ltd. V. ESI Corpn. (1971) 2 SCC 860

[17] Kishan Lal V. Kashmiro AIR 1916 PC 172

[18]Phool Rani V. Naubat Rai Ahluwalia (1973) 1 SCC 688

[19] Gannon Dunkerley & Co. Ltd. V. UOI (1969) 3 SCC 607

[20] State of Punjab V. Gurudev Singh AIR 1991 SC 2219

[21]State of Punjab V. Ajit Singh (1988) I SLR 96 (P&H)

[22]Union Carbide Corp. V. UOI AIR 1992 SC 317

[23]Mela Ram V. Dharam Chand Amrit Lal AIR 1958 Punj. 132

[24]Shakti Bhog Food Industries V. The Central Bank of India & Anr.Judgement dated June 5, 2020 in Civil Appeal No. 2514 of 2020 available at https://main.sci.gov.in/supremecourt/2017/19133/19133_2017_33_1501_22419_Judgement_05-Jun-2020.pdf (Accessed on 23/07/2020)

[25] Aditya Mehta et al., When does the clock of limitation start ticking for suits falling under Article 113 of the Limitation Act?, CYRIL AMARCHAND MANGALDAS available at https://corporate.cyrilamarchandblogs.com/2020/06/suits-falling-under-article-113-of-the-limitation-act/#more-3936 (Accessed on 23/07/2020)

[26] Parth Thummar, Limitation under Article 113 of Limitation Act starts when the right to sue accrues and not when the right to sue “first” accrues: SC, LAW STREET JOURNAL available at https://lawstreet.co/judiciary/limitation-under-article113-of-limitation-act-supremecourt (Accessed on 23/07/2020)

[27] C.P. Kapur V. The Chairman & Ors. (2013)198 DLT 56

[28] Nandini Khaitan & Srinjoy Bhattacharya, Accrual of right to sue vis-à-vis Articles 113 and 137 of the schedule of the Limitation Act, 1963, MONDAQ available at https://www.mondaq.com/india/wills-intestacy-estate-planning/958704/accrual-of-right-to-sue-vis-a-vis-articles-113-and-137-of-the-schedule-of-the-limitation-act-1963 (Accessed on 23/07/2020)

[29]UOI & Ors. V. West Coast Paper Mills Ltd. & Anr. (2004) 2 SCC 747

[30]Khatri Hotels Pvt. Ltd. & Anr. V. UOI & Anr. 6 (2011) 9 SCC 126

[31]Bolo V Koklan AIR 1930 PC 270

[32]Rukhmabai V. Lala Laxminarayan AIR 1960 SC 335

[33] Goods of: Hanuman Prasad Agarwal & Suresh Agarwal V. Satyanarain Agarwal & Ors. (GA No 990 of 2018 with TS No 7 of 2016)

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