Extension of limitation period where acknowledgement of debt made by letter


Question: I had given a loan of Rs.10 lakh in the year 2007 to my brother. He has not paid the amount till now (2017). In December 2014 he had written a letter to me acknowledging his liability to pay the said loan. I did not write or mention or sign on that letter or respond to it. Now for the purpose of limitation, will this letter be sufficient to file a case for recovery of loan amount or will the case get dismissed on the ground of limitation?

Answer: I am replying to your question on the basis of the limited information provided by you, presuming that this is the full information about the matter.

Firstly, the limitation period to file a suit for recovery of money lent is 3 years. However, Section 18 of the Limitation Act, 1963, lays down that a fresh period of limitation shall be computed from the date when an acknowledgement of such loan is made in writing signed by the party against whom such suit for recovery is to be filed, provided that such acknowledgement is made before the expiry of the limitation period. This section is as under:

18. Effect of acknowledgment in writing.—(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

Explanation.—For the purposes of this section,—

(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,

(b) the word “signed” means signed either personally or by an agent duly authorised in this behalf, and

(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.”

In your case, this limitation period was to expire in 2010. Therefore, before this expiry of limitation in 2010, if an acknowledgement of the liability for the said loan was given, then the period of limitation would have been computed afresh from date of such acknowledgement.

But, as per the facts stated by you in your question, the acknowledgement about the liability was given by your brother, i.e., the debtor, in 2014, which is much beyond the expiry of the limitation period. In view of this, such acknowledgement would not be valid under Section 18 of the Limitation Act and it will not benefit you for the purposes of extension of limitation period.

In view of this, the loan is time-barred and the suit is likely to be dismissed on the ground of limitation if it is filed now in the year 2017. It is badly delayed beyond limitation period.

About Dr. Ashok Dhamija

Dr. Ashok DhamijaDr. Ashok Dhamija is a New Delhi based Supreme Court Advocate, holds Ph.D. in Constitutional Law, is author of 3 law books, and is an ex-IPS officer. He is the founder of this law portal. Read more by clicking here. List of his articles. List of his Forum Replies. List of his Quora Answers.

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