Supreme Court Holds Acknowledgement of Partial Debt Doesn’t Extend Limitation for Entire Claim

The Supreme Court held that acknowledgement of a partial debt does not extend the period of limitation for the entire claim under Section 18 of the Limitation Act.

The Supreme Court Bench comprising Justice Sanjay Kumar and Justice Satish Chandra Sharma, while adjudicating an appeal, recently held that for the purpose of extending the period of limitation under Section 18 of the Limitation Act, 1963, only a clear and specific acknowledgement of a present and subsisting liability would suffice. Such acknowledgement, the Court clarified, would extend limitation only in respect of the acknowledged amount, and not to any additional or disputed portion of the claim.

The Supreme Court dismissed the civil appeal filed by the appellant seeking recovery of dues under a work contract by invoking the extended period of limitation under Section 18 of the Limitation Act, 1963. The appellant had executed certain works for the respondent and issued a notice on 14.03.1992 demanding a sum of ₹3,07,115.85. In reply dated 21.05.1992, the respondent acknowledged only ₹27,874.10 as payable in full and final settlement and denied liability for the remaining claim. The appellant filed a civil suit on 17.04.1995 seeking recovery of the entire amount along with interest. The Trial Court held that the suit claim was time-barred despite finding that the appellant was otherwise entitled to the claimed amount.

In the first appeal, the High Court extended the benefit of Section 18 of the Limitation Act only to the acknowledged sum of ₹27,874.10, and allowed recovery of that amount with interest at 12% per annum. However, it declined to grant relief for the remaining claim, holding that the acknowledgement did not extend to the full suit amount. Aggrieved by such a limitation of relief, the appellant approached the Supreme Court, contending that the acknowledgement by the respondent was sufficient to extend the period of limitation for the entire claim.

The Supreme Court held that to attract Section 18 of the Limitation Act, there must be a clear and unequivocal acknowledgement of a “present, subsisting liability” in respect of the amount claimed. Referring to established precedents, the Court held that acknowledgement of only a part of the claim would extend limitation only to that portion and not to the disputed or unacknowledged amount. It was observed that the respondent had specifically denied liability beyond ₹27,874.10, and hence, no fresh limitation period could be computed for the entire suit claim based on such limited acknowledgement.

Accordingly, the Supreme Court affirmed the judgment of the High Court and dismissed the civil appeal, holding that the appellant was not entitled to the extended limitation under Section 18 of the Act for any amount beyond what was specifically acknowledged by the respondent.

M/s. Khaitan & Co., AOR, Mr. Atul Shanker Mathur, Mr. Sarvapriya Makkar and Ms. Ghanistha Mishra, Advocates, represented the appellant.

For the Respondent/ Defendant: Mr. K.V. Mohan, AOR, Mr. K.V. Balakrishnan and Mr. Devesh Khanduri, Advocates, appeared for the respondent.

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