loan recovery limitation

seema sharma (Querist) 23 October 2017 This query is : Resolved
Sir, I am for an NBFC.We have issued personal loan on 2010 and the person not paid till march 2017.he paid only 1000 in cash in march 2017, proper receipt was issued.Now we want to file recovery suit. Can we file civil case or it is barred by limitation act.what are the remedies available to us. Please guide. Thanks

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Rajendra K Goyal (Expert) 23 October 2017
Whether has he signed the deposit slip himself?

Whether he sent any document acknowledging the debt?

If not, loan is time barred.

seema sharma (Querist) 23 October 2017
We are sending notices at regular intervals,normally after 30 days . Loan installment period is 50 months.it is completed in 2011 as per agreement.if it is time barred now what are the remedies available to us.

seema sharma (Querist) 23 October 2017
Thanks all learned seniors,
Now.please see-
Loan issued in January 2010 with agreement to pay in 12 installments.no payment till January 2011. Amount received in november 2013.and again in october 2016.in this case can we file recovery suit,or we are barred by limitation act.
Please guide

Advocate Bhartesh goyal (Expert) 23 October 2017
No,you can not recover legally loan amount.Lim�tation to file recovery suit is three years from the disbursment of loan or if any instalment or interest or acknowledgement of loan amout in writing within limitation period then limmitation period can be extended else not.in yor case loan was disbursed in january 2010 so loan instalment or interst or ackn�wledgement sh�uld have been made within three years from disbursment of loan which has not been done so suit if filed would be time barred.

Ms.Usha Kapoor (Expert) 24 October 2017
Since you have accepted late payment of loan even in 2017 and 2016 that itself amounts to acknowledgment of payment whether in full or part of loan gives rise to acknowledgement by late payment or delayed payment with proper receipts to the loanee. So your period of limitation of 3 years commences from 2017.You can file a suit for recovery of loan even now.

Ms.Usha Kapoor (Expert) 24 October 2017
Dear Seema Sharma,
If you appreciate my answer please click like button.

rajeev sharma (Expert) 24 October 2017
extension of limitation is a matter of evidence.whether the payment was made by the borrower himself? How you can prove it? Has he given anything in writing in response to your letters or while depositing money? Pl wxamine the matter from these angles. Any amount deposited by borrower may extend the limitation period.

Advocate Bhartesh goyal (Expert) 24 October 2017
Acknowledgement of loan should be made within limitation period in writing,after laps of period if any amount or interest or acknowledgement is made it does not extend limitation.sec 18 ,19 of limitation act is very clear.

Rajendra K Goyal (Expert) 24 October 2017
Expert Advocate Bhartesh goyal ji,

Humbly submit that as per my knowledge, time barred loan if acknowledged, it would revive the period. Please correct me if I am wrong.

Advocate Bhartesh goyal (Expert) 25 October 2017
) 2012-2-L.W. 256 (K.Krishnamoorthy v. Investment Trust of India Limited & ors.):-

40. .... As per Section 18 of Limitation Act, essentials of a valid acknowledgment are (i) an admission of acknowledgment; (ii) that such acknowledgment must be in respect of a liability in respect of a property or right; (iii) that it must be made before the expiry of the period of limitation; (iv) that it should be in writing and signed by the party against whom such property or right is claimed. ....

(ii) 2008-3-L.W. 259 (K.Jeyaraman v. M/s.Sundaram Industries Ltd.,) :-

A plain reading of Section 18 of the Limitation Act shows that the acknowledgment of liability should be made before the expiry of the prescribed period for instituting a suit on the basis of the original cause of action.

(iii) AIR 1961 SC 1236 (PC) (V 48 C 221) (S.F.Mazda v. Durga Prosad Chamaria and Others):-

(5) Section 19(1) says, inter alia, that where before the expiration of the period prescribed for a suit in respect of any right, an acknowledgment of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. It would be noticed that some of the relevant essential requirements of a valid acknowledgment are that it must be made before the relevant-period of limitation has expired, it must be in regard to the liability in respect of the right in question and it must be made in writing and must be signed by the party against whom such right is claimed.

(iv) AIR 1999 Mad 371 (Kalpana Trading Co. v. Executive Officer, Town Panchayat, Tiruchirappali):-

....To constitute acknowledgment of liability, there must be acknowledgment of liability made in writing signed by the party and that too must be before the expiry of the prescribed period and only if there is acknowledgment of liability signed by the party against whom such property or right is claimed, a fresh period of limitation starts from the time of acknowledgment of liability....

(v) 1996 (II) CTC 396 (Sri Vijayalakshmi Art Productions, Rep. By its Partners, v. Vijaya Productions Pvt. Ltd.,):-

21. The fact that the respondent has acknowledged liability on January 24, 1994, for a sum of Rs. 19,03,500 and paid the same in September, 1994, does not extend the period of limitation for the remaining part of the petitioner's claim. This acknowledgment as also the payment was after the expiry of a period of three years from April 2, 1990 - date of the acknowledgment relied on by the petitioners.

(vi) 1999 (I) CTC 511 (Sampuran Singh v. Niranjan Kaur):-

Acknowledgment of Liability should be made before expiration of prescribed period for filing suit. Limitation would not get revived under section if acknowledgment was made after expiry of period of limitation. 10.2. There cannot be any dispute over the proposition that the acknowledgement of liability should have been made only before the expiry of the period of limitation.

seema sharma (Querist) 28 October 2017
what are the remedies available to us .

Guest (Expert) 28 October 2017
No remedies are available for purely an academic query.

So far, wasteful discussion merely on an academic query!

However, if there is even the slightest truth in your case, the case falls within the category of commercial query. Question arises, why you have not so far consulted some lawyer for the last 7 years to make legal efforts for recovery?

Further, when he came to you and paid Rs.1,000/- in Mrch 2017, why you have not taken adequate precautions to get some more legal documents, like PN, bank guaranty or indemnity bond signed from him?

Ms.Usha Kapoor (Expert) 28 October 2017
IN this connection section 25(30 of the contract Act provision gives a liberal interpretation of time barred debt. Despite- the time being barred but for which the creditor would've enforced his right of recovery of money with interest etc Section 25(3) gives liberal interpretation which says even though time for the debt is barred the acceptance of or acknowledgment of debt express or implied by the debtor to the creditor of debt by -paying either principal or interest or part payment a fresh period of limitation starts for the creditor to recover the time barred debt. Please read on.:
ECTION 25 (3) OF THE CONTRACT ACT AND SECTION 18 AND 19 OF THE LIMITATION ACT DISTINGUISHED: There is a clear distinction between an acknowledgement under Section 18 and 19 of the Limitation Act and a promise under Section 25 (3) of the Indian Contract Act inasmuch as though both have the effect of giving a fresh life to the creditor to sue the debtor, but, for an acknowledgement under Section 18 and 19 of the Limitation Act to be applicable, the same must be made on or before the date of expiry of the period of limitation whereas such a condition is non-existent so far as the promise under Section 25 (3) of the Indian Contract Act is concerned. A promise under Clause 3 of Section 25 of the Indian Contract Act, even made after the expiry of the period of limitation would be applicable and would cause revival of the claim, notwithstanding the limitation. Under Section 25(3) of the Indian Contract Act, a promise in writing to pay in whole or in part, a time barred debt is not void.[5] An acknowledgement of debt implies a promise to pay though acknowledgement is required under section 19, a promise under section 25(3) can be made after the period. A promise under Section 25 of the Contract Act is made after the period of Limitation. It can be inferred that Section 25 is an exception to the general rule of the Limitation. When a promise falls within the ambit of Section 25(3) it constitutes a valid agreement for the purpose of suing it would be immaterial whether a debt would be covered within limitation period.
The Section 18 and 19 of the Limitation Act is applicable on the event of the acknowledgement made within the period of limitation which shall lead to a fresh period of limitation from the date of the acknowledgement of debt. Whereas, when the period of limitation expires, the acknowledgement of debt which was made within the period of limitation shall be treated as a promise to pay and can be invoked by the application of Section 25 (3) of the Contract Act.

In the matter of M.S.N. Charities vs. Pilla Ramarao and Ors.[6], the Hon’ble Andhra Pradesh High Court gave a very categorical differentiation on the incidence of invoking Section 18, 19 and 25(3) of the respective Acts. The Hon’ble Court observed that a debt might have become time-barred on the date a debtor entered into a fresh obligation with the creditor to pay the liability, the said obligation, if it satisfies the conditions laid down in Section 25(3) of the Indian Contract Act, will amount to a fresh contract in the eye of law and can certainly be made the basis of an action for recovering the amount promised and acknowledged therein by the debtor. Differentiating Section 25(3) from Section 18 and 19 of the Limitation Act, the Hon’ble Court further observed that while Section 18 of the Limitation Act deals with an acknowledgment made by a debtor within the period of limitation, the contractual obligation which a debtor enters into under the terms of Section 25(3) has ‘no reference whatsoever to the acknowledged debt being within time or not’.
Therefore, it will be no wrong to state that, the provision contained in Section 25(3) is far wider in scope than the acknowledgment contemplated in Section 18 of the Limitation Act. The contract entered into under Section 25(3) is an independent and enforceable contract and has no reference to the debt acknowledged under the contract being a live one in the sense that it had not become barred under the law of limitation.
In case of acknowledgement of debt under Section 18 of Limitation Act, if such acknowledgement is before expiration of prescribed period of limitation, a fresh period of limitation shall be computed from the time of acceptance when part payment was made. This is adumbrated in Section 19 of Limitation Act. In case of Section 25(3), a contract of debt, which was rendered void by reason of expiry of period of limitation, revives by reason of acknowledgement and promise made by promissor. In either case promissee gets a right to enforce the contract of debt.
THE PROMISE UNDER SECTION 25(3) TO BE EXPRESS OR IMPLIED: After comparing Sections 18 and 19 of the Limitation Act with Section 25 (3) of the Contract Act and establishing the fact that even if the acknowledgement goes outside the ambit of the limitation, it can be comfortably put within the umbrella of Section 25 (3), the question which crops up is that whether there should be a strict interpretation of section 25(3). In other words should the conditions, as mentioned in the section 25(3) to treat an acknowledgement into a promise, be strictly followed or it was the intent of the legislature to give a liberal interpretation to this section. Whether the promise made under the section 25(3) should be express or implied. As mentioned above, section 25(3) has 3 limbs, firstly, it must refer to a debt which the creditor but for the period of limitation, might have enforced, secondly, there must be a distinct promise to pay wholly or in part such debt, and thirdly, the promise must be in ‘writing’ signed by the person or by his duly appointed agent. From the third ingredient it appears that the legislature intended to restrict the promise to be expressed in writing only. If we read this section in isolation it would appear that there is no scope for implied promise. In the matter M.S.N. Charities vs. Pilla Ramarao and Others[7], the Andhra Pradesh High Court held that the basic requisite of the Section 25(3) should be satisfied in order to invoke it. Therefore, the Court was of firm opinion that the promise has to be in ‘writing’ and any other mean of expressing a promise shall not allow the section to be applicable. This observation was also given by the Hon’ble Delhi High Court in the matter of M/s. Gupta Engineering Works vs. M/s. Arihant Chini Udyog Pvt. Ltd. & Others[8], wherein, the Hon’ble Court strictly interpreted the Section 25(3) and stated that the promise has to be in writing in order to put the acknowledgement within the ambit of this section. The Hon’ble Court went on to state that promise to pay must be in writing signed by the person to be charged with or by his agent generally or specially authorized in that behalf. This is an essential ingredient; it is a condition precedent to the applicability of this section. This is clear and explicit in the language of Section 25(3) itself.[9] They relied on the case of Daulat Ram vs. Som Nath and Others[10] which gave the same observation and interpretation of Section 25(3).
However, the Hon’ble Courts have devised another way to read Section 25 (3). To increase the scope or the umbrella of Section 25(3) and to minimize the grievances and concerns of the promise, Courts are reading this section along with Sections 2(b) and 9 of the Contract Act. Section 2(b) states “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise”. Section 9 states the following “Promises, express and implied. In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied”. Therefore, the Courts, do not read the section 25(3) in isolation they read it with section 2(b) and 9 of the Contract Act. In one of the latest judgment of Hon’ble Delhi High Court[11], the promise to pay need not be always in writing and the court took the view that a promise for the purpose of section 25(3) has to be read with section 2(b) and section 9 of the Contract act. In the matter of Suresh Kumar Joon vs. Mool Chand Motors[12], the Delhi High Court had made the above mentioned analogy that the promise can be express or implied for the purpose of Section 25(3).
MEANING OF ACKNOWLEDGEMENT: Oxford Dictionary defines acknowledgement as “acceptance of the truth or existence of something; recognition of the importance or quality of something; the expression of gratitude or appreciation for something; the action of showing that one has noticed someone or something; a letter confirming receipt of something”. Black's Law Dictionary defines acknowledgement as “a recognition of something has been factual; an acceptance of responsibility; the act of making it known that one has received something; a formal declaration made in the presence of an authorised officer, such as a Notary public, by someone who signs a document and confirms that the signature is authentic”.
In most of the cases, what amounts to acknowledgement depends on the relationship between the parties and certain chain of events in which the parties converse in lieu of the unpaid debts. In the matter of State Bank of India vs. Kanhaiya lal and Others[13], the acknowledgement was determined by the letters which were circulated between the Bank and the Defendant. Delhi High Court observed that the letters clearly disclose the relationship between the parties of a debtor and a creditor and this itself proves that there is an implied promise to pay. While determining acknowledgement of debt one needs to understand the circumstances under which such an acknowledgement is made. In this matter there were reminders by the Bank for repayment of the loan amount, further lends support to the hypothesis that the letters are in the nature of a promise to pay. In the matter of Suresh Kumar Joon vs. Mool Chand Motors[14] it was held by the Delhi High Court that issuance of cheque for a certain sum towards repayment of debt to the plaintiff and the plaintiff thereby accepts the cheque upon reconciliation of the account, amounts to acknowledgement and would come within the ambit of Section 25(3). In the matter of R. Sureshchandra & Co. vs. Vandnere Chemicals Works[15], it was held that balance sheet of the firm signed by the partner stating that the firm is liable to pay certain amount, amounts to promise. It shall attract the proviso of section 25(3). In the matter of Sudarshan Cargo Pvt. Ltd. vs. M/s. Techvac Engineering Pvt. Ltd.[16], the Hon’ble Karnataka High Court held that an acknowledgement of debt by e-mail originating from a person who intends to send or transmit such electronic message to any other person who would be the ‘addressee’ would constitute a valid acknowledgement of debt and it would satisfy the requirement of Section 18 of the Limitation Act, 1963 when the originator disputes having sent the e-mail to the recipient.
Abovementioned analogy can also be drawn for Section 25(3), if the period of limitation is crossed and there come a conversation between the debtor and creditor in relation to the debt, the conversation via email can be taken one step forward to constitute it as a promise to pay. The relationship between the parties and the conversations which take place in lieu of the outstanding amount can trigger a promise and can be an acknowledgement within the ambit of Section 18 and 19 of the Limitation Act, if not, then it can constitute a promise within the meaning and scope of Section 25(3) read with section 2(b) and section 9 of the Contract Act. Now-a-days, the professional conversations are happening through emails, if there are certain emails where the originator asserts the payment of a debt to the receiver of mail. To this email, the receiver, even though not directly, but impliedly accepts the outstanding amount, this would constitute a promise for the purpose of section 25(3).
CONCLUSION: After discussing the issues categorically, conclusion can be drawn that Section 25(3) of the Contract Act is an exception to the proviso of Section 18 and 19 of the Limitation Act. When the Limitation period is over then it must be understood that acknowledgement of debt expressly or impliedly infers promise to pay and the same can be invoked after the period of limitation. While invoking section 25(3), there should be a liberal interpretation of this particular section by reading it with section 2(b) and section 9 of the Contract Act. There are contrary judgments to this aspect, however, one cannot deny the fact that promise for the purpose of Contract Act, can be express or implied. Hence, section 25(3) has to be liberally interpreted and promise should be understood in accordance with section 9. To determine acknowledgement, one must look into the nature of relationship between the parties and the chain of events which take place between the debtor and creditor or the promise and promisor. Depending on the facts and attitude of the parties it can be determined what would amount to acknowledgements. In the abovementioned cases, letters, balance sheet even a cheque can amount to an acknowledgement provided that the same directly or indirectly relates to the a debt.

Guest (Expert) 28 October 2017
Mere assumptions of any particular case law cannot be made applicable on every case of recovery. All that depends upon the nature character and circumstances of the case in question.

However, the matter provided by Ms. Usha Kapoor by her painstaking efforts can suffice to write answer to the academic question of the querist.

Of course, clicking on the "like" button by the querist becomes due to both Advocate Bhartesh Goyal and Ms. Usha Kapoor.

I also give one "like" to both of them.

Guest (Expert) 28 October 2017
I am of the opinion that one like becomes due to Advocate Bhartesh Goyal also for his good analytical observation. The querist may or may not click on like button, but I must add one like on his analytical post.

Guest (Expert) 28 October 2017
Well Advised and Agree with Ms.Usha kapoor

loan recovery limitation

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