Effect of Acknowledgement (Section 18) | Limitation Act, 1963

By delving into the key aspects related to acknowledgement, readers will attain a comprehensive understanding of the Limitation Act.

Effect of Acknowledgement (Section 18) | Limitation Act, 1963 

Introduction

The Limitation Act of 1963 (hereinafter “the Act”) is one of the key statutes governing the time limits for civil claims in India. It stipulates fixed periods within which a legal proceeding has to be initiated or a time within which a legal remedy must be claimed. The fundamental principle of this Act is to promote timely resolution of disputes and provide certainty for parties regarding potential liabilities. However, the provisions of this Act are not rigid per se as there exist certain circumstances where flexibility regarding such time limits is required for the administration of justice. Section 18 of the Act is just one of them.

This provision specifically outlines the effect that a written acknowledgement of liability can have in effectively resetting or renewing the period of limitation that would otherwise require legal action to be initiated within a prescribed time. Through this provision, the Act recognizes that even if the standard timeline for a case has lapsed, a defendant’s written and signed confirmation or acknowledgement of an overdue debt or obligation provides grounds for the deadline to be started afresh.

Such a factor in the Act introduces an amount of flexibility, as aforementioned, and takes practical realities into account. This provision protects the litigants, who in good faith, had postponed legal actions based on written payment assurances from defendants, as the defendants may stall paying the money they owe by simply making such written acknowledgements. By allowing them more time to file suit, discourages the defendants from taking undue advantage of the plaintiffs by making false promises.

In a nutshell, Section 18 of the Act aims to balance fairness to plaintiffs against defendants trying to exploit loopholes and engaging in tactics that indefinitely postpone payment of the money they owe. The ultimate goal of the provision is the deterrence of unethical delays in meeting valid financial obligations.

What is Acknowledgement?

In quite simpler terms, the Black’s Law Dictionary has defined acknowledgement as, “a recognition of something as being factual.” In other words, an acknowledgement verifies a document’s authenticity by evidencing that it has the genuine consent and approval of the named person(s) who have executed it. Acknowledgement per se can be both written or oral, however, for Section 18 of the Act, the focus will be on written acknowledgement only.

As per the provision, acknowledgement is a written and signed confirmation of liability regarding a property or right which is made by the party who owes such liability or their authorized agent, before the expiry of the original period of limitation. Such acknowledgement resets the timeline to take legal action to enforce the claim. It is to be noted that as per Subbarsadya v. Narashimha, AIR 1936 Mad 939 it is not necessary for such acknowledgement to include the promise to pay. A mere recognition of the existence of the liability is enough.

The acknowledgement must straightforwardly recognise the liability of an existing unpaid debt without any qualifications, objectively showing that the defendant still recognizes the plaintiff as the creditor of the pending legal dispute.

Important Principles of Section 18 of the Limitation Act

After a thorough reading of this provision, certain principles can be figured out which are indispensable to Section 18. Such principles are listed below –

• The primary principle is a bar of limitation.
• Written admittance of liability acts as proof of the existence of the debt.
• Grants reasonable extra time to file a suit if relied upon written confirmation.
• Assures the plaintiff who is acting in good faith.
• Deters tactical delays through unfulfilled promises.
• Provides a proper balance between timely justice and fair resolution.

Requisites of a Valid Acknowledgment

To invoke the provision, the following essentials must be fulfilled –

1. The acknowledgement must admit to the obligation involving some property, financial entitlement, or other legal right (if any) that is owed to another party.
2. It has to be a written document bearing the signature of whoever owes the liability or an authorized agent.
3. Most importantly, the acknowledgement must take place before the original legal deadline has passed for the other party to file a lawsuit or formal application to enforce the financial right or property interest against the one making such admission. The signed confirmation must come when the period of limitation is still running.

Important Cases

I) Sampuran Singh v. Niranjan Kaur (Smt.), AIR 1999 SC 1047

The question here was to decide whether the mortgage itself was valid or not, as a valid mortgage would provide one with the right to redeem to the mortgagors from that very date unless there is some kind of restriction in the deed. However, this was not the case as the court observed that such restriction can be put only through law or in terms of a valid mortgage deed.

Therefore, in the instant matter, the limitation period of 60 years commenced from the date when the valid mortgage was executed, i.e., in 1893 which was the date of the oral mortgage. As for acknowledgement, the court noted that it has to be made before the expiry of 60 years, so if the time has already expired then Section 18 would not revive the limitation period, as the acknowledgement is needed to be made only during the running of the limitation period.

II) S. Natarajan v. Sama Dharman, (2021) 6 SCC 413

In this matter, the question of whether the liability or debt being barred by limitation is to be determined based on the evidence which is to be presented by the parties as the question of limitation period is a question of law as well as fact. The court observed that criminal action is commenced only in cases where the amount is non-recoverable at all and the cheque issued towards it was dishonoured.

The apex court held that a cheque itself is a promise to pay even in case the liability of debt is time-barred. In the matter, a balance sheet was produced which was prepared every year after the loan advanced where the deposited amounts were shown. The court held this to be a valid form of acknowledgement under Section 18 of the Act.

III) Prabhakaran v. M. Azhagiri Pillai, (2006) 4 SCC 484

Here it was noted that in the case of a mortgage, if a mortgagee directly admits to the fact that they have a liability to deliver back the possession, then under Section 18 of the Act it is a valid form of acknowledgement. However, difficulty in this case arose as such acknowledgement instead of being direct, was implied. So, it was for the court to decide whether an implied acknowledgement of liability from an admission of the jural relationship would be a valid acknowledgement or not. It was noted in this regard that Section 18 also deals with the acknowledgements regarding all suits which involve properties or rights for which a limitation period is stipulated under the Act.

Further, the court has also laid down certain requirements of a valid acknowledgement by a mortgagee. Regarding the question of implied acknowledgement, the court held that the intention to admit the jural relationship with the mortgagor determines the validity of an acknowledgement.

IV) Syndicate Bank v. R. Veeranna, (2003) 2 SCC 15

The court here relied on the case of Hiralal v. Badkulal, AIR 1953 SC 225 and noted that an unqualified acknowledgement of liability by an individual or party provides for a cause of action to the plaintiff to base their claim as well as saves the limitation period. Therefore, in the instant matter, the court observed that in regards to the acknowledgement of liability made by the defendants, it is not open to them to deny making any payment of the amount, they owe to the bank, by stating that a higher rate of interest cannot be charged.

Conclusion

In conclusion, acknowledgement under Section 18 of the Limitation Act properly balances various principles including legal certainty, fairness and justice. While timely resolution of disputes is preferred, fairness is the priority of our legal system. This provision attempts to maintain a balance between the two by specifying how overdue admission in writing can restart closing limitation periods. The utility of this provision relies on the legal time limits and acknowledgement of debts while keeping pace with the dynamics of the business world. Therefore, it becomes a challenge for lawmakers to keep up with the changing dynamics and maintain the balance effectively.

References

[1] Dr. Medha Kolhatkar, Commentary on the Limitation Act, 12th Edition, 2019.

[2] U.N. Mitra, Law of Limitation and Prescription Law, 16th Edition, 2021.

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