Limitation Act — Time Limits & Condonation of Delay
What is the limitation period for filing a cheque bounce case under Section 138 of the Negotiable Instruments Act?
The limitation period for a cheque bounce complaint under Section 138 of the Negotiable Instruments Act, 1881 is one month from the date of cause of action. The cause of action arises when the payee's demand notice (sent within 30 days of the cheque being returned) expires without payment — giving the drawee 15 days to pay. If the drawee fails to pay within those 15 days, the payee has one month from the date of failure to file a complaint before the Magistrate. Unlike the Limitation Act's three-year period, this special one-month period is prescribed in NI Act S.142(b) and is not governed by the Limitation Act — but S.5 of the Limitation Act (condonation of delay) has been held applicable to cheque bounce complaints by the Supreme Court in Saketh India Ltd. v. India Securities Ltd. (1999). Missing this one-month window without obtaining condonation is fatal to the complaint.
What is the limitation period for filing a DRT Original Application (OA) for bank loan recovery?
The limitation period for filing an Original Application (OA) before a Debt Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is three years, governed by Article 137 of the Schedule to the Limitation Act, 1963. The three-year period begins to run from the date the right to apply accrues — which courts have consistently held to be the date of NPA classification, or in some formulations, the date of first default that triggers the bank's right to demand repayment of the entire outstanding amount. The Supreme Court in Punjab National Bank v. Surendra Prasad Sinha (1992) established that Article 137 applies to DRT proceedings. Banks must file the OA within three years of the NPA date (or the date the debt was called up, if a formal demand was made), subject to extension through valid written acknowledgments under S.18 or part payments under S.19 of the Limitation Act.
Does a balance confirmation letter or annual acknowledgment signed by the borrower restart the limitation period?
Yes, a balance confirmation letter signed by the authorised representative of the borrower before the expiry of the limitation period constitutes a valid written acknowledgment under Section 18 of the Limitation Act, 1963, and a completely fresh three-year limitation period begins to run from the date of that acknowledgment. The acknowledgment must meet three essential conditions: it must be in writing, it must be signed by the party against whom the debt is claimed (or their duly authorised agent), and it must be made before the existing limitation period has expired — an acknowledgment after limitation has run out cannot revive an already time-barred claim. Banks routinely obtain annual acknowledgments as part of their credit review process; each fresh acknowledgment resets the clock. An acknowledgment sent to the borrower's statutory auditors (audit confirmation) and not signed by the borrower does not qualify under S.18, and banks should not rely on audit confirmations alone. The acknowledgment need not admit the precise amount — even an acknowledgment of a jural relationship of debt is sufficient, per the Supreme Court in Sampuran Singh v. Niranjan Kaur (1999).
Does a part payment made by the borrower restart the limitation period under the Limitation Act?
Yes, a part payment made by the borrower (or their duly authorised agent) toward a debt before the limitation period expires restarts the limitation clock under Section 19 of the Limitation Act, 1963, and a fresh three-year period begins from the date of that payment. The critical requirement added by the proviso to S.19 is that the part payment must be acknowledged in writing signed by the person making the payment — typically evidenced by a pay-in slip, NEFT confirmation screen shot signed or acknowledged by the borrower, or a covering letter accompanying the payment. A unilateral entry in the bank's own books, without any signed payment record from the borrower, is generally insufficient to trigger S.19. Part payments of interest, processing fees, and commitment charges — if signed by the borrower — also qualify. Banks must therefore maintain clean, countersigned payment records for every partial payment received from NPA accounts, as these records can be the difference between a maintainable and a time-barred DRT suit.
Does Section 5 of the Limitation Act (condonation of delay) apply to suits filed in DRT or civil courts?
Section 5 of the Limitation Act explicitly applies only to appeals and applications — it does not apply to original suits. An original suit (or an Original Application before DRT, which is treated as its equivalent in many rulings) filed beyond the prescribed limitation period cannot be saved by S.5 condonation. For suits, the bar under S.3 is absolute. However, for DRT appeals before the Debt Recovery Appellate Tribunal (DRAT) and for applications (as opposed to OAs) before the DRT, S.5 has been applied by courts to condone delay on sufficient cause being shown. The distinction between an "application" (S.5 applicable) and the equivalent of a "suit" (S.5 not applicable) is a recurring litigation issue — the safest practice is to file all proceedings within the prescribed period and not rely on S.5 as a safety net.
What is the limitation period for enforcing a mortgage by sale or for filing a suit for redemption of a mortgage?
The limitation period for a suit to enforce a mortgage by sale, foreclosure, or for redemption of a mortgage is twelve years, prescribed under Articles 61 and 62 of the Schedule to the Limitation Act, 1963. Specifically, Article 61(a) prescribes 30 years for suits by mortgagees to redeem a mortgage against a government and 12 years for all other mortgages; Article 61(b) governs redemption by mortgagors. The 12-year period runs from when the money secured becomes due. This extended period recognises the durable nature of security interests and is one reason why banks prefer mortgage security — even if the personal covenant to repay becomes time-barred, the mortgage itself may still be enforceable. However, where SARFAESI enforcement is used instead of a suit, the action must still be taken within the limitation period applicable to the underlying debt (typically Article 137 for the DRT application), and delay in SARFAESI action can be challenged independently.
What is the limitation period applicable to proceedings under the SARFAESI Act, 2002?
The SARFAESI Act, 2002 does not prescribe its own limitation period in all situations, and the Limitation Act, 1963 applies to SARFAESI proceedings by virtue of the general principle that the Limitation Act applies to all proceedings in courts and tribunals unless expressly excluded. For the bank's action to take possession under S.13(4) SARFAESI, courts have held that it must be taken within three years of the NPA date (Article 137). For a borrower's application under S.17 SARFAESI challenging the bank's possession notice or action, the period is 45 days from the date of the possession notice (S.17(1) SARFAESI), which is a special period that overrides the Limitation Act for that specific application. For appeals to DRAT under S.18 SARFAESI, the period is 30 days from the DRT order (extendable under S.5 Limitation Act for sufficient cause). Banks should issue S.13(2) notices and take S.13(4) possession within three years of NPA to avoid a limitation challenge to the SARFAESI action itself.
What is the scope of Article 137 of the Schedule to the Limitation Act, and why is it significant for debt recovery?
Article 137 is the residuary provision in the Schedule to the Limitation Act: it prescribes a three-year limitation period for "any other application" — i.e., any application for which no specific article elsewhere in the Schedule provides a limitation period. It is enormously significant in debt recovery because the Debt Recovery Tribunal, established under the RDDBFI Act, is not a "court" in the traditional sense, and proceedings before it are "applications" rather than "suits" — so Article 137 has been consistently applied as the governing provision by the Supreme Court and high courts. For IBC proceedings under S.7 (financial creditors) and S.9 (operational creditors) before NCLT, S.238A of IBC applies the Limitation Act, and Article 137 is invoked for the NCLT application. The right to apply accrues on the date of default — for loan accounts, this is typically the NPA date. Subject to S.18 and S.19, banks must file OAs at DRT or S.7 applications at NCLT within three years of the NPA date.
How does the fraud exception under Section 17 of the Limitation Act operate in banking cases?
Section 17 provides that where a cause of action is based on the defendant's fraud, or where knowledge of the plaintiff's right is concealed by fraud, the limitation period does not begin to run until the plaintiff discovered (or with reasonable diligence could have discovered) the fraud. In banking cases, this provision is invoked when banks discover years after disbursement that borrowers submitted forged property documents, fabricated financial statements, or inflated stock valuations to obtain loans. The bank argues that its cause of action arose not from disbursement but from the date of fraud discovery — which can significantly extend the window to file suits or DRT OAs. Courts apply S.17 generously in favour of defrauded banks, but require the bank to plead specifically: the date of discovery, what prevented earlier discovery, and why the bank could not have discovered the fraud earlier with reasonable diligence. The proviso protects bona fide third-party purchasers who bought the property for value without knowledge of the fraud — limiting the bank's ability to claim title against them even if the original mortgage was fraudulent.
What is the legal difference between an acknowledgment under Section 18 and a part payment under Section 19, and which is more advantageous for a bank?
Both S.18 (acknowledgment in writing) and S.19 (part payment) restart the limitation period and create a fresh three-year window, but they differ in nature, evidence, and strategic utility. An acknowledgment under S.18 requires a written, signed admission of liability — it does not require any money to change hands and can be obtained through a simple letter, email (with digital signature), or balance confirmation form. A part payment under S.19 requires actual money to be paid by the borrower to the bank, accompanied by a written acknowledgment signed by the borrower. For a bank dealing with an NPA borrower who has no cash but still maintains communication, S.18 acknowledgment is more practical — a signed OTS application letter, a signed restructuring proposal, or even a signed request for more time constitutes acknowledgment. For accounts that are still partially performing, each part payment with a signed covering letter achieves both S.18 and S.19 protection. Banks should proactively obtain S.18 acknowledgments annually from all accounts — performing and NPA — as the most cost-effective form of limitation protection, and should train their relationship managers to collect acknowledgment letters as a standard operating procedure during annual reviews.
Limitation Issue in a Recovery Case?
Limitation is a common defence in DRT proceedings. Whether you are computing the limitation period for a DRT Original Application or seeking condonation of delay, getting the dates right is critical. Advocate Subodh Bajpai advises on limitation strategy in debt recovery cases.