Acknowledgment Of Debt To Save Limitation

Acknowledgment Of Debt To Save Limitation

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A promise to pay the time barred debt is a valid contract. ... 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.

Acknowledgement of Debt under Section 18 of the Limitation Act, 1963 implies promise under Section 25(3) of the Contract Act, 1872

 

Section 18 of the Limitation Act would stipulate that the period of limitation is extended in the event of an acknowledgment of liability made by the debtor before the expiration of the period of limitation to initiate the recovery process. Under Section 25(3) of the Contract Act, a promise is made by the debtor to pay in whole or in part, a time barred debt i.e., a debtor makes a promise after the expiry of the period of limitation. Both the provisions of law put new life into the creditor to sue the debtor. An acknowledgment and a promise must be in writing and shall show the existence of a jural relationship of creditor and debtor

Recently, the Hon’ble Delhi High Court in its decision in State Bank of India Vs Kanahiya Lal (Judgement) ruled that a written acknowledgment of debt, thereby, confirming the debt amount can be treated as a ‘promise’ to pay a time-barred debt under Section 25(3) of the Contract Act, 1872 and not mere an acknowledgment of debt under Section 18 of the Limitation Act, 1963. I firmly believe that the readers would know the difference between Section 18 and Section 25(3) of the respective Acts. However, I would be utterly remiss in my duty if I do not throw light on the aforesaid respective provisions of law.

 

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