The Supreme Court has held that entries made in a company’s balance sheet can constitute an acknowledgment of liability under Section 18 of the Limitation Act, 1963, thereby triggering a fresh period of limitation for filing a recovery suit. The ruling came while setting aside a Delhi High Court order that had dismissed a recovery plaint as time-barred under Order VII Rule 11 of the Code of Civil Procedure (CPC), 1908. Allowing the appeal filed by the legal heir of the original plaintiff, the apex court restored the suit before the trial court for further proceedings.
Dispute Over Rs 11.16 Lakh Recovery
The original plaintiff had filed a summary suit under Order XXXVII of the CPC in 2014, seeking recovery of Rs 11,16,000 along with annual interest of Rs 11,04,840 at 9 per cent. The claim arose from a civil works contract involving the construction of a multi-storey building in Mayur Vihar, Delhi. The plaintiff relied on running bills raised between 2000 and 2003 in support of his claim against the defendant. The dispute centred on whether the claim had become time-barred or whether subsequent financial records amounted to an acknowledgment of liability, extending the limitation period.
Delhi High Court Had Rejected the Plaint
In 2024, the Delhi High Court, while hearing a revision petition, accepted the defendant’s plea and rejected the plaint under Order VII Rule 11 CPC. The High Court held that the bank statements did not establish any acknowledgment of liability beyond 2005. Consequently, it found the recovery suit barred by limitation.
Supreme Court Restores the Suit
The Supreme Court set aside the High Court’s decision, reiterating that entries in a balance sheet may amount to an acknowledgment of liability under Section 18 of the Limitation Act. Such an acknowledgment, if it satisfies the legal requirements, can give rise to a fresh limitation period. The ruling means that financial statements cannot be disregarded at the threshold without examining whether their entries acknowledge an existing liability. With the High Court’s order set aside, the recovery suit has been restored before the trial court for consideration in accordance with law.
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Shamshad Ali is a New Delhi–based journalist with over six years of experience spanning breaking news writing, on-the-ground reporting, and editing. When he isn’t chasing headlines, Shamshad is usually exploring new destinations, discovering hidden culinary gems, and striking up conversations with strangers. Many of whom turn out to be great sources, and even better friends. He can be reached at shamshadali.dar@gmail.com.
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