Express promise to pay time-barred debt saves limitation and supports contractual interest, with reasonable future interest under section 34.

A written acknowledgment by the principal debtor was construed as an express promise to repay a time-barred liability with interest, bringing the case within section 25(3) of the Indian Contract Act, 1872 and supplying a fresh cause of action; the suit was therefore held to be within limitation and maintainable. The acknowledgment was also treated as binding the debtor to pay interest under the subsisting obligations, so refusal of contractual interest was erroneous. For post-suit interest, section 34 of the Code of Civil Procedure, 1908 was applied on the principal sum adjudged at a rate considered reasonable in the circumstances, resulting in simple interest at 8% per annum.

---

---

Issues: (i) Whether the acknowledgment executed by the principal debtor constituted an express promise to pay a time-barred debt so as to save limitation and sustain the suit. (ii) Whether the plaintiff bank was entitled to interest at the contractual rate and, failing that, to future interest at a reasonable rate under section 34 of the Code of Civil Procedure, 1908.

Issue (i): Whether the acknowledgment executed by the principal debtor constituted an express promise to pay a time-barred debt so as to save limitation and sustain the suit.

Analysis: An acknowledgment under section 18 of the Limitation Act, 1963 must be made within limitation, and an admission of repayment alone does not satisfy section 19 unless the payment is acknowledged in writing signed by the debtor. The document executed by the principal debtor, though not happily worded, was construed as containing an express promise to repay the acknowledged liability with interest and on the terms there stated. Such a promise falls within section 25(3) of the Indian Contract Act, 1872 and furnishes a fresh cause of action.

Conclusion: The suit was held to be within time and maintainable.

Issue (ii): Whether the plaintiff bank was entitled to interest at the contractual rate and, failing that, to future interest at a reasonable rate under section 34 of the Code of Civil Procedure, 1908.

Analysis: The acknowledgment executed by the principal debtor was read as binding him to pay the acknowledged amount with interest according to the subsisting obligations. The trial court's refusal to award contractual interest on the acknowledged liability was found erroneous. For future interest, the Court applied the principle that section 34 permits interest on the principal sum adjudged and that the rate must be reasonable in the facts of the case. Taking into account the purpose of the loan and the circumstances of the borrower, the Court fixed simple interest at a reduced rate for the post-suit period.

Conclusion: The bank was entitled to the contractual rate up to suit and to future simple interest at 8% per annum on the principal sum adjudged for the post-suit period.

Final Conclusion: The decree was modified to enhance the amount recoverable and to substitute the future interest awarded by the trial court with simple interest at 8% per annum on the principal sum adjudged, while maintaining the decree in the remaining respects.

Ratio Decidendi: A written acknowledgment of liability that amounts to an express promise to pay a time-barred debt constitutes a contract under section 25(3) of the Indian Contract Act, 1872 and gives rise to a fresh limitation period; future interest under section 34 of the Code of Civil Procedure, 1908 must be fixed on the principal sum adjudged at a rate that is reasonable in the circumstances.

---