2016 (5) TMI 1527 - HC - Indian Laws

Bank's Suit Revived: Promissory Letters Revive Debt, Appellate Court Restores Trial Court's Decision

STATE BANK OF INDIA Versus KANAHIYA LAL & ANR

STATE BANK OF INDIA Versus KANAHIYA LAL & ANR - TMI Issues Involved:1. Entitlement of the appellant Bank to recover the claimed amount.2. Applicability of the law of limitation to the recovery suit.3. Interpretation of letters dated 18.11.2006 and 20.11.2006 under Section 18 of the Limitation Act, 1963 and Section 25(3) of the Indian Contract Act, 1872.Detailed Analysis:1. Entitlement of the Appellant Bank to Recover the Claimed Amount:The appellant, State Bank of India, filed a suit for recovery of Rs. 2,42,199.37 from the respondents, which was initially decreed by the Trial Court. The court declared the appellant entitled to the claimed amount along with interest at 10% p.a. from the date of filing of the suit until realization, and awarded the cost of the suit to the appellant.2. Applicability of the Law of Limitation to the Recovery Suit:The First Appellate Court reversed the Trial Court’s judgment, dismissing the suit as barred by the law of limitation. The respondents argued that the last payment towards the credit facility was made on 02.09.2002, and the suit for recovery should have been filed within three years from that date. The letters dated 18.11.2006 and 20.11.2006, which the Bank claimed as revival letters, were written after the limitation period had expired.3. Interpretation of Letters under Section 18 of the Limitation Act, 1963 and Section 25(3) of the Indian Contract Act, 1872:The substantial question of law was whether the letters dated 18.11.2006 and 20.11.2006 constituted a promise to pay the debt, thus affecting the limitation period.- Section 18 of the Limitation Act, 1963: This section extends the limitation period if an acknowledgment of liability is made in writing before the expiration of the prescribed period. The respondents contended that the letters were written after the limitation period expired and thus could not extend the limitation period.- Section 25(3) of the Indian Contract Act, 1872: This section states that a promise to pay a time-barred debt made in writing and signed by the debtor is enforceable. The appellant Bank argued that the letters were not merely acknowledgments but promises to pay the debt, thus reviving the claim even after the limitation period had expired.The court analyzed the contents of the letters and concluded that they were not just acknowledgments of liability but also implied promises to pay. The letters indicated the respondents' clear admission of their liability and an implied promise to pay, which falls under Section 25(3) of the Indian Contract Act. The court referenced the case of Adivelu vs. Narainachari, suggesting a liberal construction of acknowledgments and promises.The court differentiated between an acknowledgment under Section 18 of the Limitation Act, which must be made before the expiration of the limitation period, and a promise under Section 25(3) of the Indian Contract Act, which can revive a time-barred debt even after the limitation period has expired.Conclusion:The court found that the First Appellate Court erred in dismissing the suit as time-barred. The letters dated 18.11.2006 and 20.11.2006 were deemed to be in the nature of promises to pay, thus reviving the debt under Section 25(3) of the Indian Contract Act. Consequently, the impugned judgment was set aside, and the judgment by the Trial Court was restored, allowing the appeal.