Supreme Court holds that under Article 113 of the Limitation Act, 1963, limitation period begins when the right to sue accrues and not when right to sue

The Supreme Court on June 5, 2020 set aside the decision of the trial court which was upheld by the first appellate court and Delhi High Court in the matter of Shakti Bhog Food Industries (“Appellant”) v. Central Bank of India and Anr. (“Respondent”), Civil Appeal No. 2514 of 2020 and 2515 of 2020. Facts of the Case The Appellant in the present case had filed a suit on February 23, 2005 for rendition of account and repayment of excess interest/ commission charged by the Respondent between April 1, 1997 to December 31, 2000 arbitrarily. The Appellant sought the recovery of the excess amount charged with interest @ 18% per annum. The trial court rejected the plaint invoking Order VII Rule 11(d) of the Civil Procedure Code, 1908 (“CPC”) on the grounds that the petition is barred by limitation since it was filed beyond the period of 3 (three) years as specified under Article 113 of the Limitation Act. According to the trial court, the right to sue accrued in October, 2000 since the excess amount was charged by the Respondent till such period. The contention of the Appellant was that the right to sue accrued only after the Respondent denied its liability and communicated the same to the Appellant on September 19, 2002 and June 2, 2003 and after the service of legal notice on January 7, 2005. The trial court rejected the contention on the ground that exchange of communication cannot extend the time of limitation as was held by the Delhi High Court in C.P. Kapur v. The Chairman and Ors. CS(OS) 2678 of 2012. Issues Whether the plaint filed by the Appellant could have been rejected by the court by invoking Order VII Rule 11 of CPC? Analysis The Supreme Court, referring to various judgments, observed that it is a well settled law that the averments made in the plaint must be examined as a whole and not selective parts before rejecting a plaint under Order VII Rule 11 of CPC. However, the trial court and subsequently the district court and Delhi High Court failed to do so and examined the plaint only to the extent that the first cause of action arose when the arbitrary interest/ commission was last charged by the Respondent. The Supreme Court, referring to each communication between the parties, stated that the cause of action did arise on the day when the discrepancy was noted by the Appellant as to the arbitrary deduction of charges and the cause of action also arose on July 8, 2002 when the Respondent informed the Appellant that the cheques were being collected at the prevailing rates and further on September 19, 2002 when the Respondent informed the Appellant that the actions taken by the bank are in consonance with its rules and there is no need to correspond further. Before the firm denial by the aforementioned letters of the Respondent, the Appellant had a hope for a resolution. The Article 113 of the Limitation Act is a residuary clause which has been relied upon by the trial court, first appellate court (district court) and Delhi High Court and the right to sue was deemed to have accrued merely when the basis of cause of action had occurred first. The Supreme Court pointed to the distinction between Article 113 of the Limitation Act as opposed to other articles of the Limitation Act such as Article 58, 59 and 104, where the word “first” appears in the latter case and observed that reading the expression in Article 113 as – when the right to sue (first) accrues - would be re-writing the provision of Article 113 and violating the legislative intent. It must be assumed that while drafting, the Parliament was aware of the distinction and had deliberately excluded the word “first” from Article 113 of the Limitation Act. The Supreme Court referred to Union of India and Ors. vs. West Coast Paper Mills Limited and Anr. Appeal (Civil) 1061-62 of 1998, and emphasised on the distinction between Article 58 and Article 113 of the Limitation Act where, for the former provision, the limitation period would begin from the first date of accrual of cause of action and in the latter provision, limitation would begin when the cause of action arose last. The Supreme Court further observed a similarity between Article 120 of the Limitation Act, 1908 (“Act of 1908”) and Article 113 of the Limitation Act - both using similar expression “when right to sue accrues” - and therefore drew a distinction between Article 120 of Act of 1908 and Article 58 of the Limitation Act. In the matter of Khatri Hotels Private Limited and Anr. v. Union of India and Anr. Civil Appeal No. 7773 of 2011, the court observed that while enacting Article 58 of the Limitation Act, the parliament made a departure from the approach taken for Article 120 of the Act of 1908 where the term “first” appears and therefore, in the former case, the successive violations will not give right to the fresh cause of action and hence the limitation period begins when the right to sue first accrues. Considering the argument that the limitation period cannot be extended by exchanging communications, the Supreme Court held that the cause of action arose on multiple occasions including due to firm denial by the Respondent of any liability vide its letters and also when the legal notices were issued by the Appellant. Further, even if the legal notices were to be disregarded, the plaint would be well within the limitation period. Therefore, the date of filing the suit would be well within the limitation period. Consequently, Order VII Rule 11 of CPC would not be applicable in the present case. Conclusion The Supreme Court restored the plaint setting aside the order of the trial court and held that under Article 113 of the Limitation Act, the limitation period does not begin when the right to sue first accrues but when the last cause of action arises. This update has been contributed by Harshita Jagwani and Shivani Agarwal (Associates). Download Pdf