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Object and Policy of Law of Limitation

Updated on March 10, 2015

Object and Policy of Law of Limitation

Limitation of actions

(a) Object and policy of law of limitation with special reference to contracts

At common law, lapse of time does not affect contractual rights. But it is the policy of the law to discourage stale claims, for interst reipublicae ut sit finis litium.1 Equity could in the exercise of its discretion refuse to grant relief under the doctrine of laches due to the unreasonable delay on the part of the plaintiff in applying the court for the relief, whereas the common law developed no such rule.2

A right of action for breach of contract may be extinguished by the effluxion of time in accordance with the provisions of the Limitation Act 1980.3 The object of the law of limitation is to quiet long possession and to extinguish stale demands. Statutes of limitation are statutes of repose, to quiet titles, to suppress frauds, and to supply the deficiency of proofs arising from the ambiguity and obscurity or the antiquity of transactions. They proceed upon the presumption that claims are extinguished or ought to be held extinguished whenever they are not litigated within the prescribed period. They quicken diligence by making it, in some measure, equivalent to right. They discourage litigation by burying in one common receptacle all the accumulation of past times which are unexplained and have from lapse of time, become inexplicable. Controversies are limited to a fixed period of time, lest they should be immortal, while men are mortal.

The object of the law of limitation is not to create or define causes of action but simply to prescribe the period within which existing rights can be enforced in Courts of Law. The principle of the limitation Act, 1908 is not to enable suits to be brought within certain periods, but to forbid them being brought after certain periods. The doctrine of limitation is founded on considerations of public policy and expediency. The old maxim of law interst reipublicate ut sit finis litium means that the interests of the State require that there should be an end of litigation. Another consideration that a party who is insensible to the value of civil remedies and who does not assert his own claim with promptitude has little or no right to require the aid of the State in enforcing it. The law assists the vigilant, not those who sleep over their rights.

The plea of limitation can be raised only as against the plaintiff and not as against the defendant The defendant may, therefore, interpose any matter of defence in answer to the plaintiff's suit, although he could not have brought a substantive suit upon it himself. All statutes of limitation have for their object the prevention of the rearing up of claims at great distances of time when evidence are lost, and in all well regulated countries the quieting of possession is held an important point of policy. In India rule of law is that there is no limitation against the defence. The defendant will not be precluded from setting up a right by way of defence even if it could not have done so as plaintiff by way of substantial claim.

The statute of limitation, the object of which is to prevent stale demands, must be construed strictly. The scope of the Limitation Act cannot be extended by implication, and a party's right to go to Court cannot be taken away unless the Act expressly provides that his right is expressly barred. The limitation Act, 1908 is a consolidating and amending statute relating to the limitation of suits, appeals and certain types of applications to Courts and must, therefore, be regarded as an exhaustive Code. It is a piece of adjective or procedural law and not of substantive law. Rules of procedure, whatever they may be, are to be applied only to matters to which they are made applicable by the legislature expressly or by necessary implication. Its provisions are to be construed strictly and cannot be applied to matters which do not fall strictly within its purview and it cannot be extended by analogy.

The law of limitation appertains to remedies because the rule is that claims in respect of rights cannot be entertained if not commenced within the time prescribed by the statute in respect of that right. Apart from Legislative action prescribing the time, there is no period of limitation recognised under the general law. There are two aspects of the statues of limitation, the one concerns the extinguishment of the right of claim if a claim or action is not commenced within a particular time and the other merely bars the claim without affecting the right which either remains merely as a moral obligation or can be availed of to furnish the consideration for a fresh enforceable obligation.

Where a statute prescribing the limitation extinguishes the right, it affects substantive rights while that which purely pertains to the commencement of action without touching the right is said to be procedural. Agreement of sale did not lay down any specific time or date during which the deal was to be finalized. No specific date was mentioned by the defendant on which plaintiff was put to notice that performance of agreement in question was refused. Question of limitation being mixed question of law and fact the same could not be decided unless evidence was made available on record. Courts are not permitted to travel beyond its provisions to supplement them.

The High Court has no powers by rules to add to or modify the provisions of the Limitation Act except when such power is conferred upon it by statutory authority. Law required an indolent litigant to explain delay of each day, which cannot be done merely on the ground that dispute, should be decided on merits ignoring technicalities.15 When a plea of limitation is raised and is rejected it cannot be re-agitated in appeal because of previous finding attained finality. Limitation Law operates on the principle that if a claimant does not press his claim in time specified by law, through an authority appointed by for the purpose by law, it will be presumed that either the claimant waived his right or was not serious and rather indolent so as to have acquiesced.

Law of limitation sets out rule of governance and administration which have the effect of preventing Court upon providing legal redressal of rights through judicial process even where such rights subsists. Government cannot be treated differently than the private individual on the question of limitation. Decision of the case on the merits always to be encouraged instead of non-suiting the litigants for technical reasons including on limitation. Where the order is illegal and void, the question of limitation would not arise. The object of Law of Limitation is to regulate the Courts and manners for providing relief or remedy.

(b) Periods of limitation

The legislature has laid down certain periods of limitation after the expiry of which no action can be maintained. An action founded on a simple contract must be commenced within six years, and one on a specialty within twelve years, from the date on which the cause of action accrued. But in the case of personal injuries arising from a breach of contract, the limitation period is to be three years from the date on which the cause of action accrued or the date of the plaintiff's knowledge of certain facts. In contract, the cause of action normally accrues, not when the damage is suffered, but when the breach of contract takes place. In the case of certain loans, however, the six-year period does not start to run unless and until a demand in writing for the repayment of the debt is made by or on behalf of the creditor. An action for an account shall not be brought after the expiration of any time limit which is applicable to the claim which is the basis of the duty to account, that is, six years in relation to the breach of contract. The expression cause of action means the factual situation stated by the plaintiff which, if substantiated, entitles him to a remedy against the defendant. If it discloses a breach of contract, it accrues when the breach occurs, from which moment time begins to run against the plaintiff.

The fact that actual damage is not suffered by him until some time later than the breach does not extend the time within which he must sue. Where therefore, the defendant has acted negligently in the performance of the contract, the plaintiff may be enable to formulate a claim both in contract and in tort and to take advantage of the fact that the limitation period starts to run at a later date in tort. Thus the Court applied it and held that the defendant had committed a continuing series of breaches of contract, which had the effect of extending of extending the period as well. If a defendant has by one clause of a contract agreed to indemnify the plaintiff against the consequences of breaches of other terms, the limitation period for the indemnity will not start until those consequences have been suffered. Under subsidiary limitation period, if the cause of action was not discover-able at the time it arose the plaintiff may sue within three years from the date of which it could have been discovered. Unfortunately, it appears that this section does not apply where the plaintiff is suing in contract alleging that the defendant has been in breach of the contractual obligation to act with reasonable care. The applicability of particular sections and articles of the limitation Act ought to be determined by the character of the thing sued for, and not by the status, race, character or religion of the parties. In this context, the nature of the suit and the relief claimed are important.

Calcutta High court held that for breach of a contract, the limitation is 3 years, although the breach occurred in consequence of a wrongful act to which a shorter period of limitation is applicable. A claim for damages is a claim to recover money and falls under Article 97 of the Limitation Act. Where the original sum is recoverable under a registered contract, Article 120 is applicable. For breach of a condition of payment stipulated in a bond, a suit for compensation must be brought within six years under Article 116 of Limitation Act, 1908. A claim for damages under a continuing breach is not barred by section 115 of Limitation Act, 1908. A suit for damages for breach of contract not in writing and registered can be filed within three years from the breach. What is reasonable time depends on the facts and the circumstances of each case. A suit for damages for breach of contract of marriage is governed by Art. 115, Limitation Act. The said Article prescribes a period of limitation of three years commencing from the date of the breach of contract and in the case of successive breaches, the limitation is to commence from the date of the last breach. A period of limitation cannot be extended by agreement. A suit filed beyond period of limitation is not maintainable.

Where plaintiff after dismissal of his claim for recovery of amount of damages by defendant instead of filing suit approached Wafaqi Mohtasib who accepting his claim and directed the defendant to pay amount to plaintiff. President of Pakistan, on appeal, set aside the order of Wafaqi Mohtasib. Thereafter the plaintiff filed a suit for damages and permanent injunction after about three years and ten months from dismissal of his claim by defendants, and claimed that period spent in proceeding before Wafaqi Mohtasib should have been excluded. It was held that period consumed during that proceedings before Wafaqi Mohtasib or before President of Pakistan could not be excluded as provided under s. 14 of Limitation Act, 1908, because proceedings before Wafaqi Mohtasib and President of Pakistan did not constitute civil proceedings. In absence of any legal disability of plaintiff for not bringing suit within time, suit was dismissed being barred by time. To a suit for damages for breach of an express covenant of indemnity in a sale-deed, the article applicable is Art. 116 read with Art. 83 of the Limitation Act, 1908 and the limitation will run from the date of disturbance. Time for bringing a suit for damages is not extended by the repudiation of liability by the carrier. In a case of breach of contract of sale, the cause of action arises from the breach of contract and this happened when the defendants failed to pay and take delivery of the goods.

The ascertainment of the actual amount of damages from the re-sale does not give a fresh start to limitation. Ascertainment of sale damages must be distinguished from the breach of contract and it is the latter which provides the cause of action. Therefore a claim for loss sustained by a party ought to be instituted within three years of the date of the breach of the contract, and it is no defence to urge that it was only the occasion of re-sale which enabled the defendant-firm to ascertain exactly the decree of damages, or the precise amount which could represent the injury suffered by them. In case of non-performance of a contract the suit for refund of the advance comes straight within the purview of Art. 116 of the Limitation Act, 1908. Suits based on different causes of action are governed by different periods of limitation. If the satisfaction or the discharge of the cause of action is nullified by subsequent events, the plaintiff will be entitled to a fresh cause of action consequent on such nullification, and a fresh period of limitation in respect of such cause of action will accrue. If the parties have entered into a new agreement, the cause of action would be determined by the terms of that new agreement.

In the case of a continuing breach of contract, a fresh period of limitation begins to run at every moment of the time during which the breach continues. Its object is to prevent multiplicity of suits and to enable one action to be brought for all loss suffered during the whole period the breach continued. The person damnified is not obliged to bring successive suits for damages but can wait and bring an action once for all at the end of the term when there is no possibility of future performances of the breach. A breach of a covenant for quiet possession is a continuing breach, and a suit on such breach would not be barred so long as the breach continues. A breach of a covenant to repair is a continuing breach, because the covenant is broken every day the premises are out of repair. A lease allowing rooms to be used contrary to a covenant, when he might have prevented such user, commits a continuing breach of contract. The building of a house on his holding by a tenant contrary to the terms of his tenancy is a continuing breach. Limitation, therefore, does not run against the landlord from the moment the first operation of the building is commenced, but commences definitely when it is finally erected. Where Contrary to the terms of an agreement, the defendant built his otla so as to cover up a gutter, it was held that the continuance of the otla was a continuing breach of contract.

Where the directors of a company misapplied and misappropriated the company's funds in ultra vires transactions and speculations, there was a breach of contract by the directors which continued up to their date of the annual meeting when the balance-sheet showing the loss ascertained was laid before the company, and the period of limitation for a suit against the directors ran from the date of the annual meeting. The section refers to cases of continuing breach of contract, and not to cases of successive breaches of contract. Thus, where the purchasers of certain land agreed to pay the vendors certain fees annually in respect of such land and agreed that in default of payment the vendors should be entitled to the proprietary possession of certain portion of the said land, a suit by the vendors for possession of such portion upon default of the payment of the fees by the purchasers must be brought within 12 years(Art.143) from the date of the first default, because the obligations created by the agreement was not of a continuing nature, but was of a recurring kind and could admit only of a series of successive breaches. Supreme Court of Pakistan held that it is not objectionable in Islam if a period of limitation is prescribed to seek remedy or to adjudicate disputes in a Court of law. The concept of law is only this that the authority created or appointed for helping a claimant in such a situation will not help if the claimant knowing the position of law does not ask for it within the prescribed period.

(c) Disabilities suspending operation of limitation

If on the date on which the cause of action accrued the person to whom it accrued was under a disability, the action may be brought within six years from the date when he ceased to be under the disability or dies. In English law a person under disability such as infant or of unsound mind may sue despite the disability, but is not prejudiced if he fails to do so, as the statute suspends the operation of limitation, notwithstanding that the period of limitation from the accrual of the cause of action has expired. This enlargement of time does not apply when the disability supervenes after the right of action has already accrued, or where the same person is afflicted by successive disabilities (e.g. minority followed by insanity) separated by an interval in which he is under no disability. Further, no extension is allowed when the right of action first accrues to a person not under a disability through whom the person under a disability claims.

The disabilities envisaged by the Act are minority and unsoundness of the mind. The rights of infants are much favoured in law, and regularly their laches shall not be prejudicial to them, upon a presumption that they understand not heir right and that they are not capable of taking notice of the rules of law so as to be able to apply them to their advantage. Hence, by the common law, infants were not bound for want of claim and entry within a year and a day, nor are they bound by a fine and five years non claim, nor by statutes of limitation, provided they prosecute their right within the time allowed by the statute after the impediment is removed. The general principle of law is that time does not run against a minor. In computing the period of limitation for a minor, the date on which he attains majority must be excluded from calculation. If a litigant claims the benefit of an exceptional rule, it is clearly his duty to do so expressly and to establish his claim. If the question of minority is not raised by him or on his behalf the Court is not bound to consider it ex proprio motu as it is not sufficient to throw upon the Court the duty of protecting his interests by raising a point of this kind on his behalf.

The omission on the part of the Court to consider the question of minority of the petitioner does not amount to a failure to exercise jurisdiction so as to invoke the Revisional power of the High Court under sec. 115, C.P. Code. Where the cause of action accrues not only against the minor but also against his adult brother and mother, the cause of action does not cease on account of the disability of one of the parties and the minor can not get the benefit of s.6 of the Limitation Act, 1908.

It is also settled law in Pakistan that when one of the persons is entitled to institute the suit is competent to give discharge without the concurrence of the other, then time will run against both minor and adult. Medical evidence is not of any help to prove the age of the minor for the purpose of limitation, because it is based on conjectures only, and cannot give the precise age either precision. In cases where the limitation is pleaded in defence, a difference of even a single day decides the fate of the case one way or the other, and no doctor, however competent he may be, can give the precise age of a person so as to determine the exact age of his birth.

Plaintiff or applicant labouring under the disability is not bound to wait till the disability ceases as he has the option either to take proceedings through his guardian or next friend, or to wait until the expiration of the period of his minority. When insanity is once proved to have existed, it is presumed to continue until it is proved ceased. A very strict burden of proof lies on the party who alleges recovery from insanity. A lucid interval is a temporary cessation of lunacy and it cannot be treated as a recovery unless it is of sufficient length of time to enable the person to do an intended rational act.

Where several disabilities co-exist concurrently in the plaintiff, the time does not commence to run against him till all have ceased. If the plaintiff is under one disability at the time the action accrues, and afterwards (while the first disability continues) he comes under another disability the time will not commence to run till the last of the disabilities has ceased. Where the same person is affected by successive disabilities, as where a plaintiff who is an infant at the accrual of the cause of action later becomes insane, the further extension of time depends upon the interval between the disabilities. Successive disabilities, unless they are separated by an interval, exclude the operation of the statute. If the plaintiff is an infant when his cause of action accrues but becomes insane before he reaches his majority, time does not begin to run until the insanity is determined but if he is insane at eighteen, time begins to run against him and is not stopped by his later insanity, however soon it may occur. If the disability continues up to the death of the minor, his legal representative is entitled to bring a suit within the same period after his death as would otherwise have been allowed from the time so prescribed. An extension in favour of one person may be tacked on to an extension in favour of a second person where the first person dies while still under a disability and the second person is his legal representative who is also a minor at the time of the first person's death.

Supreme court of Pakistan held that s.6 of Limitation Act, 1908 is limited only to suits and applications for execution of decrees. It does not operate in favour of an appellant under disability. But infancy may under certain circumstances, enlarge time for appeal. Parties by their agreement cannot add any additional reason or ground for extending period of limitation. Provisions of S. 6 of the Limitation Act, 1908 gives minor additional time but it does not mean that the minor is prevented from instituting proper proceedings before he attains majority through next friend.

(d) Continuous running of time

Where once time has begun to run, no subsequent disability or inability to sue stops it. According to English law, time once it has commenced to run in any case will not cease to do so by reason of any subsequent event. Generally when any of the statutes of limitation have begun to run, no subsequent disability will stop this running. Disability is want of legal qualification to act and inability is want of physical power to act. For the purpose of limitation, a disability is the state of being a minor, insane or an idiot; whereas illness, poverty etc., are instances of inability. When the limitation has begun to run, no subsequent disability will stop this running. When the time has once begun to run, it will continue to do so even should subsequent events occur which render it an impossibility that an action should be brought. Parties to a contract may agree to postpone the accrual of any rights under it, but they cannot postpone the period of limitation in case a suit should have to be filed for its breach. Therefore, where the period had commenced to run, a reference to arbitration would not prevent the operation of the law of limitation, and the period between the date of agreement to refer to arbitration and the date when the arbitration proceedings terminated should not be excluded from computation.

Supreme Court of Pakistan held that once limitation has begun to run the period can only be extended in the manner laid down in the Limitation Act,1908 and not by mere agreement of the parties which does not come within the Limitation Act. Limitation having once commenced to run in the lifetime of a full owner cannot be taken to be suspended if he dies and is succeeded by a limited owner. Time runs when the cause of action accrues when there is in existence a person who can sue and another who can be sued, and when all the facts have happened which are material to be proved to succeed.

The cause of action arises when and only when the aggrieved party has the right to apply to the proper tribunals for relief. It is only when the cause of action is complete that the bar of time begins to run. If a previous demand is required before the complete right to sue arises, the time will only begin to run from the date of demand. Therefore, if the plaintiff commences his action before his right of action is complete, he must inevitably fail in the action, even though he should be able to acquire and actually acquire the outstanding right during the currency of the action. Whenever proceedings are being conducted between the parties bona fide in order to have their mutual rights and obligations in respect of a matter finally settled, the cause of action for an application or for a suit, the relief claimable wherein follows naturally on the result of such proceedings, should be held to arise only on the date when those proceedings finally settle such rights and liabilities.

A decree holder after making several applications for execution of a decree, each of which was within time died. His minor son made an application for execution of the decree within three years after his father's death but more than three years after the date of the deceased father's last application. It was held that the minor's application for execution was time barred, it being a case not of initial but of subsequent disability. There is no distinction between voluntary and involuntary disabilities. As the rule stands, it appears to apply strictly to every case of subsequent disability or inability excepting those cases that may be specially exempted from the operation of this rule. Even circumstances beyond the control of the plaintiff have been held not to relax the rigour of the rule in favour of the plaintiff.

Lord Kenyon observed that it was mischievous to make any refined distinction between voluntary and involuntary disabilities. Ordinarily, time begins to run from the earliest time at which an action can be brought and if the right has been suspended, there may be a revival of the right to sue when a previous satisfaction of the claim is nullified with the result that the right to sue which had been suspended is re-animated. A debtor agreed to convey certain property to his creditor and to set off the debt against part of the consideration for the conveyance. A sale-deed was executed in accordance with the contract. Litigation was commenced by the debtor to enforce the agreement, but he was unsuccessful. The creditor then sued to recover the debt and was met with the plea of limitation.

The judicial Committee held that the time began to run only when the agreement wholly ineffectual and that from that date a fresh obligation was imposed upon the debtor to pay his debt. Certain disputes between a principal and an agent were referred to arbitration, and under the award thereon certain moneys were paid by the agent in satisfaction of the claim. The agent afterwards sued to set aside the proceedings on the ground that they were brought about by coercion, and succeeded in getting back the amount paid. The principal subsequently sued the agent to enforce the original liability to account. The defendant pleaded inter alia that the suit was barred. Held, that the setting aside of the satisfaction in the former proceedings gave rise to a fresh cause of action and that the suit was therefore in time.

The Limitation Act,1908 is undoubtedly an exhaustive Code governing the law of limitation. The cases in which the running of limitation can be suspended are contained in the sections of the Act. It would be dangerous to lay down generally that there is some principle outside the Limitation Act under which limitation can be suspended. If period of limitation starts running from the very lifetime of the predecessor-in-interest of the minor, no subsequent event or disability can stop its running, the minority of the successor-in-interest cannot save suit being hit by limitation which had got started in the lifetime of predecessor-in-interest of the minor. Minority or lunacy would not prevent limitation running as against the minor or lunatic. it simply gives to the minor or lunatic an extended period for filing a suit or application. It is the duty of the person claiming disqualification to bring the suit within three years of the time the disqualification ceases. A person deriving his right to sue from the person under disability is not entitled to claim the extended period that would have apply to a suit by a person under disability himself.

(e) Effect of fraud and concealment

As a general rule, the fact that the plaintiff fails to discover the existence of his cause of action until the expiration of the statutory period, does not prevent the operation of the statute. This rule, however, works a hardship where his ignorance has been caused by the fraud of the defendant. The plaintiff may be the victim of fraud in two respects. Firstly, his action may be based upon the fraud of the defendant. In these circumstances an action of deceit is available to him, but he may remain ignorant of the fact until time has run against him. Secondly, his cause of action, whatever its nature, may have been fraudulently concealed by the defendant, as by the deliberate destruction of the evidence. Common law and equity took different views on these situations. In both these cases equity took the view that time did not begin to run against the plaintiff until he had discovered or ought to have discovered the fraud. At common law, on the other hand, the defendant's fraud did not prevent time from running.

After the Judicature Act 1873, the equitable doctrine prevailed when the cause of action had been fraudulently concealed, but it remained doubtful whether it applied to a common law action of deceit when the plaintiff was ignorant of the deceit. A similar difficulty existed prior to the statute in the case of money paid or property transferred under a mistake of fact. If the plaintiff claimed purely equitable relief, time did not begin to run against plaintiff until he had discovered or ought to have discovered the mistake, but in an action at common law time began to run from the payment or transfer. The Act of 1932, however removed these difficulties and simplified the law by extending the equitable principles to all actions to which the statutory periods apply. Where in the case of any action for which a period of limitation is prescribed by this Act, either (a) the action is based upon the fraud of the defendant (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant or (c) the action is for relief from the

consequences of a mistake; the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake as the case may be or could with reasonable diligence have discovered it. In this connection, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty. But nothing herein mentioned shall be construed to enable to recover the property or its value or to enforce any charge against, or set aside any transaction affecting any property to be brought against the innocent purchaser of the property for valuable consideration or any person claiming through him in any case since the fraud or concealment or as the case may be, the transaction in which the mistake was made took place. Purchaser in this regard is an innocent third party in the case of fraud or concealment of any fact relevant to the plaintiff's right of action, if he was not a party to the fraud or concealment of that fact and did no know or have reason to believe at the time of the purchase that the mistake had been made. Thus by contract made in February 1957, the defendant agreed to build two houses for the plaintiffs and to support them on a raft foundation reinforced with a steel network of a specified type. He employed a Mr. Piper, an independent contractor, to do the work. The plaintiffs went into occupation of the houses when they were completed towards the end of 1957. In 1965, it was observed that, owing to the defective manner in which the foundation had been constructed, the houses were irreparable and unsafe for habitation. There was no raft, the reinforcement was grossly inferior to that specified and wide cracks appeared beneath the houses. The plaintiffs claimed

damages for breach of contract. Despite the fact that their action was brought more than six years after the breach of contract they succeeded on the ground that there had been concealment within the meaning of section 26 of the Limitation Act, 1939. The builder put in rubbishy foundations and then covered them up. Reasonable diligence meant the doing of that which an ordinarily prudent purchaser would do having regard to all the circumstances, including the circumstances of the purchase. If a builder fails to disclose the deliberate breach by him of a building contract by using defective bricks or if the vendors of a house knowingly fail to warn the purchaser of the risk of subsidence, when they are aware that the house has been built on a disused rubbish tip, the running of the limitation period will be postponed until such time as the plaintiff discovers the concealment or could with reasonable diligence discover it.

The principle is that the right of a party defrauded cannot be affected by lapse of time or by anything else done or omitted to be done by him, without any fault of his own, in ignorance of the fraud which has been committed. Mere non-disclosure of a transaction does not amount to fraud. It means active deceit in defrauding or endeavouring to defraud a person of his rights by artful device or concealment of facts. A mere misstatement of the value of the property in the sale transaction is not necessarily a fraudulent act. But a wilful misstatement by a decree-holder in the sale proclamation of the value of the property may be sufficient evidence, in particular cases, to justify an inference of fraud. The fraud contemplated is the fraud committed by the party against whom a right is sought to be enforced as the fraud of the defendant or some person through whom he derives his title. It does not mean the fraud of a third person. If it is alleged that the fraud was committed by the servant or agent of the defendant, it must be shown that it was committed for the general or special benefit of the principal and not for the private purposes of the servant or agent. it must be shown that it was committed by the servant or agent of the defendant.

Thus in an application to set aside a sale on the ground of fraud, the applicant will have to prove that his right to set aside the sale has been kept concealed from his knowledge by the fraud of the decree-holder or an auction-purchaser; it is not enough for him to show that the execution-proceedings were irregular and fraudulent. If it is proved that the plaintiff was fully aware of his right, in spite of the fraud practised upon him, he is not entitled to benefit of s. 18 of the Limitation Act, 1908, inasmuch as he was not kept from the knowledge of his right. Fraud must be proved as laid. When one kind of fraud has been charged, another kind of fraud cannot on failure of proof, be substituted for it. If a suit is on the face of it time-barred, O.VII, r.6, C.P. Code requires that that the plaint shall show the ground on which exemption from the law of limitation is claimed. Therefore, if the plaintiff claims exemption on the ground of fraud on the part of the defendant, he must prove the fraud. The Court will not presume fraud from the mere existence of the suspicious circumstances. Where fraud is charged against the defendant, it is an acknowledged rule of pleadings that the plaintiff must set forth the particulars of the fraud which he alleges; general allegations, however strong may be the words in which they are stated, are insufficient to an averment of fraud. It is also essential rule that the findings of the Court ought to be precise as to the particular acts and intentions constituting the fraud.

It is sufficient, if the facts stated in the plaint suggest fraud on the part of the defendant and mere omission in the plaint to expressly stigmatize the defendant conduct as 'fraudulent will be immaterial. When once fraud has been established by the plaintiff, or where the circumstances are such that fraud may be presumed, the burden is on the defendant who sets up limitation to show that the plaintiff had clear knowledge of the facts constituting the fraud at the time which is too remote to allow him to bring the suit. Every document may be said to be necessary, but a limit should be placed on the meaning of the term, and a document which is merely useful in evidence cannot be considered a necessary document. The fact that a document which is alleged to have been fraudulently concealed has been registered would seem to displace the allegation of concealment. So also does the production of the document before a public officer or in a Court in support of a claim. In the case of a suit or application, limitation runs from the date when the fraud becomes known to the plaintiff or applicant, In England, however, statute runs from the date of discovery of the fraud but from the date when the plaintiff would have discovered it, if he had due diligence. Plaintiff must allege when the fraud pleaded came to his knowledge.

Requisite knowledge is not mere suspicion. It must be knowledge of such a character as will enable the person defrauded to seek his remedy in Court. Hearsay knowledge is not the kind of knowledge contemplated by s. 18 of the Limitation Act, 1908. Such knowledge must be a clear and definite knowledge of the facts constituting the particular fraud. The mere fact that some hints and clues reached the injured party which perhaps, if vigorously and accurately followed up, might have led to a complete knowledge of the fraud, is not enough to constitute clear and definite knowledge of it. In suits for money misappropriated by an agent employed for the collection of rents, where fraudulent accounts have been rendered by agent, the Court having regard to the nature of the fraud, the facility which it may be known, and the likelihood of the attention being called to it, may infer such knowledge and may infer the time when the means of knowledge first came within the plaintiff's reach, or in other words, may hold the plaintiffs fixed with constructive knowledge of the fraud.

Calcutta High Court enunciated that under s. 18 of the Limitation Act, 1908, the extended time can be claimed only against a person guilty of the fraud and against a person accessory thereto and against a person who claims through a person who committed the fraud. But it cannot be claimed against an innocent third party against whom ordinary limitation would apply where the plaintiff alleges fraud and states that he acquired knowledge on a particular date, in ordinary cases the initial burden would be on him to lead evidence establishing the date of his knowledge ; but if notwithstanding the fact that the plaintiff did in most specific terms allege in his suit the date and the circumstances in which he acquired knowledge for the first time, the defendant's pleadings are evasive and do not raise specifically an issue as to the date of the plaintiff's acquisition of knowledge, the burden of proving the date is not on the plaintiff.

Supreme Court of India held that if the facts are proved and found as established are sufficient to make a case of fraud notwithstanding non-raising of plea of fraud before the lower courts or in the grounds of appeal, is not serious and it is only a question of law and such a question can be raised at any stage of the case and also in the final court of appeal. Calcutta High court held that where a remedy is given on the ground of fraud, the right of the party defrauded is not affected by the lapse of time so long as he remains in ignorance of the fraud. Fraud committed after limitation has begun to run cannot stop limitation. If the respondents were guilty of fraud then the time limit for instituting the suit shall be computed from the time when the fraud first become known to the person injuriously affected thereby.

Where allegation of misrepresentation, fraud and undue influence are specifically pleaded and the document impugned is in the knowledge of the plaintiffs, the suit will be governed by Article 91, Limitation Act. It is not easy to unearth a fraud because a person who embarks upon such an exercise usually defaces all traces leading to the deceitful act. Law does not provide a particular quantum of evidence for establishing a fraud. It is for the Court called upon to decide such an issue to be satisfied by the material brought before it, as to the practising of the fraud, on it on one of the litigatng parties by the other. Fraud if proved, vitiates the most solemn proceedings and transactions. No time limit for challenging fraudulent transaction deliberately kept away from affectee.

Supreme Court of Pakistan held that it cannot be expected that a person should come to Court to get relief against an order of the existence of which he had no knowledge. Question of fraud is always open to scrutiny by competent Court and no fraudulent transaction can be given protection due to bar of limitation. Where the allegation of fraud is made, the party concerned has to take remedial steps on acquiring the knowledge. Otherwise, the law of limitation if it is left at the will and whim of party to approach the Court at any time would be rendered nugatory and redundant. Contention of the party that High Court should exercise inherent power in view of the fraud having been committed not accepted. Before time can run against the person who has proved fraud relating to a sale of his property, it must be proved that the judgment debtor had knowledge not merely of the fact of the sale, but clear and definite knowledge of the fact that which constituted the fraud. Supreme Court of Pakistan held that plea of Collusion, surreptitiousness and concealment can be taken as pleading of fraud.

(f) Acknowledgement & its effect

Acknowledgement is admission by the writer, that there is a debt owed by him. In the particular case of a claim to a debt or other liquidated sum, it has long been recognised that time which has started to run against the creditor may be stopped and made to start afresh by an acknowledgement of liability, or by a part payment made by the debtor. Where any right of action has accrued to recover any debt or other liquidated pecuniary claim and the person liable or accountable therefore acknowledges the claim or makes any payment thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgement or the last date. Such an acknowledgement does not create a new cause of action. The nature of the right is not changed. In the specific circumstances of an acknowledgement or payment the right shall be given a notional birthday and that day, like the phoenix of fable, it rises again in renewed youth and also like the phoenix it is still itself.

The acknowledgement must be in writing and must be signed by the person making it. It must admit the legally liability to pay the sum claimed by the creditor. So a statement by the debtor that he only owes a smaller sum because he has a set-off is only an acknowledgement as to that smaller sum. A latter payment by the debtor of that sum would not be a part payment. Once, the limitation period has expired, the right of action cannot subsequently be revived. An acknowledgement or a payment may be made by the agent or the person liable, and it must be made to the person, or to the agent of the person, who is the claimant of the debt. The Privy Council has suggested that an acknowledgement is not effective unless it is an admission of a present debt subsisting at the date of signature and that it is not enough to admit that the debt existed in the past. On this basis, the entry of a debt in the annual balance sheet of a company does not operate as an acknowledgement, since it is usually completed some considerable time before it is signed at the annual general meeting. More recently this suggestion was rejected. But only if the creditor can show that he has received copies of the balance sheet. Provided that the present existence of the debt is admitted, the precise amount of what is due need not be stated. It is sufficient if this is ascertainable by extrinsic evidence.

The effect of an acknowledgement or a part payment by one of a number of persons liable for a liquidated debt is determined by the statute. An acknowledgement binds the persons acknowledging and his successors only, not his co-debtors; but a part payment binds all the Co-debtors. An acknowledgement is not effective unless it relates to a debt or other liquidated sum. Thus if A is entitled to recover unliquidated damages for breach of a contract by B, an acknowledgement by B of his liability does not revive the cause of action. If the statutory period expires before action is brought, the plaintiff's right is not extinguished. He is merely deprived of his two remedies of action and set-off. The statute is procedural not substantive. If, therefore, a debtor pays a statute barred debt, he cannot recover the money as money not due. A statute-barred debt is still payable despite the fact that its payment cannot be enforced by action, and if there is any other method by which the creditor can obtain satisfaction it is at his disposal. Thus if a debtor pays money on account of debts, some of which are statute-barred and some not, and does not expressly indicate that the payment is made in respect of those which are actionable, the creditor may appropriate the money to those that are statute-barred. Again if a party is entitled to lien on goods for a general balance, and he gets possession of the goods of his debtor, he may hold them until his whole demand is satisfied notwithstanding that it is barred by the Limitation Act. An acknowledgement to be valid must relate to the time when the time when the right was still enforceable.

If a claim is barred the fact that there was an acknowledgement of liability later on will not resuscitate a barred claim because under the law an acknowledgement can be only of a subsisting liability. Where a new series of acknowledgement have been made, each within a new period arising from the previous acknowledgement and the first is within three years of the date of the debt, the debt is kept alive. There should be promise in writing to pay the time-barred debt, as the promise to pay should be express, and that an implied promise to pay will not be sufficient. The onus lies on the creditor to prove that the acknowledgement was made within time. An acknowledgement does not create any new right of action but only enlarges the time and has the effect of making a new period run from the date of acknowledgement. It does not operate as a new contract but only helps to keep alive the original cause of action.

If the original debt cannot be proved, or if there is no evidence to show whether the original debt was subsisting at the time when the acknowledgement was made, the acknowledgement would be of no avail, in the absence of an express promise to pay. Document said to constitute an acknowledgement has to be construed in the context in which it is given and where its language is not clear in itself, the context may be examined to see what it is to which the words refer. Where after examining in the light of the context what it was that the person giving the acknowledgement was actually referring to, the conclusion follows that it is an unequivocal acknowledgement of the right, then that acknowledgement is sufficient. Acknowledgement means a definite admission of liability; it is not necessary that there should be a promise to pay as the simple admission of a debt is sufficient.

If the right claimed is a debt, it is necessary that an unequivocal and unqualified admission of the debt or of the subsisting relationship of the debtor and creditor should be established, but a promise to pay need not be made out. In this respect Indian law differs from the English law. In England, an acknowledgement of a claim can keep it alive if the acknowledgement amounts to a promise to pay. So the requirements of English law are more stringent. An acknowledgement is not limited in respect of a debt only, it may be in respect of any property or right which is the subject-matter of the suit. The endorsement on a promissory note that out of the amount due under the promissory note Rs. 1,000 was paid this day (signature of debtor) amounts to an acknowledgement of liability. The reason is that such payment towards promissory notes implies that something more remains to be paid. Where the defendant admitted the existence of running account between the parties and went to say that his representative would compare accounts and pay what was found to be due, held that the words were a clear admission of liability. Where there was a reference to arbitration and the arbitrators gave an award, the agreement to refer the matter in dispute to arbitration and the award thereon would amount to an acknowledgement of the debt. The acknowledgement of liability must be an absolutely unconditional one. Even if the acknowledgement be a conditional one, the condition must be fulfilled in order that such acknowledgement should save limitation.

There is no necessity of a specific and direct acknowledgement of the particular liability which is sought to be enforced in the suit. It is not required that an acknowledgement should specify every legal thing acknowledged. A simple acknowledgement by one of two joint-debtors that the original debt was a joint debt is sufficient to keep alive the right of the other to claim contribution. The plaintiff shipped 200 cases of oil on the defendant's steamship from Bombay to Jeddah. On arrival of the steamship at Jeddah, 35 of the cases were missing and the agents of the defendant company at Jeddah granted a certificate that the 35 cases had been short delivered. Held, that the certificate contained a clear acknowledgement that the 35 cases which ought to have been delivered; and from that followed the legal incident of the defendant's position to pay compensation in respect of non-delivery.

It is not necessary that the acknowledgement of liability must be made to the person who is entitled to right in respect of which the liability arises, or to any one through whom he claims. An acknowledgement to, whomsoever made, is a valid acknowledgement if it points with reasonable certainty to the liability under dispute. A deposition given and signed by a party as a witness in a suit is a sufficient acknowledgement in writing. An admission of liability contained in a deed of gift executed by the debtor in favour of his son is a valid acknowledgement. Where before a debt became barred by limitation the creditor granted an extension of time on the written application of the debtor praying for an extension, the written application amounted to an acknowledgement. An acknowledgement which is valid in other respects cannot be inoperative simply because it contains a wrong date in respect of the debt. In a suit upon a joint and several bond brought against the defendant as a principal debtor, an acknowledgement of liability made by him as surety only is sufficient to save limitation.

An acknowledgement made by a person under legal disability as an acknowledgement by a minor is not valid. An unstamped acknowledgement cannot be given in evidence for any purpose including the purpose of saving limitation. An unregistered document, registration of which is compulsory, can be used for the collateral purpose of proving acknowledgement of liability for the purpose of extending time under sec. 19 of the Limitation Act and also in order to establish part-payment of the amount due. The acknowledgement of a debt does not alter the quality of the debt and does not create a new debt.

Thus, the acknowledgement does not entitle the creditor to claim interest at a higher rate than that which was prevailing up to the date of the acknowledgement. But an acknowledgement of liability made by one of the heirs of the debtor can be used only against the person acknowledging and not against all the heirs of the debtor. An acknowledgement of a part of a debt will keep it alive only to that extent. If an acknowledgement is made in favour of a minor, the new period of limitation is to be computed from the date when the plaintiff attains majority. An acknowledgement is sufficient, even if it is accompanied by a refusal to pay. A manager who has got general authority to purchase and pay for all things required for the use of his principal, can, without any special authority, give a note promising payment of the price of goods to the suppliers of the goods; and the note is a sufficient acknowledgement of liability made by an agent duly authorized. The test for determining the effect of acknowledgement by a third person in each case be whether the person who keeps alive the debt had express or implied authority to act on behalf of those against whom limitation is sought to be asserted. The authorization need not be in writing. Where a receipt acknowledges not only the consideration of the promissory note of even date but further acknowledges that an earlier promissory note of even date but further acknowledges that an earlier promissory note in respect of the liability under which the new pro note is executed, it must be taken to have the effect of acknowledging the liability under the earlier loan.

In construing the effect of an acknowledgement or part payment, the law in force on the date of the suit has been has to be looked into and not the law on the date on which the acknowledgement was made. Right to sue becoming barred under the previous enactment at the time of the new Act coming into force, the latter Act cannot revive the right. If there is an admission of facts of which the liability in question is a necessary consequences there would be acknowledgement. Each time a liability is admitted directly or indirectly, expressly or impliedly, overtly or implicitly same will have the effect of giving a fresh period of limitation in respect of the liabilities so admitted. An acknowledgement, like any other document, should be construed according to the intention of the parties but this intention is the intention as revealed by the language of the body of the deed. Debt acknowledged before expiry of limitation, fresh period shall be computed from time when such acknowledgement has been made. Defendant admitting his liability to pay rent in his written statement but section 19 of the Limitation Act, 1908 does not extend the period of limitation where the acknowledgement is made after the expiry of the period prescribed for instituting a suit for the recovery of rent.

(g) delay & laches

It is expressly enacted that the statutory provisions shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief. The object of this section is to preserve those principles applicable to claim for relief that, prior to the Judicature Act, 1873, could be entertained only by Courts of equity. The attitude of equity with regard to Statutes of Limitation and to a failure to pursue a remedy with expedition may,

so far as contracts are concerned, be summarised in two propositions. First, in the case of equitable claims that formerly fell within its concurrent jurisdiction, equity acts on the analogy of the current Limitation Act, 1980.

Where the remedy in equity is correspondent to the remedy at law, and the latter is subject to a limitation in point of time by the Statute of Limitations, a Court of equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation. Where the suit in equity corresponds with an action at law which is included in the words of the statute, a court of equity adopts the enactment of the statute as its own rule of procedure and by doing so Court of equity acts by analogy to the statute of Limitation. Hence, the Limitation Act, 1980, after enacting that its provisions shall not apply to a claim for equitable relief, except in so far as any provision thereof may be applied by the court by analogy.

Any proceedings in equity to recover a simple contract debt are subject to this doctrine of analogy. Thus an action brought in the Chancery Division by one cestui que trust to recover money paid by the trustee to the latter under a mistake of fact is in the nature of a common law action for money had and received, and, by analogy to the Limitation Act, the claim will be barred after the lapse of six years. The situations to which the statute will be applied by analogy are relatively few, but the right to a final injunction will not be barred so long as the substantive legal right which it seeks to protect has not become barred.211 The second proposition is that in exercise of its exclusive jurisdiction as in the case of purely equitable claims, equity in accordance with the maxim vigilantibuset non dormientibus lex succurit, refuses to grant relief to stale claims. A plaintiff who has been dilatory in the prosecution of his equitable claims and has been acquiesced in the wrong done to him is said to be guilty of laches and is barred from relief, although his claim is not affected by any statute of limitation. No exact rule can be laid down as to when laches will or will not bar a claim. It is a question that depends in each case upon the degree of diligence that might reasonably have been expected from the plaintiff, but the two important factors to be considered are acquiescence on the part of the plaintiff and the length of delay.

Doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be technically unjust to give a remedy, either because the party has by his conduct done that which might fairly be regarded as an equivalent to a waiver of it, or where by his conduct and neglect he has, though not waiving that remedy, put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material. But if delay not amounting to bar by any statute of limitation, will not prevent relief which otherwise would be just, and the validity of that defence must be tried upon principles substantially equitable. Significant circumstances in this regard are the length of delay and the nature of the acts done during the interval.

Those who seek specific performance of contracts must be usually vigilant and active in asserting their rights, especially when the contract is one where the subject matter of the contract is one that fluctuates in value from day to day. Thus defendants agreed to raise and sell at a fixed price per ton to the plaintiff all the coal contained in a particular mine. After performing this contract in part the defendants refused to deliver any more coal, but instead sold it to other persons, and when objection was taken to their default they referred the plaintiffs to their solicitors. The plaintiffs waited for eleven months before filing a bill for specific performance. It was held that the delay which occurred after the plaintiffs had become aware of the breach of contract was a complete bar to their equitable claim. The doctrine of laches is preserved by the Limitation Act 1980 which provides that this Act shall not affect any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise. Delay may therefore bar equitable remedies such as claims for rescission, rectification, specific performance or for an interim or interlocutory injunction. The plaintiff must show himself to be ready, desirous, prompt and eager to assert his rights, and even a short lapse of time may, in certain circumstances, be fatal. Where suit was delayed till the last day and temporary injunction was applied for on the very day that the suit was instituted, it was held that this is in itself was a sufficient reason for refusing to issue the temporary injunction. But contrary view was enunciated by the Calcutta High Court that the delay in filing suit or application is no reason why the parties should not get temporary injunction. A person who has not shown due diligence in applying to the Court for relief, will, in general, be debarred from obtaining a mandatory injunction.

A mandatory injunction should only be granted to those whose conduct entitles them to the interference of a Court of equity. Delay will operate as a bar to the grant of relief only if it amounts to waiver or abandonment or acquiescence. A party seeking a mandatory injunction should apply promptly, but mere delay is not a bar if it can be satisfactorily accounted for, nor will a plaintiff be deemed to have acquiesced if, knowing that the defendant has a legal right to do a thing, he assumes that he is not going to use his right for an unlawful purpose. In order to justify the application of the principle of acquiescence, it must clearly appear that the party against whom acquiescence is alleged was aware of his rights, and by his conduct encouraged the other party to alter his condition, and that the latter acted upon the faith of the encouragement so held out. No hard and fast rule can be laid down as to the period within which a suit for injunction is to be filed and temporary injunction is prayed for. Each case is to be decided with reference to the facts and circumstances of the case.

Bar of limitation creates valuable and substantive right in favour of parties. Delay of each day is to be explained for condonation of delay. Whoever sleeps over his right is not entitled to relief beyond period of prescribed by law. Whenever legislature in its wisdom chooses not to prescribe a period of limitation, it implies that the legislature has deliberately and with conscious intention omitted to lay down any specific bar of limitation. In such a situation, laches or acquiescence may not be lightly inferred unless there is positive material on the record showing a conscious renunciation of his right by a plaintiff.

Mere disposal of a case or appeal on merits is not sufficient to lead to an inference that delay has been condoned. There must be something in the order or judgment itself to show that the court concerned was conscious of the fact that the proceedings were out of time and had applied its mind to the question of limitation before dealing with the case on merits. It is the duty of the court to notice the point of limitation even if such plea is not raised. 231 Court is bound to dismiss suit which is apparently time-barred. Courts, however, are not bound to dismiss, as time barred suit, which on the face of it is not beyond time. Where question of limitation is a question of law and need not be investigated, it can be raised even in second appeal or at revisional stage.

Supreme Court of Pakistan held that there is absolutely no justification to equate laches with statutory bar of limitation as the former operates as a bar in equity the latter operates as a legal bar to the grant of remedy. Thus, in the former, all the dictates of justice, equity and balance of legitimate rights are to be weighed; in the latter subject to statutory relaxation in this behalf, nothing is left to the discretion of the Court. It is harsh law. Passage of time per se brings the statute of limitation in operation, but the bar of laches does not deny the grant of right or slice the remedy unless the grant of relief, in addition to being delayed, must also perpetuate injustice to another party. It is also in this context that the condonation of delay under section 5 of the Limitation Act will be on different considerations than those in a case of laches.

It is not warranted to deny relief by way of interim injunction on the score of laches. A party cannot be non-suited for mere laches when period of limitation is yet to expire. The burden of proving that his suit is within time rests heavily on the plaintiff, which means that he must affirmatively prove that the cause of action arose within the prescribed period of limitation. In the case of a plaintiff who claims that at the time when the cause of action arose he was a minor and therefore competent to sue within three years of his becoming major it is necessary to state in unequivocal terms as to when the cause of action arose, when he became a major to come to court. All this requires that not only approximate but actual relevant dates should be given in the plaint and also proved by evidence. Medical evidence only gives approximate age. Unless it is supported by some other definite evidence it cannot be regarded as final. Duty cast upon Courts to see remedies are sought within prescribed time and never after limitation though, may appear to create hardship has got to be enforced.

Waiver of question of limitation is not permissible even where period of limitation is prescribed by a special or local law. Where question of limitation is a mixed question of law and fact, the same cannot be decided without giving opportunity to the parties to produce their respective evidence. The period of limitation for rescission of contract is 3 years.4 and the terminus a quo is the date of the knowledge of the facts entitling the plaintiffs to claim rescission.5


1 A.G. Guest, Anson’s Law of Contract, 26th edn., 1984, Oxford University press, p. 523.

2 Paul H. Richards, Law of Contract, Third edn., p. 322.

3 Cheshire, Fifoot and Furmston, The Law of Contract, 12th ed (1991), p. 636.

4 Limitation Act, IX of 1908, Schedule II, Article 114.

5 Sardar Muhammad Iqbal Khan Mokal, The Specific Relief Act, 1877, fourth ed. (1987), p.455.


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