Limitation Act is applicable to debt and after the expiry of the limitation period, debt will be time barred. But there are circumstances in which time barred debt will be active. A promise to pay time barred debt will make it active subject to certain conditions. Genuine parties who face temporary problem may give promise of paying time barred debt. As per section 25(3) of Indian Contract Act, 1872, such promise will make the time barred debt active and the creditor can claim the amount of debt subject to some conditions.
The promise must be written and should be signed by the promisor or his authorized agent and must contain the promise to pay the whole or part of the debt and the debt must of which the creditor might have enforced payment but for the law for the limits of suits. This gives scope for recover of the debt which is considered to be not recoverable.
Section 25(3) of Indian Contract Act, 1872 lays down an exception dealing with a promise to pay a time barred debt. As per this provision a promise to pay time barred debt is enforceable when the following conditions are satisfied.
The Promise must be in writing and signed by the promisor or by his agent generally or specially authorized in that behalf;
The promise must be to pay the whole or any part of the debt;
The debt must be such of which the creditor might have enforced payment but for the law for the limits of suits.
A time barred debt is a good consideration for a fresh promise to pay that debt. The term debt means an ascertained sum of money. A debt must subsist notwithstanding its recovery being barred by limitation. The debt must be otherwise recoverable but for the law for the limitation of suits. The promise to pay the time debt should be made by the debtor or his authorized agent. It must be in writing and signed. The promise may be to pay the whole or any part at their debt.
To invoke section 25(3), it is necessary that there must be an express promise in writing to pay the time-barred debt. Mere acknowledgement of debt will not be sufficient for the purpose of Section 25(3). An acknowledgement under the limitation act is required to be made before the explanation of the period of limitation but a promise under this section to pay debt may be made after the limitation period and it should be an express and not implied promise.
To calculate limitation period for any suit, the date of which such period is to be reckoned will also be excluded. The suit can be filed on the anniversary day also.
Limitation period in respect of different transactions and documents
For all bills of exchange or promissory note payable at sight the limitation period is 3 (Three) years from the date of presentation.
For all bills of exchange or promissory note payable at a fixed time after the date the limitation period is 3 (Three) years from the date of presentation.
For all loans payable in installments the limitation period is 3 years from the date on which the relative installment falls due.
For amount repayable by the mortgager on demand or installment repayments are agreed to the limitation period is 12 years from the date of mortgage.
For default of an installment or principal or interest of mortgage the limitation period is 12 years from the date of default.
In case of personal liability of the borrower the limitation period is 3 years from date of acknowledgement of debt or demand promissory note.
In other cases including where the lender has given a cheque the limitation period is 3 years from the time, the cheque is paid.
Person signing acknowledgement of debt must be authorised
The persons signing and an acknowledgement signed by one of the joint borrowers or partners do not bind the others unless it can be established by evidence that the person signing was authorised expressly or impliedly to sign.
Fresh Period of Limitation on making Part payment
Any payment made by the debtor before the expiry of the limitation period, either by himself or by his agent duly authorised on his behalf or in the handwriting of himself or such agent, fresh period of limitation starts from date of such part payment.
Absconding to avoid summons, Preventing Service of Summons, Non Attendance, Non Production of documents, false information, Refusing oath, answer, sign statement, False statement on oath False information - Section 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182 of IPC