In Shakti Bhog Food Industries Ltd. v. The Central Bank of India and Anr.[1], the Hon’ble Supreme Court has clarified as to when the three-year limitation period contemplated under Article 113[2] of the Limitation Act, 1963 (Act), commences. It has also reiterated the importance of considering the averments made in a plaint as a whole while determining an application for rejection of plaints under Order VII Rule 11[3] of the Code of Civil Procedure, 1908 (CPC).

Factual Background

The respondent (Respondent Bank) had extended a financial facility to one of its current account holders (Appellant), with effect from April 1, 1997, until October 2007. However, in July 2000, the Appellant realised that the Respondent Bank had been unilaterally and arbitrarily charging interest/ commission at the rate of Rs. 4 per thousand rupees on local cheques and drafts in violation of the assurance given earlier. Upon noticing this discrepancy, the Appellant addressed a letter to the Respondent Bank, inter alia expressing his grievance regarding such overcharged interest/ commission. On receiving the said letter, the Respondent Bank revised the interest/ commission as per the assurance given earlier, but failed to refund the overcharged amount. Thereafter, the Appellant addressed numerous correspondences to various officials of the Respondent Bank, seeking clarification regarding inflated interest/ commission that was charged earlier and refund of the same. In response to the Appellant’s letters, the Assistant General Manager of the Regional Office of the Respondent Bank addressed a letter dated July 9, 2001, to the Appellant, informing him that the matter was being examined. Thereafter, the Senior Manager of the Respondent Bank vide letter dated May 8, 2002, informed the Appellant that “the cheques were being purchased at the prevailing rates”. Subsequently, the Senior Manager vide letter dated September 19, 2002, informed the Appellant that “everything was being done in accordance with rules” and that the matter need not be pursued any further. The Appellant continued to correspond with the Respondent Bank, inter alia requesting them to provide a clarification and refund the excess amount charged by them. Ultimately, the Appellant issued a legal notice on November 28, 2003, to the Respondent Bank (Legal Notice). The Respondent Bank responded to the said Legal Notice vide its Advocate’s letter dated December 23, 2003 (Response Letter). The Appellant issued a subsequent legal notice to the Respondent Bank on January 7, 2005 (Follow-up Legal Notice).

Thereafter, the Appellant filed a suit before the Trial Court inter alia seeking (i) rendition of true and correct accounts in respect of the interest/ commission charged by the Respondent Bank and (ii) repayment of the excess money charged along with interest.

The suit was rejected by the Trial Court under Order VII Rule 11(d)[4] of the CPC on the ground that it was barred by the law of limitation as it was filed beyond the three-year period prescribed in Article 113 of the Act. In this regard, it was observed by the Trial Court that the right to sue accrued to the Appellant in October 2000. The view taken by the Trial Court was upheld by the District Court in first appeal and the High Court in the second appeal. Accordingly, the Appellant preferred an appeal to the Supreme Court by way of a special leave petition.

Findings of the Hon’ble Supreme Court:

Order VII Rule 11(d) of the CPC:

Whilst dealing with the lower Court’s decision to reject the plaint on the ground of expiry of period of limitation, the Supreme Court discussed the settled legal position with respect to rejection of plaints by Courts under CPC. In this regard, it is pertinent to note that under Order VII Rule 11(d) of the CPC, a plaint may be rejected on the ground that the suit appears from the statement in the plaint to be barred by any law for the time being in force.

In the instant case, relying on its earlier decisions, the Supreme Court observed that while deciding an application under Order VII Rule 11 of the CPC, the pleadings ought to be read as a whole (and not in isolation) to ascertain its true import. It was further observed that the lower Courts had failed to advert to and analyse the relevant averments stated in the plaint and instead selectively took notice of a stray assertion made in the plaint, wherein the Appellant had pleaded that it became aware about the discrepancies in July, 2000. Relying on this assertion, the lower Courts had wrongly proceeded to reject the plaint filed in February 2005, as being barred by law of limitation.

The Hon’ble Supreme Court further observed that the power under Order VII Rule 11 of the CPC can be exercised by the Court at any stage of the suit, i.e. before registering the plaint or after issuing summons to the defendant or at any time before the conclusion of the trial[5].

Article 113 of the 1963 Act:

Article 113 is a residuary article in the Act, which provides that the limitation period for suits not falling under any other category begins to run from the time when the right to sue accrues.

Drawing a distinction between the language used by the legislature in the other articles contained in the Act and the language contained in Article 113, the Hon’ble Supreme Court observed that unlike other articles, Article 113 did not refer to the happening of any specific event. The Court emphasised on the marked distinction between the expression “when the right to sue accrues” provided in Article 113 and the expression “when the right to sue first accrues” referred to in other articles. In this regard, it was observed that the time period under Article 58[6] begins to run when the right to sue “first” accrues. Similarly, under Article 59[7], the limitation period begins to run when the facts entitling the plaintiff to have the instrument or decree cancelled or set aside or the contract rescinded “first” become known to him. The Supreme Court noted, however, that the Parliament while drafting Article 113 was conscious of the distinction between “when the right to sue accrues” and “when the right to sue first accrues” and it had advisedly used the generic expression “when the right to sue accrues” in Article 113.

Further, equating the judicial interpretation accorded to the language contained in Article 120 of the erstwhile Limitation Act, 1908 (1908 Act), with Article 113 of the Act, the Supreme Court held that “as the expression used in Article 113 is similar to that in Article 120, namely, when the right to sue accrues, the principle underlying this dictum must apply proprio vigore to Article 113”.

Article Description of Suit Period of Limitation Time from which period begins to run
120 Suit for which no period of limitation is provided elsewhere in this schedule. Six years When the right to sue accrues
113 Any suit for which no period of limitation is provided elsewhere in this Schedule. Three years When the right to sue accrues

Precedents discussed by the Supreme Court

In order to clearly draw the distinction between “when the right to sue accrues” and “when the right to sue first accrues”, the Hon’ble Supreme Court discussed some of its earlier decisions. These were as follows:

  1. A three-judge bench of the Hon’ble Supreme Court in Union of India & Ors. v. West Coast Paper Mills Ltd. & Anr[8], pointing out the distinction between Article 58 and Article 113 of the Act, held that in situations where the right to sue may accrue to a suitor in a given case at different points of time, in terms of Article 58, the period of limitation would be reckoned from the date on which the cause of action arose first, and in case of Article 113, the period of limitation would be differently computed depending upon the last day when the cause of action therefore arose.
  2. In Khatri Hotels Private Limited & Anr. v. Union of India & Anr.[9], considering the expression used in Article 58 of the Act, in contradistinction to Article 120 of the 1908 Act, the Court pointed out that the legislature while enacting Article 58 of the Act had consciously made a departure from the language of Article 120 of the 1908 Act. The word “first” has been used between the words “sue” and “accrued”. As a result, if a suit is based on multiple causes of action, the period of limitation will begin to run from the date when the right to sue first accrues under Article 58.
  3. A three-judge bench in Rukhmabai v. Lala Laxminarayan[10] held that the right to sue under Article 120 of the 1908 Act accrues when the defendant has clearly or unequivocally threatened to infringe the right asserted by the plaintiff in the suit. The Court clarified that every threat by a party to such a right, however ineffective and innocuous it may be, cannot be considered to be a clear and unequivocal threat so as to compel him to file a suit.

In view of the foregoing, the Hon’ble Supreme Court held that the view taken by the lower Courts in the instant case would inevitably entail reading the expression in Article 113 as “when the right to sue (first) accrues” and such an interpretation would amount to rewriting Article 113, which would classify as “doing violence to the underlying legislative intent”. Further, on perusing the averments made by the Appellant, the Court found that the Appellant verily believed that its claim was being processed by the Regional Office of the Respondent Bank. That belief was shaken after receipt of letter dated May 8, 2002, from the Senior Manager of the Respondent Bank. Accordingly, the Court held that the right to sue accrued to the Appellant on (i) receiving the Senior Manager’s letter dated May 8, 2002, and in particular his letter dated September 19, 2002; (ii) receiving a firm refusal by the Respondent Bank vide their Response Letter dated December 23, 2003, in response to the Appellant’s Legal Notice; and (iii) the date of the Follow-up Legal Notice dated January 7, 2005, addressed by the Appellant. In view thereof, the Court held that the Appellant’s suit was filed well within the limitation period of three years as contemplated under Article 113. It further held that even if one were to disregard the date of the Response Letter and the Follow-up Legal Notice and only consider the receipt of a firm response from the Senior Manager of the Respondent Bank on May 8, 2002, and September 19, 2002, even then the suit (being filed on February 23, 2005) would be well within the limitation period in terms of Article 113.

Therefore, rejecting the approach adopted by the Trial Court, the District Court and the High Court, the Hon’ble Supreme Court set aside their decision, rejecting the plaint under Order VII Rule 11(d), and restored the plaint to the file of the Trial Court.

Concluding remarks:

While emphasising on the importance of considering the entire plaint (and only the plaint), whilst dealing with an application for rejection of a plaint under the CPC, the Hon’ble Supreme Court has judicially established the starting point of limitation under Article 113 of the Act. The view of the Supreme Court in the instant case is also supported by the apparent intention of the Law Commission behind Article 120 of the 1908 Act, as can be gathered from the Third Report on Limitation Act, 1908 (Report). The Report specifically provided that “Article 120 is the residuary article for suits and is intended to provide for the omission of any other kind of suit. A single residuary article may be provided fixing the period of limitation as three years from the time when the right to sue accrues”. As is evident, the Law Commission was mindful to omit the term “first” in Article 120, as far back as 1956.

 

[1] Judgment dated 5th June 2020 in Civil Appeal No. 2514 of 2020

[2]

Article 113 Any suit for which no period of limitation is provided elsewhere in this Schedule. Three years When the right to sue accrues

[3] Order VII Rule 11. Rejection of plaint— The plaint shall be rejected in the following cases:—

(a) where it does not disclose a cause of action;

(b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;

(c) where the relief claimed is properly valued, but the plaint is returned upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so;

(d) where the suit appears from the statement in the plaint to be barred by any law :

(e) where it is not filed in duplicate;

(f) where the plaintiff fails to comply with the provisions of rule 9;

[Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature form correcting the valuation or supplying the requisite stamp-paper, as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff.]

[4] Order VII Rule 11. Rejection of plaint— The plaint shall be rejected in the following cases:—

…(d) where the suit appears from the statement in the plaint to be barred by any law.

[5] Saleem Bhai vs. State of Maharashtra (2003) 1 SCC 557

[6]

Article Description of Suit Period of Limitation Time from which period begins to run
58 To obtain any other declaration. Three years When the right to sue first accrues

[7]

Article Description of Suit Period of Limitation Time from which period begins to run
59 To cancel or set aside an instrument or decree or for the rescission of a contract. Three years When the facts entitling the plaintiff to have the instrument or decree cancelled or set aside or the contract rescinded first become known to him.

[8] (2004) 2 SCC 747

[9] (2011) 9 SCC 126

[10] AIR 1960 SC 335