The Supreme Court of India recently passed a judgment in Shakti Bhog Food Industries Limited vs The Central Bank of India & Anr, and held that accrual of right to sue under Article 113 of the Schedule of the Limitation Act, 1963 (Limitation Act) did not necessarily arise when the right to sue first accrued but rather, when there was a clear and unequivocal threat of infringement of rights.

This update analyses this Supreme Court Judgment.

BACKGROUND OF CASE

• In July 2000, Shakti Bhog Food Industries Limited (Appellant) informed and raised a grievance that they were being overcharged interest and commission in respect of certain facilities availed by it from the Central Bank of India (Bank). The Appellant brought to the knowledge of the Bank and sought for a refund of the excess amount charged.
   
• The Bank, in May 2020 after due deliberation informed the Appellant that the interest and commission had been charged by it as per applicable policy and the Appellant was not entitled to any refund.
   
• After exchange of several communications between the parties, both parties were adamant on their stand. In these circumstances, in February 2005, the Appellant filed a suit against the Bank seeking rendition of true and correct accounts of the commission and interest charged by it and refund of the excess amount charged.
   
• The Bank, being the defendants in the suit, filed an application for rejection of plaint on the ground that the suit was time barred.
   
• The trial court applied Article 113 of the Schedule of the Limitation Act, which is the residuary entry governing a suit in respect of which there is no specific entry in the Schedule. Article 113 provides a limitation period of 3 years from ``when the right to sue accrues``. The trial court held that at best, the right to sue could be taken to accrue in favour of the Appellant in October 2000, which was till the time the Appellant availed the credit facilities from the Bank. This would mean that the suit had to be filed by October 2003, rendering the instant suit barred by limitation. The plaint was therefore rejected and the suit dismissed.
   
• This view was affirmed by the first appellate court and the second appellate court, which was the Delhi High Court. Aggrieved, the Appellant filed a Special Leave Petition before the Supreme Court.

SUPREME COURT HELD

• The issue for consideration before the Supreme Court was whether the present suit was liable to be rejected as barred under the Limitation Act.
   
• The Supreme Court thereafter examined Article 113 in light of other entries in the schedule of the Limitation Act and observed that unlike other articles, Article 113 does not specify any event as the starting point of computation of limitation. Further, as opposed to entries like Article 58 which require limitation to be calculated from when the right to sue “first” accrues, Article 113 merely requires limitation to be computed from when the right to sue accrues.
   
• In the scheme of the Limitation Act, wherever it was intended that the period of limitation be calculated from the occurrence of an event earliest in point of time, it had been specified. The legislature had consciously worded Article 113 liberally. For the purposes of Article 113, the right to sue would only arise when there was a clear and unequivocal threat of infringement of rights.
   
• The Supreme Court further held that the trial court had failed to read the plaint as a whole and did not consider specific averments in the plaint. Since limitation is a mixed question of fact and law, courts were required to be circumspect while considering applications for rejection of plaint on the ground of the suit being time barred on the basis of the whole plaint and not one stray averment that the Appellant.
   
• In these circumstances, the Supreme Court allowed the appeal and restored the plaint to the file.

MHCO Comment: This judgment of the Supreme Court clarifies that limitation for the purposes of Articles 113 would start running when there is a clear and unequivocal threat to one’s rights and not merely when the breach happened. The Supreme Court by this judgment has judicially established the starting point of limitation under Article 113 of the Limitation Act. Further, it laid emphasis on the importance of considering the entire plaint and circumstances, whilst dealing with an application for rejection of a plaint under the Civil Procedure Code.

This update was released on 01 Aug 2020.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
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