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IN THE HIGH COURT OF DELHI
Prathiba M. Singh, J.
Gobind Ram Keswani - Appellant
Versus
Ram Sharan Rai - Respondent
C.R.P. 130 of 2018 & CM Appls. 34577 of 2021 and 34578 of 2021
Decided On : 01-10-2021
Limitation for a loan recovery suit based on demand is applicable, requiring evidence to substantiate the agreement's terms, not dismissible on limitation grounds alone.
Headnote:(A) Limitation Act, 1963 - Sections 2(j) and 3 - Order VII Rule 11 CPC - Dismissal of application challenging suit based on limitation - The court held that the limitation for filing a suit regarding a loan arises at the time of demand, not upon giving the loan. Evidence is crucial for determining the existence and terms of an alleged agreement. (Paras 4, 5, 6, 11)
(B) The issues of limitation and cause of action must be adjudicated based on evidence presented in trial rather than solely on an application for rejection of the plaint. (Paras 7, 9)
Facts of the case:
A suit for recovery of Rs.41,10,000/- was initiated, with the petitioner as Defendant No.1, who challenged the suit’s maintainability citing the expiration of the limitation period, claiming no relationship with the plaintiff.
Findings of Court:
The court reiterated the necessity of evidence to adjudicate issues of limitation and cause of action, without prejudging the merits of the case.
Issues: Whether the suit was filed within limitation, and whether there is a cause of action against the defendants.
Ratio Decidendi: The court asserted that limitation periods commence upon demand, and evidence is required to establish the existence of an agreement. Results: Petition disposed; trial court directed to proceed with final arguments.
| Table of Content |
|---|
| 1. factual background of the case (Para 2 , 3) |
| 2. arguments regarding limitation (Para 4 , 5) |
| 3. court's observations on agreement and limitation (Para 6 , 9) |
| 4. issues framed regarding limitation and cause of action (Para 7 , 8) |
| 5. trial court to adjudicate on merits (Para 10 , 11) |
| 6. conclusion and direction for trial court (Para 12) |
JUDGMENT
Prathiba M. Singh, J. (Oral)--This hearing has been done through hybrid mode.
2. This petition has been filed challenging the impugned order dated 27th February, 2018 by which an application under Order VII Rule 11 CPC which had been filed by the Petitioner/Defendant No.1 has been dismissed by the District Judge, Saket Courts, New Delhi (hereinafter "Trial Court") in Suit No. 959 of 2017 titled Ram Sharan Rai v. Gobind Ram Keshwani & Ors..
3. The brief facts are that a suit for recovery of a sum of Rs.41,10,000/- was filed by the Respondent No.1/Plaintiff against the Petitioner as also the Respondent No.2 and other defendants. The Petitioner herein was Defendant No.1 in the suit and he filed an application under Order VII Rule 11 CPC raising various pleas.
4. For the purposes of this petition, primarily the issue of limitation has been raised. The submission of Mr. Aggarwal, ld. Counsel for Defendant No.1, is that the loan as per the plaint, was given in 2012 and there are promissory notes which are stated to be executed by the Defendant No.2, i.e. M/s NIHO Construction Limited. He submits that considering the provisions of Sections 2 (j) and 3 of the LIMITATION ACT , 1963 (hereinafter "Act") read with Articles 19, 21 and 35 of the Schedule therein, the limitation for filing a suit in such circumstances, would be three years from the date when the loan was made and this period had expired in this case. Additionally, he disputes the Plaintiff's case that the Defendant No.1 is the Chartered Accountant of the Defendant No.2-Company. Instead, he states that the Defendant No.1 was a Chartered Accountant of the Plaintiff's daughter and had no relationship with the Defendant No.2-Company as such. In any event, Mr. Aggarwal, ld. Counsel, submits there was no privity of contract between him and the Plaintiff. It is his further submission that the promissory notes have also not been executed by him and hence there is no cause of action which exists against Defendant No.1. However, the suit may continue qua the other Defendants.
5. The Plaintiff on the other hand, relies upon Sections 2 (j) and 3 of the Act read with Article 22 of the Schedule to argue that the limitation period would apply for a period of three years from the time when the demand is made. In this case, he submits that the demand was made in 2016 and the agreement as pleaded, is that the amount would be paid on demand as per paragraph 18 of the plaint. Thus, the suit is not barred by limitation. Mr. Khemka, ld. Counsel further submits that the entire evidence in the suit has already been recorded and hence the suit should proceed for final arguments.
6. This Court has considered the submissions made on behalf of the parties. It is the settled position of law that for an application under Order VII Rule 11 CPC, only the plaint needs to be considered and the defense of the Defendants cannot be considered. In the plaint, the Plaintiff pleads the background in which the loan was given, in paragraphs 12 and 13. Insofar as giving of the loan itself is concerned, it is the admitted position that the loan was given in 2012. However, in paragraphs 18 and 19, the plea of the Plaintiff is as under:
"....
18. That defendant no.1 gave three undated Promissory Notes, each for Rs.5,00,000/- (Rs. Five Lac only) duly filled by defendant no.1 on behalf of the defendant no.2 and also promised that the amount will be paid to plaintiff with promised rate of interest as on demand. The copies of Promissory Notes are annexed as ANNEXURE P-2 (Colly).
19. That due to the medical contingency plaintiff contacted defendant no.1 telephonically in
