Chitambaresh, J.

1. It is often said that an 'acknowledgment' merely extends the period of limitation and does not create a new right of action. How far the balance sheet and the profit and loss account will operate as an acknowledgment of liability is the pivotal question in this appeal suit.

2. The plaintiff contended that he had advanced money to the defendant on various occasions totalling to Rs. 2,65,000/- for the construction of a building and the suit is one for realization of the same. The receipt of the amount by the defendant is not disputed and the same is reflected in Ext.A1 balance sheet and the profit and loss account for the period ending 31.3.1995. The suit is filed in the capacity of a creditor even though the plaintiff is also a director of the defendant which is a company registered under the Companies Act, 1956.

3. The defendant contended that the amount was paid back to the plaintiff during the year 1995-96 and the same is reflected in Ext.B11 balance sheet and the profit and loss account for the period ending 31.3.1996. The defendant added that the suit filed on 3.1.2000 for realization of the amount allegedly due on 31.3.1995 is hopelessly barred by the law of limitation. The defendant pointed out that Ext.A1 balance sheet and the profit and loss account does not operate as an acknowledgment and that the same can at best relate to the period ending 31.3.1995.

4. The court below decreed the suit awarding interest at the rate of 12% per annum on the principal sum of Rs. 2,65,000/- against which the defendant has come up in appeal urging several grounds. The defendant reiterated that directors cannot acknowledge the liability to themselves and the period of limitation is not extended by signing Ext.A1 balance sheet and the profit and loss account. The defendant also contended that there is no reason as to why the same sanctity should not be attached to Ext.B11 balance sheet and the profit and loss account.

5. We heard Mr. T. Sethumadhavan, Senior Advocate on behalf of the appellant/defendant and Mr. S. Ramesh Babu, Senior Advocate on behalf of the respondent/plaintiff.

6. Section 18 of the Limitation Act, 1963 (hereinafter referred to as 'the Act' only) speaks of the effect of acknowledgment in writing and is as follows:

“18. Effect of acknowledgment in writing.-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

Explanation.-For the purposes of this section,-

(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right;

(b) the word “signed” means signed either personally or by an agent duly authorised in this behalf; and

(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.” (emphasis supplied)

The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirement of law for a valid acknowledgment under Section 18 of the Act. We may recapitulate the words of Mr. Justice P. Subramoni