Case Note & Summary
The appellants, original plaintiffs, filed a suit for recovery of money seeking refund of an advance amount of Rs. 5,00,000 paid to the respondent-defendant under an agreement to sell dated 17.02.2011. The agreement stipulated that the defendant would execute a sale deed within one year, and if the defendant failed to do so, the advance amount would be refunded. The defendant did not execute the sale deed, and the plaintiffs demanded refund, which was refused. The plaintiffs filed the suit on 20.07.2017. The trial court dismissed the suit as barred by limitation, applying Article 24 of the Limitation Act, which provides a one-year limitation period for suits for money payable under a bond. The plaintiffs appealed. The High Court examined whether Article 24 applies to an agreement to sell. It held that Article 24 applies only to 'bonds', which are instruments executed by the obligor and sealed. An agreement to sell is not a bond as it is not under seal and does not create an immediate obligation to pay money. Therefore, Article 24 is inapplicable. The court held that the suit is governed by the residuary Article 113, which provides a three-year limitation period from the date when the right to sue accrues. The right to sue accrued when the defendant refused to execute the sale deed or when the plaintiffs demanded refund and the defendant refused. The suit was filed within three years from the date of refusal, and thus was within limitation. The High Court allowed the appeal, set aside the trial court's judgment, and remanded the suit for fresh disposal on merits.
Headnote
A) Limitation Act - Article 24 - Applicability to Agreement to Sell - Article 24 applies only to suits based on a 'bond', which is defined under Section 2(c) of the Limitation Act as an instrument executed by the obligor and sealed. An agreement to sell is not a bond as it is not under seal and does not create an immediate obligation to pay money. Therefore, Article 24 is inapplicable to a suit for refund of advance paid under an agreement to sell. (Paras 7-10) B) Limitation Act - Article 113 - Residuary Article - Suit for Refund of Advance - A suit for refund of advance amount paid under an agreement to sell, where the defendant fails to execute the sale deed, is governed by the residuary Article 113 of the Limitation Act, which provides a limitation period of three years from the date when the right to sue accrues. The right to sue accrues when the plaintiff demands refund and the defendant refuses, or when the defendant fails to perform the contract. (Paras 11-14) C) Limitation Act - Article 24 - Bond - Definition - Article 24 applies only to suits for money payable under a 'bond', which must be an instrument executed by the obligor and sealed. An agreement to sell, even if it contains a clause for refund of advance, does not constitute a bond as it is not under seal and does not create a debt. (Paras 7-10) D) Limitation Act - Article 113 - Right to Sue - Accrual - In a suit for refund of advance under an agreement to sell, the right to sue accrues when the defendant refuses to execute the sale deed or when the plaintiff demands refund and the defendant refuses. The limitation period of three years under Article 113 runs from that date. (Paras 11-14)
Issue of Consideration
Whether Article 24 of the Limitation Act, 1963, applies to a suit for refund of advance amount paid under an agreement to sell, or whether the residuary Article 113 governs the limitation period.
Final Decision
Appeal allowed. The judgment and decree dated 31.10.2018 passed in O.S.No.245/2017 by the Principal Senior Civil Judge and Chief Judicial Magistrate, Belagavi, is set aside. The suit is remanded to the trial court for fresh disposal on merits in accordance with law. Parties to appear before the trial court on 26.05.2025.
Law Points
- Limitation Act
- 1963
- Article 24
- Article 113
- Agreement to Sell
- Bond
- Refund of Advance
- Specific Relief Act
- Section 55
