Case Note & Summary
The appellant, Nova Flexipack (P) Ltd., a company registered under the Companies Act, 1956, filed a summary suit for recovery of Rs.21,79,218/- from the respondent, Ketan Gor, proprietor of M/s A Crescent Marketing, for unpaid invoices for goods supplied between June and December 2006. The payment terms required payment within 30 days of invoice, failing which interest at 24% per annum was payable. The last invoice was dated 15/12/2006, making payment due by 14/01/2007. The plaintiff issued letters and a legal notice, and the defendant issued four cheques of Rs.1,00,000/- each on 18/06/2009, which were dishonoured. The suit was filed on 11/01/2010. The trial court dismissed the suit as barred by limitation, relying on Chintaman Dhundiraj vs Sadguru Narayan Maharaj Datta Sansthan, AIR 1956 Bom 553, holding that dishonoured cheques do not extend limitation under Section 18 of the Limitation Act, 1963. The appellant argued that the suit was within limitation because the cause of action arose on 14/01/2007 (the date of default) and the suit was filed within three years. The High Court allowed the appeal, holding that the period of limitation under Article 14 of the Limitation Act, 1963 runs from the date of default, not the invoice date. Since the last invoice was dated 15/12/2006 and payment was due within 30 days, the default occurred on 14/01/2007, and the suit filed on 11/01/2010 was within three years. The court set aside the trial court's judgment and remanded the suit for fresh decision on merits, noting that the trial court had not considered the date of default.
Headnote
A) Limitation Act, 1963 - Article 14 - Recovery of Price of Goods - Period of Limitation - The period of limitation for a suit for the price of goods sold and delivered runs from the date when the payment becomes due, i.e., the date of default, and not from the date of the invoice. In the present case, the last invoice was dated 15/12/2006 and payment was due within 30 days, i.e., by 14/01/2007. The suit filed on 11/01/2010 was within three years from the date of default and hence within limitation. (Paras 5-6) B) Limitation Act, 1963 - Section 18 - Acknowledgment of Liability - Issuance of Cheques - The issuance of cheques which are subsequently dishonoured does not amount to an acknowledgment of liability under Section 18 of the Limitation Act, 1963, as it is not a written acknowledgment signed by the party. The trial court's reliance on Chintaman Dhundiraj vs Sadguru Narayan Maharaj Datta Sansthan, AIR 1956 Bom 553 was correct on this point. (Para 7) C) Limitation Act, 1963 - Article 14 - Date of Default - Computation - Where the contract provides for payment within a specified period, the cause of action for recovery arises on the expiry of that period, i.e., the date of default. The suit filed within three years from the date of default is within limitation. (Paras 5-6)
Issue of Consideration
Whether the summary suit for recovery of the price of goods was barred by limitation, and whether the issuance of cheques which were dishonoured amounts to an acknowledgment of liability extending limitation under Section 18 of the Limitation Act, 1963.
Final Decision
Appeal allowed. Impugned judgment dated 30/06/2015 set aside. Suit remanded to trial court for fresh decision on merits in accordance with law. Parties to appear before trial court on 21/01/2019. No order as to costs.
Law Points
- Limitation period for recovery of price of goods runs from date of default in payment
- not from date of invoice
- Issuance of cheques does not extend limitation under Section 18 of Limitation Act
- 1963 unless acknowledged in writing
- Suit for recovery of price of goods is governed by Article 14 of Limitation Act
- 1963
