Limitation Period for Instrument Cancellation Runs from Date of Knowledge, Constituting a Mixed Question of Fact and Law

The plaintiffs filed a suit for recovery, declaration/cancellation, and permanent injunction regarding a Sale Deed dated December 28, 2016, for land in Village Dichaun Kalan.

The plaintiffs alleged that based on an Agreement to Sell dated September 26, 2014, a total consideration of ₹4,05,09,375 was agreed upon, but ₹2,09,90,125 remained unpaid.

While the Sale Deed was executed on August 24, 2015, it was registered only on December 28, 2016.

Defendant No. 1 filed an application under Order VII Rule 11 of the CPC, contending the suit was barred by limitation, arguing the cause of action arose on August 24, 2015, when the balance became payable.

The plaintiffs countered that the defendants had assured payment at the time of mutation and only explicitly denied the liability on February 1, 2018, before the SDM.

1. Whether the plaint is liable to be rejected under Order VII Rule 11 of the CPC on the ground of being barred by the Law of Limitation.

2. Whether the period of limitation for a suit seeking cancellation of a registered instrument based on fraud begins from the date of execution/registration or the date of the plaintiff’s actual knowledge of the fraud.

Order VII Rule 11(d) of the CPC mandates the rejection of a plaint if the suit appears barred by any law.

Article 59 of the Limitation Act, 1963, prescribes a three-year limitation period for cancelling an instrument, starting from when the facts entitling the plaintiff to relief "first become known" to him.

In Popat and Kotecha Property v. State Bank of India Staff Association, it was held that only averments in the plaint are germane at this stage.

In P. Kumarakurubaran v. P. Narayanan, it was established that where limitation hinges on the "date of knowledge" or allegations of fraud, it becomes a mixed question of law and fact.

The court reasoned that under Order VII Rule 11, it must look exclusively at the averments in the plaint, taking them as true, without considering the defendant's written statement.

The plaintiffs specifically pleaded that they were assured of payment during the mutation process and only discovered the categorical denial of the balance payment on February 1, 2018, when Defendant No. 1 made a statement before the SDM.

The court observed that Article 59 emphasizes the accrual of the cause of action based on the "date of knowledge" of the fraud.

Since the plaintiffs alleged that the Sale Deed was executed through fraud and misrepresentation regarding the payment of consideration, the court determined that the credibility of the plaintiffs' claimed date of knowledge is an evidentiary matter.

Consequently, the court held that the plea of limitation could not be decided summarily as it involves triable issues of fact.

The court ruled that based on the plaint's narrative, the suit did not appear to be manifestly barred by law at this stage and listed the matters for further proceedings.