Supreme Court Revives Contractor’s Payment Suit, Saying Society’s Balance-Sheet Carryovers Through 2013 Could Extend Limitation

The original plaintiff brought a summary suit in 2014 to recover amounts allegedly due under a civil works contract dated 10 February 2000, relying on running bills from 2000–2003 and claiming that the defendant society’s accounts continued to reflect the liability in later years.

The Trial Court declined to reject the plaint under Order VII Rule 11 CPC, finding that the society’s balance sheets reflected outstanding amounts through 2013 and that other issues required evidence.

The High Court allowed the defendant’s revision and rejected the plaint as time-barred, concluding that the records did not establish an acknowledgment of liability to the plaintiff.

The original plaintiff’s legal heir appealed to the Supreme Court.

Section 18 of the Limitation Act, 1963 provides that a written acknowledgment of liability, made and signed before expiry of the prescribed limitation period, starts a fresh limitation period from the date of acknowledgment.

An entry in a balance sheet may constitute such an acknowledgment, but must be assessed in the context of the balance sheet as a whole, including relevant qualifications or explanations.

An acknowledgment need not name the creditor or follow a prescribed form; read with surrounding circumstances, it must indicate a subsisting jural relationship.

At the Order VII Rule 11 stage, the court assesses whether the plaint discloses a prima facie case and should not conclusively determine disputed matters requiring evidence.

The plaintiff relied on the 2004–05 bank reconciliation statements, which recorded three cheques issued to “Wazir Hussain Contractor,” together with later balance sheets carrying forward an amount under “Balances pertaining to 2004–05” through 2012–13.

Read cumulatively, those records and the surrounding circumstances could indicate a continuing liability and a subsisting relationship, making acknowledgment under Section 18 a matter fit for consideration at trial.

The records did not conclusively establish that the entire amount claimed was owed to the plaintiff; the connection between the cheques, carried-forward amounts, and claim required evidence.

The High Court therefore went beyond the proper scope of an Order VII Rule 11 inquiry by finally resolving that issue at the threshold.

It set aside the High Court’s order, revived the suit before the Trial Court, and left all questions on the merits open.

The appeal was allowed.