The Limitation Act, 1963 (“Limitation Act”) is the statue that prescribes the statutory time frame within which a person may initiate a legal proceeding against another party. The Limitation Act is based on the legal principal of “vigilantibus non dormientibus Jura subveniunt” which means that the law will assist only those who are vigilant with their rights and not those who sleep on it.

The Supreme Court in the recent judgment of Mongia Realty vs Manik Sethi Civil Appeal No. 814 of 2022 held that if the determination of the question of limitation is not a pure question of law, it cannot be decided as preliminary issue under Order XIV Rule 2 of the Civil Procedure Code, 1908 (“CPC”).

Order XIV Rule 2 states that where issues both of law and of fact arise in the same suit, and the Court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to either the jurisdiction of the Court, or a bar to the suit created by any law for the time being in force.

In present matter, Mongia Realty, hereinafter, Appellant alleged that it had extended a business loan to the Respondent on the request of the Respondent himself. However, the Respondent failed to repay the loan and discharge his full liability within the stipulated time period.

Accordingly, the Appellant instituted a suit against Manik Sethi, hereinafter the Respondent under Order XXXVII of the CPC for recovery of an amount of INR 1,11,63,633 along with interest at 18% per annum from the date of institution of the suit till the realization of the full amount. It was the claim of the Appellant that the loan was disbursed to the Respondent with the understanding that it shall be returned along with interest @ 18% p.a. within one year from the date of payment of the last installment of the loan. The Appellant contended that the last installment towards the loan extended to the Respondent was made on 9 April 2014. However, the Appellant alleged that the Respondent had only partially discharged his liability and that the balance amount of INR 1,11,63,633 along with an interest at 18% per annum was yet to be discharged by the Respondent. The Appellant accordingly initiated the suit against the Respondent on 31 March 2017.

In the Trial Court, the Respondent filed an application under Order 7 Rule 11 of CPC for rejection of the Appellant’s plaint alleging that the same was time barred as it was filed after the statutorily prescribed time limit for filing a suit of recovery of money under the Limitation Act.

It is to be noted that the schedule of the Limitation Act, 1963 (“Limitation Act”) provides the limitation period for institution of a suit where money payable for money lent by a party is three (3) years from the date on which the loan was made.

Further, the Respondent also denied any loans being disbursed by the Appellant and alleged that the amount claimed by the Appellant in the suit was in fact the charges paid by the Appellant to the Respondent for providing real estate services including carrying out of renovation work in the Appellant’s properties.

On the other hand, the Appellant claimed that since it had made the last payment for extending the loan to the Respondent on 9 April 2014, the suit for recovery of loan which was instituted on 31 March 2017 was well within the three (3) years prescribed limitation period.

The Trial Court while hearing the preliminary issue of limitation only based its judgment on the basis of the oral arguments and failed to lead any evidence by either of the parties. The Trial Court came to the conclusion that the Appellant’s plaint in paragraph 10 had an admission that the last payment of the loan was made on 20 June 2013 and hence the institution of the suit on 1 April 2017 was beyond the prescribed limitation period under the Limitation Act.

Aggrieved by the Trial Court’s observations and dismissal of the suit, the Appellant appealed in the High Court which also held that the suit was time barred.

Additionally, the High Court also observed that there was no written agreement between the parties that could suggest that the loan was be payable within one year from the date of payment of the last installment, as claimed by the Appellant. The High Court remarked, “it is not expected of a company to have oral mutual understandings with its customers” and that the acceptance of a suit will set a wrong precedence in law.

The High Court’s dismissal was based on the observation that in the absence of a written agreement a party could indefinitely delay the payment of the last installment for a loan sanctioned more than three (3) years back which would indefinitely increase the limitation period in such disputes.

The Appellant then filed the present Civil Appeal No.814 of 2022 against the impugned Order of the High Court. The Appellant submitted that the plaint expressly submitted that the last installment of the loan amount made by the Appellant to the Respondent was on 9 April 2014 and therefore the suit instituted on 31 March 2017 was well within the limitation period prescribed under the Limitation Act.

The Appellant further argued that the issue of limitation in the present case could not have been dismissed on the basis of oral arguments and required that evidence be led to prove the same since it was a question of both law and fact.

The Indian statues do not define question of law or a question of fact. However, judicial interpretations over the years have established the basic difference between the two.

A question of law is one which is ascertained by the application of relevant legal principals and its interpretation. A question of law is distinct from a question of fact which has to be determined by a court of law by reference to the facts and evidence distinct in each dispute. A mixed question of law and fact is one where the court requires assessment of both the interpretation of law as well as the facts and evidence of a particular dispute to reach a conclusion.

In the present case, the Respondent argued that it is an admitted fact there was no written contract for extending the loan by Appellant to the Respondent. Further, IT reiterated that no such loans were extended by the Appellant to the Respondent. The Supreme Court observed that the present question of limitation was not purely a question of law but a mix question of law and fact which required leading of evidence to establish the correct facts of the dispute which the Trial Court as well as the High Court had failed to conduct.

The Apex Court referred to the decision laid down in Nusli Neville Wadia vs. Ivory Properties (2020) 6 SCC 557, where the Court had to assess whether the issue of limitation can be determined as a preliminary issue under Order XIV Rule 2. The three-judge bench of this court observed that if the issue of limitation is based on an admitted fact, it can be decided as a preliminary issue under Order XIV Rule (2)(b). However, if the facts surrounding the issue of limitation are disputed, it cannot be decided as a preliminary issue.

Applying the principles of law settled in Nusli Neville Wadia vs Ivory Properties, the apex court, in the present judgment observed that since the determination of the issue of limitation in the case was not a pure question of law, it could not be decided as a preliminary issue under Order XIV Rule 2 of the CPC.

It was observed that Order XIV Rule of CPC provides two circumstances when the court may dispose of the suit on the issue of law, i.e. when the issue was either related to the jurisdiction of the Court or when an existing statute created a bar to the suit.

However, in the present dispute, the ascertainment of whether the Appellant’s suit was barred by limitation required an assessment of the facts of the matter. Therefore, a dismissal of the suit on an issue which was a mixed question of fact and law, without ascertaining the correct facts was not a power provided to the Courts under Order XIV Rule 2 of the CPC.

Accordingly, the judgment of the Trial Court as well as the High Court were set aside by the judgment by the Apex Court. It was also ordered by the court that the issue of limitation which has been framed by the learned trial Judge may be decided, along with the other issues of trial.

The Supreme Court has thus clarified that that such preliminary issues can be disposed of under Order XIV of the Code only when it is established that they are pure questions of law.