Introduction:

In a significant judgment interpreting the scope of Section 18 of the Limitation Act, 1963, the Supreme Court of India in M/S. Airen and Associates versus M/S. Sanmar Engineering Services Limited, 2025 LiveLaw (SC) 745, has ruled that an acknowledgment of a part of the debt by a debtor does not revive or extend the limitation period for the entire debt claim if the full amount is not unequivocally acknowledged. The verdict delivered by a Division Bench comprising Justices Sanjay Kumar and S.C. Sharma upheld the ruling of the Chhattisgarh High Court, which had dismissed the appeal filed by the Appellant seeking recovery of ₹3,07,115.85, and had held that only the acknowledged portion of ₹27,874.10 could benefit from the limitation extension under Section 18. The bench categorically stated that as the debtor did not acknowledge the entire sum due, the appellant could not take shelter under Section 18 for the remaining unacknowledged portion, thereby clarifying the jurisprudence around acknowledgment of debt and its impact on limitation law.

Arguments of the Appellant:

The appellant, M/S. Airen and Associates, had initially filed a suit for the recovery of ₹3,07,115.85 along with interest at 18% per annum, based on claims arising from business transactions with the respondent. The Appellant’s primary contention before the trial court, the High Court, and ultimately the Supreme Court was that the respondent had, in correspondence and communication, acknowledged the outstanding liability in part, specifically admitting ₹27,874.10 as due. The appellant argued that such an acknowledgment—though partial—should be construed as sufficient under Section 18 of the Limitation Act to extend the limitation period for the entire claim. According to the appellant’s legal team, represented by Mr. Atul Shanker Mathur and others, the partial acknowledgment indicated the existence of a debtor-creditor relationship, and hence, it should operate as a reset of the limitation clock for the entire outstanding balance. Further, they submitted that the acknowledgment was not isolated but was part of a chain of business dealings where some invoices were not specifically denied. They contended that the trial court erred in failing to appreciate the commercial realities and communication context that bound both parties. The appellant urged the Supreme Court to interpret Section 18 in a liberal manner to ensure that genuine creditors are not left remediless due to technical interpretations of limitation law, especially when part-payment or acknowledgment exists.

Arguments of the Respondent:

M/S. Sanmar Engineering Services Limited, the respondent in the case, countered the arguments by asserting that their acknowledgment was limited strictly to the amount of ₹27,874.10 and not to the entire claimed amount. Represented by Mr. K.V. Mohan and his team, the respondent emphasized that beyond this figure, the claim was expressly disputed in their communication, and the larger claim of ₹3,07,115.85 was never admitted. The respondent further argued that under the settled principles of limitation law, particularly Section 18, acknowledgment of liability must be unambiguous, unconditional, and specific in terms of the amount. They relied on established judicial precedent to assert that a mere acknowledgment of a part of the debt cannot be stretched to include an implicit admission of the full claim, especially when the rest is disputed. Citing the case of J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. & Anr., (2008) 2 SCC 444, the respondent’s counsel underscored that limitation can only be extended with respect to the sum acknowledged, not for any unacknowledged or disputed portion. The respondent thus defended the decisions of the lower courts and emphasized the need for strict construction of acknowledgment clauses to prevent misuse by creditors attempting to revive stale claims by relying on partial acknowledgments.

Court’s Judgment and Analysis:

After carefully examining the submissions of both parties and the documentary evidence on record, the Supreme Court affirmed the Chhattisgarh High Court’s interpretation of Section 18 of the Limitation Act. The apex court underscored that for the benefit of limitation extension to apply, acknowledgment of debt must be clear, unequivocal, and specifically refer to the amount claimed. The Court held that the debtor’s acknowledgment of ₹27,874.10 could not be extrapolated to extend the limitation period for the entire claim of ₹3,07,115.85, especially since the balance amount had been disputed consistently. In its reasoning, the Court laid emphasis on the plain language of Section 18 and stressed that acknowledgment must pertain to the exact amount sought in the suit or at least an unambiguous part thereof. Where the debtor has either denied liability for the remaining amount or remained silent despite demands, no such acknowledgment can be inferred for the unacknowledged balance. The Court referred to and endorsed the precedent set in J.C. Budhraja, wherein it was conclusively held that limitation is only extended to the extent of the admitted debt and not beyond. The bench, therefore, observed, “There was no acknowledgment of the full amount claimed by the appellant in terms of the requirement prescribed in Section 18 of the Act of 1963. The question of extending the period of limitation for the entire suit claim of the appellant did not arise.” The apex court also took a pragmatic approach by allowing the appellant to recover the admitted amount, as permitted by the High Court, but dismissed the claim for the remainder as time-barred. The Court’s decision sends a strong message regarding the necessity of proper documentation and timely legal action in debt recovery matters and sets a precedent for future litigations involving partial acknowledgment of liability.