Source: Supreme Court

Why in News?

In a recent ruling, the Supreme Court in the matter of S. Shivraj Reddy(died) v. Raghuraj Reddy and Ors., has emphasized on the importance of adhering to the prescribed limitation period for filing suits, even if the defence of limitation isn't raised initially.

• The case underscores the significance of Section 3 of the Limitation Act,1963 and highlights the need for timely legal action in matters concerning partnership dissolution and rendition of accounts.

What was the Background of S. Shivraj Reddy(died) v. Raghuraj Reddy and Ors. Case?

• Partnership firm "M/s Shivraj Reddy & Brothers" was formed on 15^th August 1978, engaged in construction contracts with government and municipalities.
• S. Raghuraj Reddy filed application seeking dissolution of the firm and accounts.
• Trial court decreed in favor of S. Raghuraj Reddy ordering dissolution and accounts from 1979 to 1998.
• M/s Shivraj Reddy & Brothers and Anr. appealed to High Court, citing limitations due to a partner's death in 1984; a Single Judge allowed the appeal on the ground that application was barred by limitation as one of the partners in subsisting partnership firm, Shri M. Balraj Reddy expired in 1984, therefore the firm stood dissolved immediately on the death of the partner. Since the original suit was filed in 1996, it was barred by limitation.
• S. Raghuraj Reddy appealed to the Supreme Court, Division Bench, arguing limitation plea wasn't raised initially.
• The court allowed the appeal and restored the judgment of the Single Judge of the High Court.

What were the Court’s Observations?

• Supreme Court relied on the case of V.M. Salgaocar and Bros. v. Board of Trustees of Port of Mormugao and Another (2005) to render this case
• It was emphasized that according to Section 3 of the Limitation Act, the court must dismiss any lawsuit filed after the specified limitation period, even if the issue of limitation hasn't been raised as a defence.
• The period of limitation for filing a suit for rendition of account is three years from the date of dissolution.
• In the present case, the firm dissolved in year 1984 by virtue of death of Shri M. Balraj Reddy (deceased partner) and thus, the suit could only have been instituted within a period of three years from that event.
• Indisputably, the suit came to be filed in the year 1996 and was clearly time-barred
• Section 42(c) of the Partnership Act, 1932 state that the partnership firm automatically dissolves upon the death of a partner.
• Any suit filed beyond the limitation period would not be maintainable due to the enforcement of a specific bar to entertain the time-barred suit under the Limitation Act.

What is Time Barred in Limitation Act?

• The law of limitation finds its roots in the maxim “Interest Reipublicae Ut Sit Finis Litium” which means that in the interest of the state as a whole there should be a limit to litigation and vigilantibus non dormientibus Jura subveniunt which means the law will assist only those who are vigilant with their rights and not those who sleep upon it.
• The Limitation Act, 1963 prescribes different periods of limitation for filing of suits, appeals or applications.
• In the Limitation Act, a "time-barred" claim refers to a legal action that cannot be pursued in court because it has exceeded the time limit set by the relevant statute of limitations.
• Once the prescribed period for initiating legal proceedings has elapsed, the claim becomes time-barred, meaning that the plaintiff loses the right to seek judicial remedy for that matter.
• Section 3 of the Limitation Act lays down the general rule that if any suit, appeal or application is brought before the court after the expiry of the prescribed time then the court shall dismiss such suit, appeal or application as time barred.

What is the Bar of Limitation Under Section 3?

Section 3 of the Act provides that any suit, appeal, or application must be made within the limitation period specified in the Limitation Act.

• If any suit, appeal or application is made beyond the prescribed period of limitation, it is the duty of the Court not to proceed with such suits irrespective of the fact whether the plea of limitation has been set up as a defence or not.
• The provisions of Section 3 are mandatory, and the Court can suo motu take note of question of limitation.
• The question whether a suit is barred by limitation should be decided on the facts as they stood on the date of presentation of the plaint. It is a vital section upon which the whole Limitation Act depends for its efficacy.
• The effect of Section 3 is not to deprive the Court of its jurisdiction. Therefore, decision of a Court allowing a suit which had been instituted after the period prescribed is not vitiated for want of jurisdiction. A decree passed in a time barred suit is not a nullity.

What are the Major Case Laws related to Time Barred?

• Craft Centre v. Koncherry Coir Factories (1990):
  • It was held by the Kerala High Court that the plaintiff's duty is to convince the Court that his suit is within time.
  • If it is out of time and the plaintiff relies on acknowledgments to save the limitations, he must plead or prove them, if denied.
  • The Court further held that, provision of Section 3 is absolute and mandatory and if a suit is barred by the time, the court is under a duty to dismiss the suit even at the appellate stage though the issue of limitation may not have been raised.
• Punjab National Bank and Ors v. Surendra Prasad Sinha (1992):
  • The Supreme Court held that the rules of limitation are not meant to destroy the rights of the parties. Section 3 only bars the remedy but does not destroy the right which the remedy relates to.