An Exposition of Section 20 of the Limitation Act, 1963: The Jurisprudence of Payment and Acknowledgment

Introduction

The law of limitation is founded on the principles of public policy, aiming to provide finality to legal disputes and prevent the unsettling of affairs after a considerable lapse of time. The Limitation Act, 1963 ("the Act") prescribes specific periods within which legal remedies can be sought. However, the Act also provides for circumstances under which this period can be extended or a fresh period can commence. Section 20 of the Act is a pivotal provision in this regard, dealing with the effect of payment on account of a debt or of interest on a legacy. It stipulates that a part-payment of a debt, made before the expiration of the prescribed limitation period, can give rise to a fresh period of limitation, computed from the time the payment was made. This provision, however, is not without its complexities, particularly concerning its proviso, which mandates that an acknowledgment of the payment must appear in the handwriting of, or in a writing signed by, the person making the payment. This article seeks to provide a comprehensive analysis of Section 20, delving into its constituent elements, its interplay with other sections of the Act, and its interpretation by the Indian judiciary.

The Statutory Framework of Section 20

Section 20(1) of the Limitation Act, 1963, reads as follows:

"Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made: Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment."

A dissection of this provision reveals several essential conditions that must be met for its invocation:

• The payment must be on account of a debt or interest on a legacy.
• The payment must be made before the expiry of the original limitation period. A payment made after the debt has become time-barred cannot revive it.^[1]
• The payment must be made by the person liable to pay the debt or by their duly authorised agent.
• Crucially, the proviso requires that an acknowledgment of the payment must be in a writing attributable to the person making the payment.

Furthermore, the operation of Section 20 is qualified by Section 21(2) of the Act, which clarifies that a payment by one of several joint contractors, partners, executors, or mortgagees does not, by itself, render the others chargeable. As noted by the Calcutta High Court in Azizur Rahaman Osmani And Another v. Upendra Nath Samanta And Others, this provision restricts the effect of a payment under Section 20, ensuring it does not automatically bind all co-debtors unless the paying debtor was acting as an agent for the others.^[5]

Judicial Interpretation of 'Payment' and its Acknowledgment

The Nature of Payment by Cheque

A significant body of jurisprudence has developed around the issue of payment made by cheque. The Supreme Court, in Jiwanlal Achariya v. Rameshwarlal Agarwalla, established that payment by cheque is generally considered conditional payment.^[15] The fresh period of limitation under Section 20 does not commence from the date the cheque is handed over, but from the date the cheque is honoured. In the case of a post-dated cheque, the critical date is the date the cheque bears, as that is the earliest it could be presented for payment. The Court reasoned that "the payment for purposes of Section 20 would be the date on which the cheque would be actually payable at the earliest, assuming that it will be honoured."^[23]

This principle was reaffirmed in Shanti Conductors Private Limited v. Assam State Electricity Board And Others.^[23] The Court held that where a post-dated cheque is given as conditional payment, the date it bears is the date from which the fresh limitation period starts, provided it is eventually honoured. The cheque itself, being in the handwriting of the drawer, satisfies the requirement of the proviso to Section 20. Conversely, as held in Makalu Impex Pvt. Ltd. v. Vivek Nagpal, the dishonour of a cheque means that no payment has been made, and therefore, it cannot save limitation under Section 19 or 20 of the Act.^[22]

The Requirement of Written Acknowledgment of Payment

The proviso to Section 20 is a mandatory safeguard. Its purpose is to ensure that there is clear and unequivocal evidence of the payment, preventing fraudulent claims of part-payment to extend limitation. The courts have examined what constitutes sufficient compliance with this requirement. In Sada Shiva v. Mahabir Prasad, the Allahabad High Court held that where the defendant admitted in the witness box to making payments that were recorded in his own account books, this constituted positive evidence and sufficient compliance with Section 20.^[13]

The interpretation of "signed" has also been subject to judicial scrutiny. Following the definition in the General Clauses Act, courts have held that "sign" includes making a mark. In Karuppayya Thevar v. Subbayya Thevar, the Madras High Court considered a scenario where the debtor touched a pen, which was then used by another to write the endorsement. This was deemed sufficient to constitute a signature for the purposes of Section 20, reflecting a practical approach to the realities of transactions among all sections of society.^[20]

Distinction from Other Key Provisions of the Limitation Act

Section 20 v. Section 18 (Acknowledgment of Liability)

It is imperative to distinguish Section 20 from Section 18 of the Act. While both provisions can start a fresh period of limitation, their subject matter is different. Section 18 deals with an acknowledgment of the underlying *liability* in respect of the property or right. In contrast, Section 20 requires an acknowledgment of the *payment* itself. An acknowledgment of liability under Section 18 need not be accompanied by any payment. Conversely, a payment under Section 20 is ineffectual unless its acknowledgment is recorded in writing as per the proviso.

The Supreme Court's decision in State Of Kerala v. T.M Chacko, while dealing with Section 18, provides valuable insight into the stringency required for an acknowledgment. The Court held that for an acknowledgment to be valid, it must be a clear and unambiguous recognition of a present subsisting liability with respect to the specific claim.^[4] Generic admissions or documents dealing with related but distinct matters do not suffice. While the subject of acknowledgment differs, this principle of clarity and specificity is equally relevant to the written acknowledgment of payment required under the Section 20 proviso. Similarly, in Sampuran Singh v. Niranjan Kaur, the Court clarified that an acknowledgment under Section 18 must be made before the original limitation period expires; it cannot revive a right that is already extinguished.^[1] This principle is explicitly embedded in the text of Section 20 itself.

Section 20 v. Section 5 (Condonation of Delay)

Section 20 must also be distinguished from Section 5, which empowers courts to condone delays in filing appeals or applications if "sufficient cause" is shown. Section 20 operates automatically upon the fulfillment of its statutory conditions; it is a mechanism that *restarts* the limitation clock. Section 5, on the other hand, is a discretionary remedy that *excuses* a delay after the limitation period has already expired. It does not apply to the institution of suits.

As observed in several consumer and high court judgments, the term "sufficient cause" in Section 5 is construed liberally to advance substantial justice.^[14] However, this liberal approach cannot be used to override the substantive law of limitation.^[12] Courts must balance the rights of both parties, and condonation of delay is not an automatic right, especially in cases of negligence or inaction.^{[10], [11]} Section 20, by contrast, is not a matter of judicial discretion but of statutory right, provided its factual predicates—payment before expiry and written acknowledgment—are proven.

The Interplay of Limitation Principles with Other Statutes

The principles of limitation, including the effect of payment and acknowledgment, are of cross-cutting importance in various legal domains. Several provided references concern Section 20 of the Arbitration Act, 1940, which deals with an application to a court to file an arbitration agreement. In cases like Union Of India v. L.K Ahuja And Co.^[18] and Asia Resorts Ltd. v. Usha Breco Ltd.,^[19] the Supreme Court confirmed that Article 137 of the Limitation Act, 1963, which prescribes a three-year limitation period, applies to such applications. These cases discuss when the "right to apply" accrues, which is the starting point for limitation under Article 137. While this involves a different "Section 20," the underlying theme is the strict application of limitation law to legal proceedings, reinforcing the idea that remedies must be sought within the prescribed time unless a statutory exception, such as that provided by Section 20 of the Limitation Act for the underlying debt, is applicable.

Similarly, in the context of the Insolvency and Bankruptcy Code, 2016 (IBC), the NCLAT in Rajendrakumar Kundanmal Jain confirmed that an application under Section 9 can be dismissed if the underlying operational debt is time-barred.^[16] For a debt to be enforceable, it must be "due and payable," which implies it must not be barred by limitation. This highlights the critical role of provisions like Section 20 of the Limitation Act in keeping a debt alive, thereby making it a valid basis for initiating proceedings under modern statutes like the IBC.

Conclusion

Section 20 of the Limitation Act, 1963, serves as a crucial bridge between the creditor's right to recover a debt and the debtor's protection from stale claims. It embodies a balanced legal policy: a creditor who receives a part-payment is granted a fresh lease of life for their claim, while the debtor is protected by the strict requirement that such payment be acknowledged in writing. Judicial pronouncements have meticulously carved out the contours of this provision, clarifying the conditional nature of payment by cheque, the scope of "signing," and the distinct domains of Section 20, Section 18, and Section 5. The provision's dual requirements—an act of payment and a written record of that act—ensure that the extension of limitation is based not on ambiguous conduct but on a clear, conscious act by the debtor. As a cornerstone of the law of limitation, Section 20 continues to be vital for the orderly conduct of commercial and financial transactions in India.