Article 115 of the Limitation Act: Breach of Contract

An Exposition of Article 115 of the Limitation Act, 1908, and its Successor, Article 55 of the Limitation Act, 1963: Navigating Claims for Breach of Contract in Indian Law

Introduction

The law of limitation prescribes the time within which legal proceedings must be initiated. Its fundamental purpose, as observed in legal scholarship, is to ensure diligence in pursuing rights, prevent the litigation of stale claims where evidence may be lost or obscured, and provide certainty to defendants after a reasonable period (*G. Narayan Reddy v. P. Narayana Reddy*, Telangana High Court, 2016). Within the framework of Indian contract law, a pivotal provision governing the time limit for seeking remedies for contractual breaches (not involving registered instruments) was Article 115 of the Indian Limitation Act, 1908. This article was subsequently re-enacted, with almost identical wording, as Article 55 of the Limitation Act, 1963. This analysis delves into the scope, applicability, and judicial interpretation of these provisions, focusing on their role in suits for compensation arising from the breach of contracts that are express or implied, not in writing registered, and not otherwise specially provided for in the Limitation Act.

It is pertinent to note that the Limitation Act, 1963, also contains an "Article 115" in its Schedule, which pertains to the period of limitation for appeals under the Code of Criminal Procedure, 1973 (as discussed in *Biplab Bhowmik v. Sabitri Banik*, 2015 SCC ONLINE TRI 764 and *Gaya Prasad v. State Of Madhya Pradesh And Another*, Madhya Pradesh High Court, 1988). This article, however, focuses exclusively on the provisions governing breach of contract, namely Article 115 of the Limitation Act, 1908, and its direct successor, Article 55 of the Limitation Act, 1963.

The Legislative Framework: Article 115 (1908 Act) and Article 55 (1963 Act)

Article 115 of the Indian Limitation Act, 1908, stipulated:

"Description of suit: For compensation for the breach of any contract, express or implied, not in writing registered and not herein specially provided for. Period of limitation: Three years. Time from which period begins to run: When the contract is broken, or (where there are successive breaches) when the breach in respect of which the suit is instituted occurs, or (where the breach is continuing) when it ceases." (As quoted in *B. Ram Chander Sahai v. Cantonment Board Of Meerut*, Allahabad High Court, 1945).

Article 55 of the Limitation Act, 1963, which replaced the 1908 Act, mirrors this provision:

"Description of suit: For compensation for the breach of any contract, express or implied not in writing registered and not herein specially provided for. Period of limitation: Three years. Time from which period begins to run: When the contract is broken or (where there are successive breaches) when the breach in respect of which the suit is instituted occurs or (where the breach is continuing) when it ceases."

The continuity in language underscores the consistent legislative intent regarding the limitation period for a significant category of contractual disputes.

Core Elements of Applicability

The application of Article 115 (1908 Act) / Article 55 (1963 Act) hinges on several key elements embedded in its text.

"Compensation for the Breach of any Contract"

The term "compensation" has been interpreted broadly by Indian courts. It is not confined to unliquidated damages but encompasses claims for a definite sum of money due as a result of a contractual breach. The Orissa High Court in *T. Yeruku Naidu And Another… v. J. Basava Raju…* (Orissa High Court, 1972), citing a plethora of authorities including a Full Bench of the Allahabad High Court, affirmed that "compensation" under this article has the same meaning as under Section 73 of the Indian Contract Act, 1872, denoting a sum payable for loss or damage caused by breach. This includes suits for recovery of a specific sum of money arising from a contract (*T. Yeruku Naidu*, ibid.; *Mohammad Hussain v. Firm Andani Co.*, 1958 SCC ONLINE MP 117).

Furthermore, a suit for the refund of a deposit made under a contract, where the refund is claimed due to a breach by the other party, has been held to be, in essence, a suit for compensation for breach of contract, falling under Article 115 (*Union Of India v. M/S. Gangadhar Mimraj And Another*, Patna High Court, 1962). The Madhya Pradesh High Court in *Mohammad Hussain v. Firm Andani Co.* (1958) also clarified that the word "compensation" is sufficiently comprehensive to include a claim for refund of money paid as an advance for the performance of the contract.

"Express or Implied, Not in Writing Registered"

These articles apply to contracts whether they are expressly stated (orally or in an unregistered writing) or implied from the conduct of the parties or the circumstances of the case. The crucial qualifier is that the contract must *not* be "in writing registered." If a contract is in writing and registered, a different limitation period, typically longer, would apply (e.g., Article 116 of the 1908 Act provided six years). In *Krishnan Nambiar And Ors. v. Kannan And Anr.* (Madras High Court, 1897), it was argued that a covenant of title implied by law under Section 55 of the Transfer of Property Act, if not embodied in a registered sale-deed, would fall under Article 115 rather than Article 116, as it wouldn't constitute a "contract in writing registered."

"Not Herein Specially Provided For"

This phrase signifies the residuary character of Article 115/55 within the domain of unregistered contractual breaches. If the Limitation Act contains another, more specific article governing a particular type of contractual breach (e.g., specific performance, or claims related to particular instruments), that specific article would prevail. As noted in *Union Of India v. M/S. Gangadhar Mimraj And Another* (Patna High Court, 1962), Article 115 is a residuary article for actions ex contractu not specifically provided for elsewhere.

Commencement of the Limitation Period

The starting point for the three-year limitation period is critical and varies based on the nature of the breach.

"When the Contract is Broken"

This is the primary trigger. The determination of when a contract is "broken" is a question of fact and depends on the terms of the contract and the circumstances of the alleged breach. The cause of action arises when there is a clear and unequivocal threat to a right or an actual infringement (*Mst Rukhmabai v. Lala Laxminarayan And Others*, 1960 AIR SC 335, though dealing with property rights, lays down general principles on accrual of cause of action).

Successive and Continuing Breaches

Article 115/55 explicitly addresses scenarios beyond a single, isolated breach:

  • Successive Breaches: Where a contract involves obligations that are to be performed periodically (e.g., monthly payments), each failure to perform can constitute a separate breach. In such cases, the limitation period for a suit concerning a particular breach runs from the date that specific breach occurred. The Allahabad High Court in *B. Ram Chander Sahai v. Cantonment Board Of Meerut* (1945) considered non-payment of monthly salary as potentially giving rise to successive breaches.
  • Continuing Breaches: If the breach is of a continuing nature (e.g., failure to maintain a property as per contract over a period), the limitation period begins to run when the breach ceases.

Judicial Determination of the Date of Breach

The courts undertake a careful examination of the facts to pinpoint the date of breach. For instance, in *M.L Dalmiya And Co. v. Union Of India* (Calcutta High Court, 1961), the issue of when limitation commenced for claims arising from deductions made by the government from running bills was considered. The court had to determine if the date of each deduction constituted the date of breach for the purpose of Article 115.

Judicial Interpretation: Key Precedents

Several judicial pronouncements have shaped the understanding of Article 115 (1908 Act) and Article 55 (1963 Act):

  • In *B. Ram Chander Sahai v. Cantonment Board Of Meerut* (Allahabad High Court, 1945), the court elaborated on the three distinct starting points for limitation under Article 115 depending on whether the breach is singular, successive, or continuing.
  • The Patna High Court in *Union Of India v. M/S. Gangadhar Mimraj And Another* (1962) established that a claim for refund of a security deposit, if rooted in the contractual terms and their alleged breach, is essentially a suit for compensation under Article 115.
  • The Calcutta High Court in *M.L Dalmiya And Co. v. Union Of India* (1961) affirmed the applicability of Article 115 to contractual claims for deductions and emphasized that the starting point is the date of breach, which needs careful determination.
  • The Kerala High Court in *Kora Lukose v. Chacko Uthuppan* (1956 SCC ONLINE KER 11) distinguished claims based on contract (governed by Article 115) from obligations arising under quasi-contract (Section 70 of the Indian Contract Act, 1872), which might attract the residuary Article 120 of the 1908 Act.
  • The liability of a surety under a simple bond for payment of a debt was held to be governed by Article 115, not Article 132 (which relates to money charged on immovable property), as decided in *Mohd. Sultanuddin… v. Mohd. Dastagir And Another…* (Andhra Pradesh High Court, 1959).
  • The Supreme Court in *Municipal Corporation v. Sri Niyamatullah* (1969 SCC 2 551) discussed the applicability of Article 115 versus Article 120 of the 1908 Act. Where the High Court found no contract of service, Article 115 (for breach of contract) was deemed inapplicable, and Article 120 (residuary) was applied.

Distinction from Other Articles of Limitation

It is essential to distinguish Article 115/55 from other related articles in the Limitation Act:

  • Registered Contracts: Article 116 of the 1908 Act (corresponding in part to provisions under the 1963 Act like Article 54 for specific performance of registered contracts, though the six-year period for general breach of registered contract is not directly replicated as a single article in 1963 Act for all types of compensation) provided a longer limitation period (six years) for suits for compensation for the breach of a contract *in writing registered*. The registration status is thus a key differentiator (*Krishnan Nambiar And Ors. v. Kannan And Anr.*, Madras High Court, 1897).
  • Residuary Articles: Article 120 of the 1908 Act (now Article 113 of the 1963 Act) is the general residuary article for suits for which no period of limitation is provided elsewhere. It applies only when no other specific article, including Article 115/55, is applicable (*Kora Lukose v. Chacko Uthuppan*, 1956; *M.L Dalmiya And Co. v. Union Of India*, 1961; *Municipal Corporation v. Sri Niyamatullah*, 1969).
  • Other Specific Articles:
    • Article 145 of the 1908 Act (recovery of movable property deposited or pawned) was held inapplicable to a situation where money was given not for return as such, but to be spent for a specific purpose, in *Chandrabhan Bansilal v. Municipal Council, Bikaner* (Rajasthan High Court, 1974), where the court considered Article 55 (1963 Act) as potentially relevant.
    • Article 97 of the 1908 Act (money paid upon an existing consideration which afterwards fails) was considered as an alternative to Article 115 in *Mohammad Hussain v. Firm Andani Co.* (1958), depending on whether the claim was framed as one for failure of consideration or breach of contract.
    • Article 132 of the 1908 Act (to enforce payment of money charged upon immovable property) is distinct from Article 115, as the latter deals with personal contractual liability, not enforcement against charged property (*State v. Jathavedan Nambooripad And Another*, Kerala High Court, 1958; *Mohd. Sultanuddin… v. Mohd. Dastagir And Another…*, Andhra Pradesh High Court, 1959).

Interaction with Special Limitation Periods and Other Statutes

Certain special enactments may prescribe their own limitation periods for suits against public authorities or specific types of entities. For example, Section 273(1) of the Cantonments Act, discussed in *B. Ram Chander Sahai v. Cantonment Board Of Meerut* (1945), laid down requirements for notice and potentially influenced the overall timeframe for initiating suits. Similarly, municipal acts often contain special limitation clauses for actions against municipal bodies for acts done or purporting to be done under such acts (*Municipal Corporation v. Sri Niyamatullah*, 1969, referring to the Indore Municipal Act). In accordance with Section 29(2) of the Limitation Act, 1963, such special or local laws prescribing different limitation periods will prevail over the general provisions of the Limitation Act, though Sections 4 to 24 of the Limitation Act may apply unless expressly excluded by the special law.

In the context of arbitration, which is a common mechanism for resolving contractual disputes, the Limitation Act generally applies. The Supreme Court in *Union Of India And Another v. L.K Ahuja And Co.* (1988 SCC 3 76) affirmed that applications under Section 20 of the Arbitration Act, 1940, were subject to limitation periods. While the Arbitration Act, 1940, had specific provisions (e.g., Section 37(5) discussed in *Commissioner Of Sales Tax, U.P, Lucknow v. Parson Tools And Plants*, 1975 SCC 4 22) regarding the exclusion of time spent in arbitration proceedings for subsequent suits, the applicability of the Limitation Act to arbitration underscores that contractual claims, even if routed through arbitration, are not immune from limitation principles. Cases like *Uttam Singh Duggal & Co. v. U.O.I* (1988 SCC ONLINE DEL 94) and *Shakti Bhog Foods Limited v. Kola Shipping Limited* (2009 SCC 2 134) deal with arbitration of contractual claims, the underlying right to which would be subject to limitation.

Conclusion

Article 115 of the Limitation Act, 1908, and its successor, Article 55 of the Limitation Act, 1963, play a crucial role in the landscape of Indian contract law. They provide a clear, albeit fact-dependent, three-year timeframe for seeking compensation for breaches of a vast array of express or implied contracts that are not in writing registered and are not otherwise specially provided for. The judiciary has consistently interpreted "compensation" broadly and has provided guidance on determining the commencement of the limitation period based on the nature of the breach—be it a single event, successive occurrences, or a continuing wrong. Litigants and legal practitioners must remain vigilant in identifying the precise date and nature of the contractual breach to ensure compliance with these provisions, thereby safeguarding their right to seek legal redress in a timely manner. The careful delineation of these articles from other provisions of the Limitation Act and their interplay with special statutes further highlight the nuanced application of the law of limitation in contractual disputes.