Balance Sheet Entries Acknowledging Debt Give Rise to a Fresh Period of Limitation, Rules Supreme Court in Yusuf v. Vigyapan Loke Delhi Advertising CGHS Ltd.
Case: Yusuf v. Vigyapan Loke Delhi Advertising CGHS Ltd.
Citation: 2026 INSC 1207
Date of Judgment: 06 November 2026
Court: Supreme Court of India
Coram: Justice Vikram Nath, Justice Augustine George Masih and Justice Sandeep Mehta
Proceedings: Civil Appeal arising out of SLP (C) No. 30778 of 2024
Court Observation
“Simply stated, a written acknowledgment of a subsisting liability gives rise to a fresh period of limitation, commencing from the date on which the acknowledgment is made.”
Summary
The Supreme Court has held that entries in a company’s balance sheets acknowledging a debt can amount to an acknowledgment of liability under Section 18 of the Limitation Act, 1963, giving rise to a fresh period of limitation from the date of each acknowledgment. A three-judge bench set aside a Delhi High Court order that had rejected a contractor’s money-recovery suit as time-barred at the threshold, and revived the suit for trial on its merits.
The original plaintiff, contractor Wazir Hussain, had filed a summary suit in 2014 to recover money due under a civil works contract dated 10 February 2000 for a multi-storey building at Mayur Vihar, Delhi. The defendant society sought rejection of the plaint as barred by limitation. The trial court refused, noting that the society’s balance sheets for the years 2004 to 2013 continued to reflect the outstanding amounts, including Rs. 21,79,465 shown as sundry creditors in the balance sheet as on 31 March 2013. The Delhi High Court, however, allowed the society’s revision and rejected the plaint. The Supreme Court held that the High Court had gone too far into disputed evidence at the threshold stage: a balance-sheet entry may constitute an acknowledgment under Section 18, which does not require the acknowledgment to name the creditor specifically or follow a fixed format, though the accounts must be read as a whole, including qualifications, explanatory notes and the auditor’s report. Whether the entire sum claimed was actually payable remains for trial.
Key Holdings
- A written acknowledgment of a subsisting liability, such as a balance sheet acknowledging a debt, gives rise to a fresh period of limitation commencing from the date on which the acknowledgment is made.
- Section 18 of the Limitation Act, 1963 does not require an acknowledgment to name the creditor specifically or to follow a fixed format, so long as it acknowledges a subsisting liability.
- Balance-sheet entries must be read as a whole, including qualifications, explanatory notes and the auditor’s report; every outstanding entry does not automatically extend limitation, and the surrounding circumstances, the nature of the entry and the existence of a subsisting jural relationship remain material.
- Whether a suit is barred by limitation cannot be decided at the threshold by weighing disputed evidence; the balance-sheet entries here did not conclusively establish that the whole amount claimed was due, so the question remains for trial.
Directions Issued
- The suit stands revived on the file of the trial court, with all questions on the merits of the claim left open.
Background
The suit was filed in 2014 under Order XXXVII of the Code of Civil Procedure, 1908. The trial court rejected the defendant’s application under Order VII Rule 11 of the Code on 6 January 2020. The Delhi High Court allowed the defendant’s revision petition on 4 November 2024 (C.R.P. No. 66 of 2020) and rejected the plaint as barred by limitation, leading to the appeal before the Supreme Court.
Related Articles
- Legal Disability under Limitation Act, 1963
- The effects of fraud, mistake, and Acknowledgment under the Limitation Act, 1963
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Disclaimer: This is a summary prepared for informational purposes only and does not constitute legal advice. Readers should refer to the official judgment for the authoritative text.
