Describe what is an "acknowledgement" under the limitation Act. What are the effects of "acknowledgement" on limitation? Discuss with illustrations.

An acknowledgement under the Limitation Act is a written and signed admission of a subsisting liability, and its legal effect is to start a fresh period of limitation from the date of signature if it is made before the existing period expires. The governing provision is Section 18 of the Limitation Act, 1963.

What is acknowledgement

Section 18 says that where, before the expiry of the prescribed period, an acknowledgement of liability in respect of any property or right is made in writing and signed by the party against whom the right is claimed, a fresh period of limitation is computed from the date of signing. The acknowledgement need not be in any set form, need not use the word “acknowledge,” and need not even contain an express promise to pay; it is enough if it shows a present subsisting jural relationship such as debtor and creditor.

The Supreme Court in Shapoor Freedom Mazda v. Durga Prasad Chamaria held that the statement must show the existence of a subsisting liability and an intention to admit that relationship; it need not be a promise to pay, but it must be a clear admission of liability. In Hira Lal v. Badkulal, the Court treated a clear admission of liability in writing as sufficient to save limitation.

Effect on limitation

A valid acknowledgement does not create a new debt; it revives or refreshes the running period. The legal effect is that a fresh period begins from the date on which the acknowledgement was signed. So if the original period was three years and the debtor acknowledges the liability in the second year, the creditor gets a new three-year period from the date of acknowledgement.

This fresh start can happen more than once. Successive acknowledgements made within the current limitation period keep extending the time. But if the acknowledgement is made after limitation has already expired, it has no effect.

Requirements

To invoke Section 18, these conditions must be satisfied:

• The acknowledgement must be in writing.

• It must be signed by the party against whom the right is claimed or by an authorised agent.

• It must be made before the expiry of the prescribed period.

• It must relate to a subsisting liability in respect of the same property or right.

• It need not be unconditional; it may be qualified or even accompanied by a refusal to pay.

The courts have repeatedly held that a mere casual reference to a transaction is not enough. The writing must, on a fair reading, show an admission of liability. In Tilak Ram v. Nathu, the Supreme Court emphasized that the writing must indicate a jural relationship and an intention to admit it.

Illustrations

1. A lends money to B on 1 January 2020. The limitation period is three years. On 1 December 2022, B signs a letter saying, “I owe you the amount and shall pay shortly.” A gets a fresh three-year period from 1 December 2022.

2. If B writes the same letter on 15 March 2023, after limitation has already expired on 1 January 2023, Section 18 does not help.

3. If B writes, “I owe you the money, but I cannot pay now,” that is still a valid acknowledgement. A refusal to pay does not destroy the effect of the admission.

4. If a company’s balance sheet signed by the proper officers admits a debt, it may amount to acknowledgement. The Supreme Court in Asset Reconstruction Co. v. Bishal Jaiswal recognised that balance-sheet entries can constitute acknowledgement, depending on the facts.

Important case law

• Shapoor Freedom Mazda v. Durga Prasad Chamaria — acknowledgement must show a subsisting liability and jural relationship.

• Hira Lal v. Badkulal — a clear written admission of liability saves limitation.

• Tilak Ram v. Nathu — the admission must be of a present liability, not a vague reference.

• Lakshmiratan Cotton Mills v. Aluminium Corporation of India — an acknowledgement may be sufficient even if it is qualified or accompanied by a refusal to pay.

• Asset Reconstruction Co. v. Bishal Jaiswal — entries in balance sheets may amount to acknowledgement.

Brief conclusion

So, acknowledgement under Section 18 means a written, signed admission of a subsisting liability made before limitation expires. Its effect is to restart limitation from the date of acknowledgement. The law is liberal in form, but strict on essentials.