⏳ Money Recovery (Contract / Loan) - Limitation Calculator

Limitation Period for Money Recovery (Contract / Loan): A Complete Guide for Advocates

Money recovery suits are the backbone of civil litigation in India. Whether arising from a loan agreement, supply of goods, service contract, or breach of promise to pay, the Limitation Act, 1963 prescribes a uniform 3-year period for most money recovery actions. The clock starts ticking from the date the cause of action arises — typically the date money became due and payable.

How is the limitation period calculated?

1. Identify the date when the money became due under the contract, agreement or loan document.
2. Count 3 years (1095 days) from that date — this is the last date to file the suit.
3. If the debtor has made a part payment, the limitation restarts from the date of part payment (Article 19, Limitation Act).
4. If the debtor has acknowledged the debt in writing, limitation restarts from the date of acknowledgement (Section 18, Limitation Act).
5. For running accounts (current accounts, supplier accounts), the starting date is typically 3 years from the date of the last entry on the wrong side.

Important rules advocates must know

• Acknowledgement under Section 18 must be in writing signed by the party against whom limitation runs — verbal acknowledgements do not suffice.
• A cheque that bounces after being issued as payment does not itself acknowledge the debt for limitation purposes — it is a separate instrument.
• In cases of continuing breach (e.g., monthly rent arrears), each month's default gives rise to a fresh cause of action with its own 3-year period.
• The Supreme Court in Laxmi Engineering Works v. P.S.G. Industrial Institute held that limitation starts when the right to sue first accrues.
• For suits on a bond or promissory note, Article 21 applies (3 years from the date the bond/note is due).

Common mistakes to avoid

• Calculating limitation from the date the contract was signed rather than the date performance was due or breach occurred.
• Overlooking that part payments or acknowledgements restart the limitation — always check payment history before advising that a suit is time-barred.
• Failing to file a delay condonation application when the limitation has expired by a few days — Section 5 of the Limitation Act applies to suits.
• Not considering that for government defendants, limitation may differ under Article 119 (1 year for suits by the government).