LIMITATION BARS THE REMEDY & NOT THE RIGHT
In this statement, the word “right” is used to mean a primary & substantive right. In the wider sense of the word, remedy is also a right but a secondary right, a procedural right. The rule that limitation bars the remedy but not the right is contained in Section 3 of the Act.
Section 3 states that every suit instituted, appeal preferred & application made after the prescribed period shall be dismissed. The second part of the rule that it does not bar the right is a necessary corollary of the first since S.3 only bars the judicial remedy.
The rule of limitation is a rule of procedure, a branch of adjective law. It does not either create rights or extinguish rights, except in the case of acquisition of title to immovable property by prescription under S.27 of Limitation Act, 1963.
After the remedy is barred by limitation, the right remains as a moral obligation or can be availed to furnish consideration for a fresh enforceable obligation. So a right to the debt does not cease to exist only because its recovery is barred by the statute of limitation. A debtor can pay the “time barred debt” and cannot claim it back on the plea that it was barred by limitation.
Similarly, if a debtor has several debts due to a creditor & he makes payment without any specification, then the creditor can adjust it towards any of the debts even if recovery of such debts is barred by time.
Since the limitation bars the remedy by filing a suit & does not extinguish the right, a defendant can set up a right in defence though he could not have enforced the right by way of a suit. There is no limitation against a defence.
The only exception to this rule that limitation bars the remedy and not the right is contained in S. 27 of Limitation Act, 1963. S. 27 states that in a suit for possession of any property, on the determination of limitation period, not only the remedy but the right is also extinguished. In such a circumstance, a defendant cannot also set up such an extinguished right by way of defence.
In case PNB vs. Surendra Prasad Sinha, AIR 1992 SC, PNB gave loan to Mr. Dubey, Surendra Prasad Sinha stood guarantor & executed a security bond giving FDR to bank. Dubey defaulted in payment of loan. Bank did not proceed against Mr. Dubey for 3 years. Limitation expired. Even after 4 years when FD of Surendra Prasad Sinha was to mature, bank deducted loan & interest amount from FDR of Surendra Prasad Sinha & credited the remaining amount in savings account of Surendra Prasad Sinha. Sinha filed criminal complaint for 405, 409 criminal misappropriation. HC declined to quash complaint. SC quashed the complaint.
SC said: though the right to enforce the debt by judicial process is barred, the right to debt remains. The time barred debt does not cease to exist by virtue of S. 3. The debt is not extinguished but the remedy to enforce the debt is destroyed.
In Balakrishnan v. M.A. Krishnamurthy (1998) 7 SCC 123, it was held by the Supreme Court “that the Limitation Act is based upon public policy which is used for fixing a life span of a legal remedy for the purpose of general welfare. It has been pointed out that the Law of Limitation are not only meant to destroy the rights of the parties but are meant to look to the parties who do not resort to the tactics but in general to seek remedy. It fixes the life span for legal injury suffered by the aggrieved person which has been enshrined in the maxim ‘interest reipublicaeut sit finis litium’ which means the Law of Limitation is for general welfare and that the period is to be put into litigation and not meant to destroy the rights of the person or parties who are seeking remedy. The idea with regards to this is that every legal remedy must be alive for a legislatively fixed period of time”
Critical Note- It is sometimes expressed that the plea of limitation is dishonest plea. Although a debt may be irrecoverable in court, it nevertheless continues to be binding on the debtor in foro conscientiae i.e. forum of the conscience. But considering the object of law doctrine of law of limitation, it cannot be said that it is unjust to raise the plea. Moreover in India, the question of morality of the plea is of less consequence, for whether the defendant takes up the plea of limitation or not, the court is bound u/s 3 of Limitation Act, to dismiss a suit if out of time.
It is sometimes said that the statute of limitation is a statute of repose, peace and justice. This is because the statute of limitation, in a way, furnishes guarantee to the general public that after the lapse of certain period, their settled rights or title shall not be litigated upon in courts and they may live in peace.