This judgment does not decide whether the amounts claimed in the suit were in fact owed, or the precise relationship between the cheques issued, the amounts carried forward and the sum claimed. Those questions are for trial. It decides only that the plaint could not have been rejected at the threshold as time-barred.
- Case
- Yusuf v. Vigyapan Loke Delhi Advertising CGHS Ltd.
- Court
- Supreme Court of India
- Decision
- Citation
- 2026 INSC 1207
- Bench
- Vikram Nath; Augustine George Masih; Sandeep Mehta
- Judgment by
- Vikram Nath
- Case numbers
- C.A. 14175/2026; SLP(C) 30778/2024
- Outcome
- Judgment dated 6 November 2026 in C.A. 14175/2026 allowing the appeal, setting aside the Delhi High Court's order dated 4 November 2024 in C.R.P. 66/2020, and reviving the suit on the file of the Trial Court.
The decision
The Supreme Court has held that a written acknowledgement of a subsisting liability, such as entries in a company's balance sheets acknowledging a debt, gives rise to a fresh period of limitation running from the date of the acknowledgement. A three-judge Bench comprising Justices Vikram Nath, Augustine George Masih and Sandeep Mehta allowed the appeal, set aside the Delhi High Court's order rejecting the plaint as barred by limitation, and directed that the suit stand revived on the file of the Trial Court.
The judgment states the principle plainly: a written acknowledgement of a subsisting liability gives rise to a fresh period of limitation, commencing from the date of the acknowledgement, so that the period is renewed or extended. All questions on the merits remain open.
The suit and the objection
The original plaintiff, Wazir Hussain, instituted a suit under Order XXXVII of the Code of Civil Procedure, 1908, in 2014, seeking recovery of money due under a civil works contract dated 10 February 2000. The contract was entered into by the defendant society for construction work in connection with a multi-storey building in Mayur Vihar, Delhi. Relying on running bills raised between 2000 and 2003, the plaintiff sought recovery of Rs. 11,16,000 along with interest of Rs. 11,04,840 calculated at 9% per annum, and pendente lite and future interest at the same rate until realisation.
The defendant applied under Order VII Rule 11 of the Code to reject the plaint, contending the suit was barred by limitation, disclosed no cause of action, and was not maintainable in view of alleged embezzlement. By an order dated 6 January 2020, the Trial Court rejected the application, observing that the outstanding amounts were reflected in the defendant society's balance sheets for 2004, 2005 to 2013, amounting to an acknowledgement of debt giving rise to a fresh period of limitation.
In revision, the High Court, by order dated 4 November 2024, allowed the defendant's petition and rejected the plaint as time-barred, observing that the bank statements relied on did not establish an acknowledgement of liability extending beyond 2005 and that no balance sheet or other document had been produced showing any acknowledgement. The legal heir of the original plaintiff appealed to the Supreme Court.
The issue
The limited question before the Court was whether, in the face of entries in the defendant's balance sheets up to 2013, the suit could have been rejected at the threshold as being barred by limitation.
It was not in dispute that the running bills pertained to 2000 to 2003, and that the defendant had issued cheques in the plaintiff's favour which were dishonoured. The plaintiff's case, however, was not founded solely on those transactions: he relied on the balance-sheet entries which, as per him, continued to reflect the amounts pertaining to the financial year 2004-05 up to the financial year 2012-13.
The rule under Section 18
To understand the effect of the balance-sheet entries, the Court turned to Section 18 of the Limitation Act, 1963, which provides that where, before the expiration of the prescribed period, an acknowledgement of liability in respect of a property or right has been made in writing signed by the party against whom the property or right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.
The Court noted that a three-judge Bench had held in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal that entries in books of account, including balance sheets, may constitute an acknowledgement of liability under Section 18, with the caveat that the entry must be assessed in the context of the balance sheet as a whole, including any qualifications or explanations in the accompanying notes or the auditor's report. The same principle was reiterated in Axis Bank Ltd. v. Naren Sheth, where the Court recognised that Section 18 would apply to balance sheets acknowledging a debt.
Applying the rule to the entries
In this case, the plaintiff relied on the defendant society's balance sheet for the year 2004-05 and the bank reconciliation statements for the same financial year. The latter explicitly recorded three cheques issued in favour of "Wazir Hussain Contractor", directly connecting the plaintiff with the society's financial records and the transactions underlying the suit.
The plaintiff further relied on the defendant society's balance sheets for the subsequent financial years, in which an amount of Rs. 21,79,134 continued to be carried forward under the head "Balances pertaining to 2004-05". As per him, the amount claimed in the suit formed a part of the amount reflected in the balance sheets, read cumulatively with the cheques and bank reconciliation statements, and constituted an acknowledgement of liability from 2005 onwards. The High Court had noted that the balance sheet as on 31 March 2013 reflected an amount of Rs. 21,79,465 under the head of sundry creditors pertaining to the year 2004-05, but had held that it did not indicate that the amount was due and payable to the plaintiff.
The Court held that Section 18 does not require an acknowledgement to name the creditor or follow a fixed format, so long as it acknowledges a subsisting liability. The acknowledgement, read with the surrounding circumstances, must indicate a subsisting jural relationship. Here, those circumstances amply supported the plaintiff's claim that a liability existed, was reflected in the defendant's own balance sheets, and continued to be carried forward to 2013, renewing the limitation period every year.
Operative outcome and limits
The Court made clear that its discussion does not mean the entries conclusively establish that the entire amount claimed was owed. The precise relationship between the cheques, the amounts carried forward and the sum claimed requires examination of evidence, and those are matters for trial. At the Order VII Rule 11 stage, the Court ought not to have gone into the depths of evidence and conclusively determined the non-existence of liability; it had only to assess whether the plaint disclosed a prima facie case on the material available.
The Court also rejected the defendant's contention that a time-barred debt cannot be revived indefinitely, particularly in the absence of an application seeking condonation of delay. Since the entries constituted an acknowledgement under Section 18, a fresh period of limitation would automatically run from each subsequent date of acknowledgement, and no application seeking condonation of delay was required. The High Court's order was set aside, the suit stands revived, and the appeal was allowed.
BANTHRY ANALYSISFor law students
This judgment is a clean application of the threshold test under Order VII Rule 11. At that stage, the court asks only whether the plaint discloses a cause of action on the material available; it does not decide whether the claim will ultimately succeed. The High Court's error was to decide at the threshold a question that needed evidence — whether the balance-sheet entries acknowledged a liability to this plaintiff.
Note also how Section 18 works mechanically. The acknowledgement need not name the creditor or follow a form; what matters is that a signed writing acknowledges a subsisting liability, read with the surrounding circumstances. Each fresh acknowledgement restarts the clock, which is why no condonation application was needed at all.
READING PROMPTSQuestions for a closer reading
- Why did the Court hold that the balance-sheet entries amounted to an acknowledgement of liability under Section 18 of the Limitation Act?
- What did the Court say the Trial Court should have examined at the Order VII Rule 11 stage, instead of deciding the existence of liability?
- Why was no application for condonation of delay required in this case?
