Limitation Period for Suits Relating to Accounts under the Limitation Act, 1963
Part I of the First Division of the Schedule to the Limitation Act, 1963 covers suits relating to accounts. Articles 1 to 5 prescribe a limitation period of three years for the specified categories, but the date from which those three years begin to run differs according to the nature of the suit.
Articles 1 to 5: Suits Relating to Accounts
The following table reproduces the substance of Part I of the Schedule and identifies the event from which limitation begins to run for each category of account-related suit.
| Article | Description of suit | Period of limitation | Time from which period begins to run |
|---|---|---|---|
| 1 | For the balance due on a mutual, open and current account, where there have been reciprocal demands between the parties. | Three years | The close of the year in which the last item admitted or proved is entered in the account; such year is computed as in the account. |
| 2 | Against a factor for an account. | Three years | When the account is, during the continuance of the agency, demanded and refused or, where no such demand is made, when the agency terminates. |
| 3 | By a principal against his agent for movable property received by the latter and not accounted for. | Three years | When the account is, during the continuance of the agency, demanded and refused or, where no such demand is made, when the agency terminates. |
| 4 | Other suits by principals against agents for neglect or misconduct. | Three years | When the neglect or misconduct becomes known to the plaintiff. |
| 5 | For an account and a share of the profits of a dissolved partnership. | Three years | The date of the dissolution. |
Meaning and Application of Article 1
Article 1 applies specifically to a balance due on a mutual, open and current account in which there have been reciprocal demands between the parties. The limitation period is three years, but it does not simply run from the date of every individual entry. The statutory starting point is the close of the year in which the last item admitted or proved is entered in the account, and that year is computed according to the account itself.
The statutory requirements are important. An account must fall within the description in Article 1 before its special starting point can be applied. Whether an account is mutual, open and current and contains reciprocal demands depends on the legal character of the dealings and the evidence in the particular case.
Articles 2 and 3: Factor, Principal and Agent
Article 2 concerns a suit against a factor for an account. Article 3 concerns a suit by a principal against an agent for movable property received by the agent and not accounted for. Both prescribe three years and use the same statutory starting rule: where an account is demanded during the agency and refused, limitation runs from that refusal; if no such demand is made, it runs when the agency terminates.
Article 4: Neglect or Misconduct of an Agent
Article 4 applies to other suits by principals against agents for neglect or misconduct. The prescribed period is three years. Unlike Articles 2 and 3, the period begins when the neglect or misconduct becomes known to the plaintiff. The date of knowledge can therefore be material to computation of limitation.
Article 5: Accounts of a Dissolved Partnership
Article 5 covers a suit for an account and a share of the profits of a dissolved partnership. The limitation period is three years and begins on the date of dissolution. The date on which the partnership was legally dissolved is therefore central to computing limitation under this Article.
How the Limitation Period Is Computed
The Schedule identifies the prescribed period and its starting point, but computation is also governed by the operative provisions of the Limitation Act, 1963. Depending on the facts, provisions dealing with exclusion of time, legal disability, acknowledgment in writing or payment on account of a debt may affect computation. For example, section 12 provides for exclusion of the first day when computing a period of limitation, while sections 18 and 19 deal respectively with the effect of a qualifying acknowledgment in writing and qualifying payment before expiry of the prescribed period.
Official Text of the Limitation Act, 1963
For the authoritative statutory text, amendments and the complete Schedule, refer to the official India Code version of the Limitation Act, 1963.
Official Limitation Act, 1963 - India Code
Important Note
The applicable Article and the date on which limitation begins can depend on the pleadings, nature of the account, relationship between the parties, date of knowledge, dissolution or termination of agency, and other facts. The provisions of the Limitation Act should therefore be applied to the facts and documents of the particular dispute.