Last Payment Doesn’t Push the Clock Forward – Punjab & Haryana High Court Holds Limitation in Goods Sale Runs from Each Delivery, Not Final Payment

“Successive Credit Sales Are Not a Mutual Account” – Punjab and Haryana High Court dismissed a long-pending Regular Second Appeal No. 1356 of 1989, affirming that the limitation period for recovery of price of goods sold and delivered begins from the date of each delivery, not the date of last payment, when the transaction is not governed by a mutual open and current account.

Justice Mandeep Pannu, delivering the judgment, held: “There is no plea or proof of any mutual, reciprocal dealings between the parties so as to constitute a mutual open and current account... It is a case of successive sales made by the plaintiff-company on credit. Therefore, Article 14 would apply and not Article 1.”

The decision reaffirmed the difference between mutual open accounts, which may attract Article 1 of the Limitation Act, and mere successive credit transactions, to which Article 14 applies, providing a three-year limitation from the date of each delivery.

“Part Payment Can Settle Debts, But It Cannot Reset Limitation” – Court Rejects Plea Based on Contract Act Sections 59–61

The appellant-company had argued that under Sections 59 to 61 of the Indian Contract Act, 1872, it was entitled to appropriate the part payments made by the defendant (worth ₹2,27,380/-) toward earlier debts, and that the last payment made in March 1983 should be treated as the starting point for limitation.

However, the Court categorically rejected this argument: “The appropriation of payments may determine which particular debt stands discharged, but it does not alter the fact that limitation for recovery... begins from the date of their delivery.”

It clarified that appropriation of payments only affects which debt is extinguished, not when the cause of action accrues for limitation purposes.

“Running Ledger Entries Alone Do Not Prove Mutuality” – Court Finds Plaintiff’s Account Unilateral

Rejecting the plea that the dealings constituted a mutual and open account, the Court emphasized that the ledger entries relied upon by the appellant were entirely unilateral, maintained solely by the plaintiff and devoid of reciprocal entries by the defendant.

“The entries relied upon in Ex.P42 and Ex.P43 are unilateral statements of account... and do not reflect any debit or credit entries arising out of reciprocal obligations.”

Thus, the Court applied Article 14 of the Limitation Act, which mandates a three-year limitation from the date of each delivery of goods, effectively nullifying any claim older than three years from the filing date of the suit—17 July 1984.

“Appeal Lacked Merit and Was Deservedly Dismissed” – Trial Court’s View on Limitation Overruled as Erroneous

The Trial Court had decreed the suit, treating the last payment date (March 1983) as the date from which limitation would run. However, the First Appellate Court reversed this, holding that only goods supplied within three years prior to the suit were actionable, and that the defendant’s payments during this period had already extinguished those dues.

Justice Pannu upheld this view, concluding:

“The finding of the lower appellate Court that only such claims which relate to deliveries within three years of the institution of the suit would be within time is unexceptionable.”

“Since the payments made by the defendant within the said period exceeded the value of the goods supplied, no liability survives against him.”

“Reliance on ‘M/s Singh Steel Sales’ Misplaced” – Case Distinguished for Lack of Mutuality

The appellant’s reliance on M/s Singh Steel Sales v. M/s Manjit Machinery Works, 2018(3) PLR 527, was brushed aside as inapplicable. That case involved reciprocal dealings and a true mutual open and current account, unlike the present case, which involved simple one-way supplies on credit.

“In the present case, there is no evidence to show that the account was mutual or open in nature... The reliance placed on Singh Steel Sales is clearly distinguishable.”

 “Suit Time-Barred, No Surviving Liability” – Appellate Court's Decree Affirmed

In conclusion, the Court held that:

“The suit, filed on 17.07.1984, could only claim price for deliveries made after 17.07.1981. The lower appellate Court rightly found that for this period, the defendant had paid more than the value of goods received.”

Accordingly, the appeal was dismissed, and the judgment and decree dated 10.08.1988 of the lower appellate court was upheld.

Date of Decision: 26 September 2025