Section 18 Limitation Act | Acknowledgement Of Loan In Promissory Note Extends Period Of Limitation For Entire Debt: Delhi High Court

"The loans may have been taken on different dates in 2014 and 2017, but the consolidated acknowledgment of the total loan has been recorded in the Promissory note... By virtue of Section 18 of the Limitation Act, 1963, the Promissory Note was the acknowledgment in writing of a loan taken on the earlier date, which extended the limitation period and became reckonable from the date of execution of the Promissory Note." Delhi High Court, in a significant ruling, clarified that a consolidated promissory note executed by a borrower acknowledging multiple previous loan transactions serves as a valid acknowledgment under Section 18 of the Limitation Act, 1963, thereby extending the period of limitation for the entire debt.

 The bench of Justice Neena Bansal Krishna observed that when a borrower signs a composite instrument, the limitation period for the recovery of the total sum is refreshed and becomes reckonable from the date of such execution.

The respondent (plaintiff) had advanced a friendly loan of Rs. 2,60,000 to the late Sh. Naveen Kumar Tiwari across three tranches between 2014 and 2017. In May 2017, the borrower executed a composite Promissory Note-cum-Receipt acknowledging the total liability. Following the borrower's death, his legal heirs failed to repay the debt despite the dishonor of cheques issued towards partial repayment, leading the respondent to file a suit for recovery.

The court was primarily tasked with determining whether a consolidated promissory note extends the limitation period for loans advanced on different dates. Additionally, the court addressed whether legal heirs can be held liable for the debts of a deceased borrower when they claim no inheritance of the estate.

The court held that the plaintiff sufficiently proved the loan advancement through bank statements and corroborative evidence of cash withdrawals. The defendants' reliance on the argument that the promissory note was forged was rejected, noting that they failed to lead any forensic evidence or initiate criminal proceedings to challenge the signatures.

Section 18 Limitation Act Application

The court emphasized that the consolidation of past loans into a single promissory note acts as a written acknowledgment of liability. Under Section 18 of the Limitation Act, 1963, such an acknowledgment effectively restarts the clock for limitation, making the suit filed by the respondent well within the prescribed period of law.

Validation of Testimonies

The court found the testimony of the attesting witnesses to be credible. The fact that the witnesses were not present during the original 2014 transactions did not invalidate their testimony, as they were witnesses to the execution of the consolidated Promissory Note-cum-Receipt in 2017, which legally merged the prior debts.

Court Explains Liability of Legal Heirs

Regarding the liability of the legal representatives, the court held that while their personal liability is limited to the extent of the inherited estate, the burden of proving that no such estate exists lies upon the defendants. The court noted that the immediate sale of property by the legal heirs following the borrower's death—and the subsequent withholding of the relevant sale deeds—warranted an adverse inference.

Adverse Inference Against Withholding Evidence

The court observed that the defendants' failure to produce the sale deed for the deceased's property, despite their claim that it was not inherited property, justified the inference that the estate had indeed devolved upon them. The court emphasized that when a party possesses crucial documentary evidence and chooses to withhold it, the court must draw an adverse inference.

Finding no substantial question of law to be adjudicated in the Second Appeal, the High Court affirmed the concurrent findings of the lower courts. The appeal was dismissed, confirming the decree for recovery of Rs. 2,60,000 along with interest and costs.

Date of Decision: 31 August 2026