Punjab National Bank v. Surendra Prasad Sinha
The law of limitation bars only the remedy and not the right; expiry of the limitation period extinguishes the right to sue but not the underlying debt or right itself.
Facts
A bank held security/guarantee in respect of a loan and adjusted the guarantor's amounts towards a debt in respect of which the period for filing a recovery suit had expired. A criminal complaint was filed against bank officers alleging wrongful action. The question turned on the effect of the bar of limitation on the creditor's underlying right and remedy.
Issues
- Whether the expiry of the period of limitation under Section 3 extinguishes the creditor's substantive right or merely bars the judicial remedy.
Arguments
It was argued that once limitation had run, the debt itself stood wiped out so any appropriation towards it was wrongful. The bank contended that limitation only bars the remedy by suit and does not extinguish the debt or the right, which survives and can be otherwise enforced or adjusted.
Held
The Court held that the rules of limitation are not meant to destroy the rights of parties; they are designed to ensure that parties seek their remedy diligently and within a fixed time. Section 3 only bars the remedy by way of suit but does not extinguish the right itself, which continues to subsist even after the remedy is time-barred (except where a statute, such as Section 27, expressly extinguishes the right). Consequently, a time-barred debt remains a debt in law, and recovery by lawful means other than a barred suit is not necessarily impermissible. On the facts, the criminal proceedings against the bank officers were held to be an abuse of process and were quashed.
Ratio decidendi
The bar of limitation under Section 3 extinguishes the remedy, not the right; a time-barred debt subsists and is not destroyed by the running of limitation save where a statute expressly extinguishes the right.
Significance
A leading authority for the classic principle that limitation bars the remedy but not the right; frequently cited to explain the nature and object of the Limitation Act and the distinction from Section 27 (extinguishment of right to property).
Related
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