Login : Advocate | Client
Home Post Your Case My Account Law College Law Library

Report No. 89

32.31. Deposits.- Controversies often arise as to period of limitation applicable where a transaction is on the border-line between deposit and loan. The Supreme Court has observe1 as under, regarding such border-line case.-

"Further, as this was a deposit, limitation would run at the earliest from the refusal and not from the date of demand. It was contended that the plaintiff had made a demand as far back as 1948 and therefore the period of limitation would run from that date, and hence the suit was hopelessly barred by limitation, because six years expired some tune in the year 1954."

Earlier also, the Court2 had made general observations indicating the guidelines to be followed for determining whether a transaction is one of deposit or a loan:

"Even though the transaction was a transaction of deposit as above stated, the deposit could be coupled with an agreement that it would be payable on demand.

Such an agreement could be expressed or implied and if an express agreement in that behalf was recorded in the document in the terms above, the transaction of deposit could not be thereby converted into a transaction of loan and the words 'we shall pay the said sum' could not convert the document into a promissory note.

The promise to pay would be involved in a promissory note as well as in a deposit within the meaning of Article 60. Limitation Act and the court would have regard to the intention of the parties and the circumstances of the case in order to arrive at the conclusion whether document was a promissory note."

1. Abdul Karim v. Dy. Coutodiaqn General, AIR 1964 SC 1256 (1259).

2. Annamalia v. Verrappa, AIR 1956 SC 12.

32.32. No change needed.- In this position, it does not seem necessary to suggest any amendment in the article. The question of fixed deposits (deposits for a specified period) will be dealt with separately.1

1. See discussion relating to Article 22A, infra.

32.33. Article 32A (propose.-suits to recover money placed in fixed deposit.- Although the Limitation Act contains fairly elaborate provisions regarding suits for the recovery of money, it does not deal specifically with claims for the recovery of money which is placed in fixed deposits with banks or other companies. As a result, one cannot immediately locate the article that is applicable to suits which are instituted for getting back money deposited for a stipulated period.

It appears to us that the law of limitation should contain a specific provision on the subject, since the placing of money in fixed deposits with companies and banks is now a very common practice. The articles of the Act which might possibly become applicable to such transactio.-Article 27 or Article 55 are not specifically meant for fixed deposits. If the law is to be easy of understanding, it is necessary that a specific article should be inserted in the Act to cover such suits. This will help in removing the obscurity of position which has been referred to above.

According to a Supreme Court judgment, the period of limitation in the case of money deposited for a specified period would start running on the expiry of the period of deposit and a demand, as such, is not a condition precedent to the starting of the period of limitation.1 According to the Allahabad High Court2 and the Nagpur High Court3, Article 60 of the Act of 1908 (present Article 22) does not apply to fixed deposits.

According to the High Court of Patna,4 Article 22 applies where a demand after the termination of the period is necessary.

According to the High Court of Jammu and Kashmir5 and the High Court of Punjab and Haryana6, a demand is required before money placed in fixed deposit in bank can be claimed and, therefore, limitation starts from the date of demand. The Jammu and Kashmir ruling referred to above seeks to distinguish the Supreme Court judgment of 1958 (mentioned above)7 on the ground that the Supreme Court case was a case of "debt", but, with respect, this does not appear to be a correct reading of the facts to which the Supreme Court judgment relates. The Punjab decision (referred to above) seeks to distinguish the Supreme Court ruling of 1958 on the ground that that was not a case of deposit with a bank.

The difficulty seems to have arisen because the distinction between money payable on demand and money payable without demand does not seem to have been given its due prominence.

Where money is deposited with a bank, no doubt, the question whether it is to be paid only on demand depends on the intention of the parties and the terms of the agreement. Where money is payable only on a demand being made, limitation does not commence until the demand is made.8 However, the case is different where the period of deposit is fixed. It should be noted that banks and companies accepting deposits do not, in general, pay interest for the period after expiry of the term of deposit. This shows that on expiry of the term of deposit the money becomes payable.

From the case law on the subject, it appears that there is considerable obscurity as to the position concerning the computation of the period of limitation for money placed in fixed deposits. In the absence of a specific provision on the subject, courts have had to hunt out the article to be applied and to take resort to some provision or other which was not perhaps specifically intended for a fixed deposit (i.e., deposit for a stipulated period).

For example, in an Orissa case,9 it was held that the deposit of money was covered by Article 145 of the Act of 1908, corresponding to Article 70 of the present Act (Deposit of "movable property"), and that the limitation for a suit to recover money so deposited started not on the date of demand, but from the date of the refusal following the demand.

1. K.S. Wani v. New Akola Cotton Ginning Press, AIR 1958 SC 437 (438, 439).

2. Bank of Upper India v. Arif Hussain, AIR 1931 All 59 (62).

3. Kashinath v. N.A.C,G. & Co., AIR 1951 Nag 255.

4. Nokhlal Sarjuprasad v. Mojthan, AIR 1939 Pat 261.

5. Jammu and Kashmir Bank v. Nirmal Devi, AIR 1959 J&K 95.

6. Hindustan Commercial Bank v. Jograr Singh, AIR 1974 P&H 211 (212), paras..-9.

7. KS. Wani v. New Akola Cotton Ginning Press, AIR 1958 SC 437 (438, 439).

8. Annamalai v. Veerappa, AIR 1956 SC 12 (15).

9. Gouri Shankar Misra v. Bannamali Babu, ILR (1979) 2 Cut 108.

32.34. Position under earlier Act.- By way of a statement of the legal position under the earlier Act (Act of 1908), it may be mentioned that the situation was not unambiguous under the Act also. Article 59 of that Act, for example, applied to a suit "for money lent under an agreement that it shall be payable on demand." Again, Article 60 covered certain other suits for money.

But none of these articles was specifically applicable to a suit for the recovery of money deposited for a fixed term. Sometimes, the residuary article as to "compensation for the breach of any contract1 was resorted to2. It is to be remembered that generally where money is placed for a definite term, the liability to repay commences as soon as the term expir.-which is the reason why articles dealing with money payable, "on demand" do not take within their fold fixed deposits.

The result of this position is that both under the earlier Act and under the present Act, the courts have to fall back upon the residuary article governing a suit for "compensation for breach of any contract" (Article 115 of the Act of 1908, corresponding to Article 55 of the present Act) or on some article not specifically intended for fixed deposits.

1. Article 115, 1908 Act, Article 55, 1963 Act.

2. I.S. Seema v. R.K. Bonerjee, AIR 1936 Rang 338.

32.35. Recommendation to insert Article 22A.- This is hardly a satisfactory situation. Once the deposit becomes payable, limitation should start running and there is need for a specific provision on the subject. For these reasons, we recommend that a specific article on the subject, to be numbered as Article 22A should be inserted in the Limitation Act, after Article 22. It should run somewhat on the following line.-

"22 For money deposited under an agreement that it shall be payable on the expiry of a stipulated period, including money of a customer in the hands of is banker so payable.

Three years.

When the stipulated period expires."

32.36. Article 23.- This takes us to Article 23, which reads as under:

"For money payable to the plaintiff for money paid for the defendant.

Three years.

When the money is paid."

It is identical with Article 61 of the Acts of 1908 and 1877, and with Article 59 of the Act of 1871.

32.37. Voluntary payments.- A question may arise whether the payment contemplated by the article should be voluntary payment or one in lieu of the coercive process of law. The following observations1 of Anson (in the context of the substantive law of contracts) may be of interest in this connection, though they do not deal with limitation as such:

"The payment made by the plaintiff may be purely voluntary. It need not be the result of any legal liability, or compulsion. Nor need it operate so as to relieve the defendant of a liability for the claim to reimbursement is not affected by the fact that payment is not made in discharge of a debt for which the defendant would himself be liable."

The basis of the cause of action for the claim in such cases is a matter of substantive law. There is a Madras judgment2 from a very distinguished Judge (Bhashyafn Ayyangar, J.) to the effect that it is immaterial whether the party seeking contribution made the payment voluntarily or involuntarily. In either case, he is damnified and the parties against whom he seeks contribution have to that extent been benefited.

A Calcutta judgment3 bases the right and duty of contribution on the doctrine of equity (and not on contract). When a person's property is sold for a debt where the liability is joint, he does have, even according to the Calcutta view, a claim against his joint debtor for the amount paid in excess of his half share (though he cannot be said to have "paid" the amount). In either view of the matter, the person making payment is not left without a remedy. We would not therefore recommend any amendment in the article under consideration.

1. Anson's Law of Contract, 23rd Edn., para. 594.

2. Rajah of Vizianagram v. Rajah Setrucherla Somasokhararaz, 1903 ILR 26 Mad 686 (693, 696) (FB).

3. Cope Hath Munshi v. Chandra Nath Munshi, 1896 ILR 21 Cal 814.

32.38. Two causes of action for breach of contract.- It can happen1 that when the plaintiff pays the money which the defendant is legally bound to pay, the payment will give rise to two causes of acti.-(i) cause of action for recovery of the money so paid by the plaintiff, governed by Article 61 (of the Act of 1908) (corresponding to the present Article 23), (ii) cause of action arising on the date when the contract is broken, thus giving rise to a suit for damages for breach of contract. It is for the plaintiff to elect between the two. No amendment of the article is called for on this count.

1. Vishram v. Pannalal, AIR 1937 Nag 152.

32.39. Volunteers making payment.- As to the persons who make payment in a matter in which they have no interest (volunteers), this aspect does not appear to have come to surface in decided cases. But Anson1 observes:

"Secondly, the plaintiff have been under a legal liability to pay the money. If he chooses voluntarily to pay money in discharge of the defendant's liability, he will have no claim to reimbursement..... English law does not favour the negotiorum gestor, the 'officious bystander', who intervenes, without being requested to do so, on another's behalf."

Though this facet of the matter, namely, that the article applies only when the plaintiff has paid money for the defendant where he has a legal interest.has not been brought out in the text of the article, the decided cases do not seem to entertain any doubt that it is so.2

In the result, no change is needed in Article 23.

1. Anson's Law of Contract, 23rd Edn., p. 592.

2. Cf. sections 68 to 70, Indian Contract Act, 1872.

32.40. Article 24.- Article 24 reads as under:

"For money payable to the plaintiff for money paid for the defendant.

Three years.

When the money is paid."

The article is identical with Article 62 of the Acts of 1908 and 1877, and with Article 60 of the Act of 1871.

The Limitation Act, 1963 Back

Client Area | Advocate Area | Blogs | About Us | User Agreement | Privacy Policy | Advertise | Media Coverage | Contact Us | Site Map
powered and driven by neosys