Benefit Of S.14 Limitation Act Can't Be Construed So Liberally Just To Save A Lis: Kerala High Court

A division bench of Justice Satish Ninan and Justice P. Krishna Kumar, while hearing the appeal, set aside the trial court order, which decreed the suit in favour of the respondents (plaintiffs), after finding that the respondents' pursuit of an earlier suit can be excluded in view of the benefit under Section 14 of the Limitation Act.

The court referred to judgments on the manner of interpretation given by Courts to the phrase “cause of like nature” mentioned in Section 14. The Bench relied on various judgments of the Apex Court and the High Court to arrive at the conclusion that dismissal of suit as per Section 69(2) of the Partnership Act is a “cause of like nature”, which can attract the benefit of Section 14 of Limitation Act. 

However, the Court was of the opinion that the benefit would not be applicable in the instant case since the plaintiffs did not prosecute the earlier proceedings with due diligence.

The Court observed:

“…It reveals that, even in the plaint it was pleaded that the plaintiff firm is an unregistered one, and that the defendants in their written statement had specifically urged the plea that the suit is not maintainable in view of Section 69(2) of the Indian Partnership Act. An issue was raised on the maintainability of the suit. Still the plaintiffs chose to proceed to trial and invited the judgment. Law in the said regard, as notice supra, is categoric that such prosecution of the suit even after being put on notice with regard to the non-maintainability was at their peril and cannot be said to be bonafide prosecution. Hence, we have no hesitation to hold that the plaintiffs are not entitled for the benefit of exclusion for the period of limitation under Section 14 of the Limitation Act.”

The Court, therefore, allowed the appeal noting that the Court cannot take a liberal approach in construing S.14 to save the lis. Any benefit under the provision would be available only if all the ingredients thereunder are satisfied.

It further observed:

“Though the learned Senior Counsel appearing for the respondents would place a host of decisions to contend that a liberal approach is to be taken in interpreting the provisions of the Limitation Act, especially under Section 14, to save a lis and not to abort it, we are afraid that how much ever be the elasticity given, unless the ingredients mentioned in Section 14 are not satisfied, the parties cannot claim its benefit.”

For context, S.14 of the Limitation Act reads thus:

Exclusion of time of proceeding bona fide in court without jurisdiction.—(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

Background

The appellants in the appeal were the defendants in the money suit under challenge. The suit was preferred by the respondents (plaintiffs), a registered partnership firm and its two partners, praying for recovery of money allegedly due from the defendants in the course of various business transactions between the parties.

Prior to institution of the present suit under challenge, another suit seeking the same prayers, was preferred by the respondents in 2013 while their firm was unregistered. There, the appellants opposed the suit and raised the plea of bar under Section 69(2) of the Partnership Act. This provision bars institution of a suit on a contract with a third party by an unregistered partnership firm. Even though maintainability was challenged by the appellants, the respondents chose to proceed to trial; this suit was eventually dismissed.

Subsequently, the respondent firm got itself registered and the present suit was preferred after the statutory period of limitation. The appellants unsuccessfully contended that there was res judicata and that suit was barred by limitation. The suit was decreed by the Trial Court in favour of the respondents. The trial court found that the suit is not barred by res judicata. It was also found that the period during which the earlier suit was pending can be excluded in view of the benefit under S.14 of the Limitation Act. Against the extension of limitation period the appellants moved the high court in appeal. 

Arguments

The appellants/defendants argued that the benefit of S.14 would not be available in the present case since the earlier proceeding was not prosecuted bona fide or with due diligence. The act of the plaintiffs in proceeding for trial in the earlier suit when a specific plea of maintainability was raised cannot be considered to be bona fide.

The line of arguments urged by the respondents/plaintiffs was that S.14 is a beneficial provision, which has to be beneficially interpreted to save the lis.

Findings

The Court look in detail into the ingredients to be satisfied for the applicability of the benefit under S.14. It listed out 4 ingredients, one of which was “The earlier proceeding must have been prosecuted in good faith in a court which enable to entertain the suit for defect of jurisdiction or other cause of a like nature.”

The Bench also examined the meaning of the term “good faith” in the provision and differentiated it with the meaning given to it as per the General Clauses Act. Relying on Apex Court judgments, the Court clarified that the definition of “good faith” under S.2(7) of the Limitation Act means any act not done with due care and attention is not deemed to be done in good faith. 

Thus, the Court allowed the appeal and set aside the decree and judgment of the Trial Court.

Case Title: M/S. National Collateral Management Service Ltd. and another v. Valiyaparambil Traders

Citation: 2025 LiveLaw (Ker) 302

Counsels for the Appellants: K. Narayanan (Parur), Gilbert George Correya, T. Krishnanunni (Sr. Counsel)

Counsels for the Respondents: T.S. Athira, M.P. Joseph Tijo, Millu Dandapani, Premchand R. Nair, Priyanka Ravindran, Roshen D. Alexander, Roy Thomas Muvattupuzha, Tanya Joy, S.Vishnu, Sumathi Dandapani (Sr. Counsel)

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