Effect of Acknowledgment and Part Payment

Explanation (a): an acknowledgment may be sufficient though:

• it omits to specify the exact nature of the property or right
• it avers that the time for payment, delivery, performance or enjoyment has not yet come
• it is accompanied by a refusal to pay, deliver, perform or permit to enjoy
• it is coupled with a claim to set off
• it is addressed to a person other than the person entitled to the property or right

So a letter saying "I accept the amount is due but I refuse to pay it, and in any case I have a set-off", written to a third party, is still a good acknowledgment. What matters is the admission of liability, not the willingness to honour it.

Explanation (c) is a limit worth knowing: an application for the execution of a decree shall not be deemed to be an application in respect of any property or right for the purposes of the section.

Section 18(2): where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but, subject to the Evidence Act, oral evidence of its contents shall not be received.

That sub-section draws a precise line. You may prove when an undated writing was signed by oral evidence; you may not prove what it said.

Part payment: section 19

Section 19: where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy, or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made.

The proviso is the condition that catches people out: save in the case of payment of interest made before 1 January 1928, an acknowledgment of the payment must appear in the handwriting of, or in a writing signed by, the person making the payment.

So a part payment alone is not enough. There must also be writing evidencing it, in the payer's own hand or signed by him. A payment made in cash with no receipt signed by the payer does not extend limitation under this section, however clearly it can be proved otherwise.

Explanation (a): where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of that land shall be deemed to be a payment.

Explanation (b): "debt" does not include money payable under a decree or order of a court.

Explanation (b) matters. A decretal amount is not a "debt" for section 19, which is consistent with Explanation (c) to section 18 keeping execution applications outside that section too. The Act deliberately keeps these fresh-start provisions away from execution.

Who can bind whom: section 20

Section 20 answers the questions that arise when more than one person is involved.

Section 20(1): the expression "agent duly authorised in this behalf" in sections 18 and 19 shall, in the case of a person under disability, include his lawful guardian, committee or manager, or an agent duly authorised by such guardian, committee or manager to sign the acknowledgment or make the payment.

Section 20(2), and this is the important one: nothing in sections 18 and 19 renders one of several joint contractors, partners, executors or mortgagees chargeable by reason only of a written acknowledgment signed by, or of a payment made by, or by the agent of, any other or others of them.

So one joint debtor cannot extend limitation against his co-debtors by acknowledging or paying. Each is bound by his own acknowledgment only. That is a change from the older law and it is a standing exam point.

Section 20(3)(a): an acknowledgment signed or a payment made in respect of any liability by, or by the duly authorised agent of, any limited owner of property governed by Hindu law, shall be a valid acknowledgment or payment against a reversioner succeeding to that liability.

Section 20(3)(b): where a liability has been incurred by or on behalf of a Hindu undivided family, an acknowledgment or payment made by, or by the duly authorised agent of, the manager of the family for the time being, shall be deemed to have been made on behalf of the whole family.

Acknowledgment against part payment

The two things they share are the two things to state first in any answer: both must occur before the period expires, and both produce a fresh period rather than an extension.

A worked example

Tarun lends Usha Rs. 5,00,000 on 1 May 2022. The period is three years, expiring 1 May 2025.

On 1 March 2024 Usha writes to Tarun: "I know I owe you the money, but I am not paying until you finish the work." That is an acknowledgment under section 18. It is in writing, signed, made before the period expired, and it admits liability. That it is accompanied by a refusal to pay does not matter: Explanation (a) says so expressly. A fresh three-year period runs from 1 March 2024, expiring 1 March 2027.

Suppose she had written it to her brother rather than to Tarun. Still good. Explanation (a) covers an acknowledgment addressed to a person other than the person entitled.

Suppose she had only said it on the telephone. No good. Section 18 requires writing signed by her.

Suppose the letter is undated. Section 18(2): oral evidence may be given of the time it was signed, but not of its contents.

Suppose she had instead paid Rs. 50,000 in cash on 1 March 2024, with no receipt. Section 19 does not help Tarun. The proviso requires an acknowledgment of the payment in her handwriting or in a writing signed by her. Without it, the payment does not start a fresh period.

Suppose she paid by a cheque she signed. The writing requirement is satisfied by her signed writing, and a fresh period runs from the date of the payment.

Suppose she writes the letter on 1 June 2025, after the period has expired. Section 18 does not apply at all, because the acknowledgment must be made before the expiration of the prescribed period. Tarun's only route would be a fresh written promise under section 25(3) of the Indian Contract Act 1872, which section 29(1) of this Act preserves.

Suppose Usha and Vikas are joint debtors and only Usha acknowledges. Section 20(2): Vikas is not made chargeable by reason only of Usha's acknowledgment. Limitation continues to run in his favour.

Suppose the debt was incurred on behalf of a Hindu undivided family and the karta acknowledges it. Section 20(3)(b): the acknowledgment is deemed made on behalf of the whole family.

Suppose Tarun holds a decree instead of a debt, and Usha writes acknowledging it. Explanation (c) to section 18 and Explanation (b) to section 19 keep decrees and execution applications outside both sections.

What it does not mean

An acknowledgment after the period has expired does nothing. Section 18 requires it before expiry; a time-barred debt is revived only by section 25(3) of the Contract Act.

These sections do not extend the old period. They start a fresh period of the same length.

A refusal to pay does not spoil an acknowledgment. Explanation (a) to section 18.

A part payment alone is not enough. The proviso to section 19 requires writing in the payer's hand or signed by him.

One joint debtor cannot bind the others. Section 20(2).

Neither section applies to a decree. Explanation (c) to section 18 and Explanation (b) to section 19.

Quick revision

Section 18: an acknowledgment of liability, in writing, signed by the party or by one through whom he derives title or liability, made before the prescribed period expires, gives a fresh period from the date of signature. Explanation (a): still sufficient though it omits the exact nature of the property, says the time for performance has not come, is accompanied by a refusal, is coupled with a set-off, or is addressed to a stranger. Explanation (b): "signed" includes by a duly authorised agent. Explanation (c): an execution application is not an application in respect of property or right. Section 18(2): oral evidence of the date of an undated writing is admissible; oral evidence of its contents is not.

Section 19: a payment on account of a debt or of interest on a legacy, made before the period expires, by the person liable or his duly authorised agent, gives a fresh period from the date of payment; proviso, an acknowledgment of the payment must appear in the payer's handwriting or in a writing signed by him. Explanation (a): a mortgagee in possession receiving rent or produce is deemed to receive payment. Explanation (b): "debt" excludes money payable under a decree.

Section 20: for a person under disability, the guardian, committee or manager counts as the duly authorised agent; one of several joint contractors, partners, executors or mortgagees is NOT bound by another's acknowledgment or payment; a Hindu limited owner binds the reversioner; and the karta binds the whole joint family.

Test yourself

1. What is the effect of an acknowledgment under section 18? Where an acknowledgment of liability in respect of any property or right is made in writing signed by the party against whom the property or right is claimed, or by a person through whom he derives his title or liability, before the expiration of the prescribed period, a fresh period of limitation is computed from the time when the acknowledgment was signed.

2. Must the acknowledgment be made before the period expires? Yes. Section 18 applies only where the acknowledgment is made before the expiration of the prescribed period. A time-barred claim is not revived by it; that requires a fresh written promise under section 25(3) of the Indian Contract Act 1872, which section 29(1) of the Limitation Act preserves.

3. Is an acknowledgment bad because the debtor refuses to pay? No. Explanation (a) to section 18 provides that an acknowledgment may be sufficient though it is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than the person entitled.

4. What is required besides the part payment itself under section 19? An acknowledgment of the payment must appear in the handwriting of, or in a writing signed by, the person making the payment, save in the case of payment of interest made before 1 January 1928.

5. Does the acknowledgment of one joint debtor bind the others? No. Section 20(2) provides that nothing in sections 18 and 19 renders one of several joint contractors, partners, executors or mortgagees chargeable by reason only of a written acknowledgment signed by, or of a payment made by, or by the agent of, any other of them.

6. An acknowledgment is in writing but undated. How is its date proved? Under section 18(2) oral evidence may be given of the time when it was signed; but, subject to the Evidence Act, oral evidence of its contents shall not be received.

7. Do these sections apply to a decree? No. Explanation (c) to section 18 provides that an application for execution of a decree is not an application in respect of any property or right, and Explanation (b) to section 19 provides that "debt" does not include money payable under a decree or order of a court.