Banking - Creditor–Debtor - Acknowledgement & Promise to pay time barred debt is good consideration, therefore, enforceable

Limitation to file a suit for recovery against the debtor runs for 3 years from the 1) date on which loan was availed, 2) date on which Debt is acknowledged by debtor, 3) date on which last was payment made by debtor 4) Balance Confirmation Statement (in case of company). But the debt shall be acknowledged by the Debtor within the period of Limitation i.e., 3 years.  

In Bhartiya State Bank Vs Bhanjan Singh & Another, the Hon’ble Chhattisgarh High Court had to decide the consequence of ‘acknowledgement & promise to pay the debt’ by the debtor 'beyond the period of limitation'. The Hon’ble High Court taking aid of Section 25(3) of the Indian Contract Act observed as under;

“The interpretation of Section 25(3) provides that a debtor can enter into an agreement in writing to pay the whole or part of a debt, which the creditor might have enforced but for the law of limitation, and a suit can lie on a written promise to pay the barred debt as it is a valid contract; such a promise constitutes novation, and hence, can form a basis of a suit independently of the original debt. The reason for this provision is that the debt is not extinguished; only the remedy gets barred by passage of time, and this provision does not revive a dead right but merely resuscitates the remedy to enforce the right, which already exists.”