Delhi High Court Refuses to Reject 2008 Loan Recovery Suits as Time-Barred; Holds TDS Deposits and Balance Confirmations Raise Triable Limitation Issues Requiring Evidence
Delhi High Court Dismisses Borrower’s Plea to Reject 2017 Recovery Suits; Finds Continued TDS Deposits and Balance Confirmations Raise Triable Limitation Issues
Facts
The Delhi High Court decided together two petitions filed by Amit Gupta under Article 227 of the Constitution against Sandeep Gupta and Krishna Gupta, since both arose from the same factual and legal matrix. The petitioner was the defendant in the underlying civil recovery suits and challenged the Trial Court’s common order dated 4 July 2019.
The parties had friendly relations. In 2008, the respondents advanced loans to the petitioner without executing formal loan documents. However, the petitioner subsequently deducted TDS on the interest payable and issued signed balance confirmations acknowledging the amounts due after the close of accounts each year.
The balance confirmations continued until March 2014, while TDS deductions continued until 31 March 2015. The TDS was deposited with the Income Tax Department, as reflected in Form 26AS and Form 16-A for financial year 2014-15.
After the petitioner stopped making payments, the respondent issued a legal notice dated 29 May 2017 and instituted a recovery suit. The petitioner applied under Order VII Rule 11 CPC, seeking rejection of the plaint as barred by limitation.
The Trial Court rejected that application, holding that limitation constituted a mixed question of fact and law requiring evidence. Amit Gupta challenged that decision before the Delhi High Court.
Issues
The principal issues were:
- Whether recovery suits instituted in 2017 concerning loans advanced in 2008 were ex facie barred by the three-year limitation period.
- Whether continued TDS deductions and deposits on interest payable on the loans could constitute payment on account of debt under Section 19 of the Limitation Act, 1963 and trigger a fresh limitation period.
- Whether the petitioner’s signed balance confirmations could constitute acknowledgments relevant under Section 18 of the Limitation Act.
- Whether the effect of TDS deductions and balance confirmations could be finally decided while considering an application under Order VII Rule 11(d) CPC, or required evidence at trial.
- Whether Bombay High Court authorities holding that TDS certificates by themselves do not constitute acknowledgment of debt governed the issue.
- Whether the Trial Court committed any jurisdictional error warranting interference under Article 227 of the Constitution.
Petitioner’s Arguments
Amit Gupta argued that the loans were admittedly advanced in 2008. Under Article 19 of the Limitation Act, the three-year limitation period expired in 2011.
Since the recovery suits were instituted only in 2017, approximately six years after expiry of the original limitation period, he contended that they were plainly time-barred and the plaints should have been rejected under Order VII Rule 11 CPC.
He relied on Ramisetty Venkatanna v. Nasyam Jamal Saheb, arguing that clever drafting creating an illusory cause of action cannot be used to circumvent limitation.
The petitioner principally disputed the respondents’ reliance upon TDS deductions.
Relying upon S.P. Brothers v. Biren Ramesh Kadakia, he argued that a TDS certificate is generated merely to comply with statutory obligations under income-tax law and does not by itself acknowledge a subsisting debt or extend limitation.
He also relied upon ACTAL v. India Infoline Ltd. and the Bombay High Court’s order in Kirtikumar Shantilal Chandan v. Hitesh Pawanraj Mehta to support the proposition that issuance of TDS certificates does not amount to acknowledgment of debt.
Respondent’s Arguments
The respondents first questioned the maintainability of the Article 227 petitions, arguing that the petitioner had an alternative remedy under Section 115 CPC. Reliance was placed on Virudhunagar Hindu Nadargal Dharma Paribalana Sabai v. Tuticorin Educational Society.
On limitation, the respondents argued that the petitioner had:
- executed signed balance confirmations; and
- continuously deducted and deposited TDS on interest payable on the loans.
According to them, these acts amounted to recognition/payment of the subsisting liability and extended limitation under the Limitation Act.
They relied upon Ansal Housing Ltd. v. Samyak Projects Pvt. Ltd., where the Delhi High Court held that deposit of TDS could extend limitation under Section 19. That judgment had subsequently been affirmed by a Division Bench in Samyak Projects (P) Ltd. v. Ansal Housing Ltd.
The respondents specifically relied upon Form 26AS, showing TDS deductions continuing until 31 March 2015. If a fresh three-year period was computed from that date, the suits filed in 2017 were within limitation.
Analysis of the Law
TDS Deposits and Section 19 of the Limitation Act
The High Court held that the continued deduction and deposit of TDS could not simply be disregarded while considering limitation.
Section 19 of the Limitation Act provides for computation of a fresh limitation period where payment on account of a debt is made before expiry of the prescribed period, subject to the statutory requirements regarding acknowledgment of payment.
The Court referred to Ansal Housing Ltd., which had considered Sections 194A and 198 of the Income Tax Act together with Section 19 of the Limitation Act and held that TDS deposited against the transaction in question constitutes payment on account of debt and can extend limitation.
Significantly, that interpretation had been affirmed by the Delhi High Court’s Division Bench in Samyak Projects. The Division Bench held that TDS deposits could result in a fresh period of limitation under Section 19.
Signed Balance Confirmations
The Court also found that the respondents were not relying solely upon TDS certificates.
They had specifically relied upon signed balance confirmations issued by Amit Gupta, together with continued TDS deductions up to March 2015.
The Court held that these materials prima facie attracted consideration under Sections 18 and 19 of the Limitation Act. Their precise evidentiary and legal effect could only be determined after examining the relevant documents and evidence.
Order VII Rule 11 and Limitation
At the Order VII Rule 11 stage, the question is whether a meaningful reading of the plaint and documents demonstrates that the suit is ex facie barred by law.
Where limitation depends upon disputed payments, acknowledgments or documentary evidence, and those matters create a triable issue, the plaint cannot ordinarily be rejected at the threshold.
Thus, the High Court did not finally hold that the suits were within limitation. It held that the issue could not be conclusively determined against the plaintiffs at the threshold and required trial.
Precedent Analysis
Ansal Housing Ltd. v. Samyak Projects Pvt. Ltd., 2023 SCC OnLine Del 2387
This was a central authority supporting the respondents.
The Delhi High Court had considered the interaction between the Income Tax Act and Section 19 of the Limitation Act and held that deposit of TDS against the relevant transaction could constitute payment on account of debt, thereby extending limitation.
Samyak Projects (P) Ltd. v. Ansal Housing Ltd., 2024 SCC OnLine Del 3778
The Division Bench affirmed the above proposition.
The present Court treated this as binding and noted that the Division Bench had specifically declined to ignore TDS deposits when calculating limitation.
S.P. Brothers v. Biren Ramesh Kadakia and ACTAL v. India Infoline Ltd.
The petitioner relied on these Bombay High Court judgments to argue that TDS certificates do not constitute acknowledgments of debt.
The Delhi High Court distinguished them because they dealt with the evidentiary effect of TDS certificates and could not override the subsequent binding Delhi High Court Division Bench ruling concerning TDS deposits and Section 19 of the Limitation Act.
Kirtikumar Shantilal Chandan v. Hitesh Pawanraj Mehta
The Bombay High Court order relied upon by the petitioner was similarly distinguished and held not to detract from the position affirmed by the Delhi High Court Division Bench.
Valliamma Champaka Pillai v. Sivathanu Pillai, (1979) 4 SCC 429
The Court emphasised that a decision of one High Court has only persuasive value before another High Court and is not binding upon it.
Accordingly, the Bombay High Court authorities could not prevail over binding Delhi High Court precedent.
Salim D. Agboatwala v. Shamalji Oddhavji Thakkar, (2021) 17 SCC 100
The Supreme Court reiterated that rejection of a plaint under Order VII Rule 11 is a drastic power terminating a civil action at its inception and therefore must be exercised with circumspection.
This is particularly important where rejection is sought on limitation, which frequently involves a mixed question of fact and law requiring trial.
Ramisetty Venkatanna v. Nasyam Jamal Saheb, 2023 SCC OnLine SC 521
The petitioner relied upon this decision for the principle that a plaintiff cannot defeat Order VII Rule 11 through clever drafting or by creating an illusory cause of action.
The High Court did not find that principle sufficient to reject the present plaints because there was actual documentary material—TDS deposits and signed balance confirmations—requiring evidentiary consideration.
Court’s Reasoning
The Court rejected the petitioner’s attempt to determine limitation solely from the original 2008 loan date.
The pleadings were not confined to the original advancement of money. The respondents specifically relied upon later acts by Amit Gupta—particularly:
- signed balance confirmations continuing until March 2014; and
- TDS deductions and deposits continuing until 31 March 2015.
Those circumstances potentially affected computation of limitation under Sections 18 and 19 of the Limitation Act.
The Court considered it inappropriate at the Order VII Rule 11 stage to undertake a final determination of the evidentiary effect of Form 26AS, Form 16-A, balance confirmations and other documents.
Further, binding Delhi High Court precedent already recognised that TDS deposits made against the underlying debt could trigger a fresh limitation period under Section 19.
The Court therefore agreed with the Trial Court that limitation was a mixed question of law and fact requiring evidence, rather than an obvious statutory bar apparent from the plaint itself.
Consequently, the Trial Court had committed neither perversity nor patent illegality in refusing to terminate the recovery suits at the threshold. There was therefore no basis for interference under Article 227.
Conclusion
The Delhi High Court dismissed both Article 227 petitions and upheld the Trial Court’s refusal to reject the recovery suits under Order VII Rule 11 CPC.
The Court held, in substance, that:
- the mere fact that the loans originated in 2008 did not conclusively make the 2017 recovery suits time-barred;
- TDS deductions and deposits continuing until March 2015 were relevant under Section 19 of the Limitation Act;
- signed balance confirmations were also relevant under Sections 18 and 19;
- their precise evidentiary effect required trial;
- limitation was therefore not capable of final determination at the Order VII Rule 11 stage; and
- the Trial Court correctly refused to reject the plaints at the threshold.
Importantly, the High Court did not finally adjudicate that the recovery claims were within limitation. It held that limitation remained a triable issue to be determined after evidence.
Case Details
Case: Amit Gupta v. Sandeep Gupta with Amit Gupta v. Krishna Gupta
Court: High Court of Delhi at New Delhi
Case Number: CM(M) 1345/2019 & CM APPL. 40567/2019; CM(M) 1346/2019 & CM APPL. 40632/2019
Judge: Hon’ble Mr. Justice Ajay Digpaul
Date: 24 August 2026
Result: Petitions Dismissed; Trial Court order refusing rejection of plaints upheld; limitation to be determined after evidence at trial
