Legal notice and limitation for money recovery in India

Why payment correspondence misleads

A business may have a long email chain of invoices, reminders and a proposed repayment schedule. The debtor keeps saying finance is reviewing it, and the creditor assumes the chain keeps the claim alive.

What the chain proves and what it does to limitation are different questions. A creditor's reminder does not become the debtor's acknowledgment because both sit in the same thread, and negotiations do not pause the clock in general.

Work out the limitation date before sending another demand. Collection and protecting the claim should run on separate schedules.

The start date depends on the claim

There is no rule that every recovery claim has three years from the latest invoice or reminder. Most ordinary money claims do have three years, but the start date depends on the Schedule article that fits the transaction:

Schedule article	Claim	Period	Time runs from
Article 1	Balance due on a mutual, open and current account, with reciprocal demands	Three years	The close of the year in which the last item admitted or proved is entered
Article 14	Price of goods sold and delivered, no fixed credit period	Three years	The date of delivery
Article 15	Price of goods sold and delivered, payable after a fixed credit period	Three years	When the credit period expires
Article 18	Price of work done at the defendant's request, no time fixed for payment	Three years	When the work is done
Article 55	Compensation for breach of contract not otherwise provided for	Three years	When the contract is broken
Article 113	Any suit not provided for elsewhere	Three years	When the right to sue accrues

For each claim, identify the contract, the supply or performance, the credit terms, the due date and any breach. A group of invoices may need separate calculations.

A ledger with invoices and payments is not automatically a "mutual, open and current account" under Article 1. That needs reciprocal demands between the parties.

When an acknowledgment starts a fresh period

Under section 18, an acknowledgment of liability in writing, signed by the person liable (or someone through whom they derive liability), made before the period expires, starts a fresh period from the date it was signed.

The Explanation is generous on wording. An acknowledgment can still count if it does not state the exact amount, says payment is not yet due, refuses to pay, claims a set-off, or is addressed to someone other than the creditor.

"Signed" includes signature by a duly authorised agent.

But it must acknowledge the liability in question. A message saying "will look into this" from someone without authority, about a different transaction, does not reset this claim.

If the writing is undated, oral evidence may show when it was signed, but not what it said. Preserve originals and metadata; a cropped screenshot can lose who acknowledged what.

A part-payment is not an automatic extension

Under section 19, a payment on account of the debt, made before the period expires by the person liable or their authorised agent, starts a fresh period from the date of payment.

The proviso adds a condition: an acknowledgment of the payment must appear in the handwriting of, or in a writing signed by, the person making it. A bank entry proves money moved; it may not, alone, satisfy that condition.

Where a customer has several open invoices, document how each payment was allocated. Do not reallocate an unrelated payment to the oldest invoice after the event to create a limitation argument.

If the period has already expired

Sections 18 and 19 only work if the acknowledgment or payment comes before expiry. A later acknowledgment does not revive the claim under those sections.

A separate route may exist under section 25(3) of the Indian Contract Act, 1872: a written promise, signed by the debtor or an authorised agent, to pay all or part of a debt that is time-barred is a valid contract.

That needs a promise to pay, not just an admission that the money was owed.

Delay in filing a suit cannot simply be condoned

Section 5, which lets a court admit late appeals and applications for sufficient cause, does not apply to suits. Under section 3, a suit filed after the period must be dismissed even if the defendant does not raise limitation.

So a last-minute demand letter is not a rescue plan. If a claim is close to its deadline, decide the proceeding and file in time.

Commercial suits: mediation first, and that time is excluded

For a commercial dispute, section 12A of the Commercial Courts Act, 2015 bars a suit that does not seek urgent interim relief unless the plaintiff first tries pre-institution mediation.

The Supreme Court held this mandatory in Patil Automation v Rakheja Engineers (2022).

The time the parties spend in that mediation is not counted for limitation. Mediation is to finish within three months, extendable by two with consent. Plan the application well before the deadline.

Arbitration needs its own check

Where the contract has an arbitration clause, section 43 of the Arbitration and Conciliation Act, 1996 applies the Limitation Act to arbitrations.

Under section 21, unless agreed otherwise, the arbitration starts when the respondent receives a request to refer the dispute to arbitration.

A letter demanding payment and a request referring a dispute to arbitration do different jobs. Do not assume a generic payment notice commenced the arbitration. Check the clause, wording, recipient and delivery.

Cheque dishonour has its own separate timetable. See our guide to the first 15 days after a cheque bounce notice.

A limitation check before the next demand

Gather the record. Keep the contract, purchase orders, invoices, proof of supply, credit terms, bank receipts and the full correspondence together.
Fix the start date. For each claim, identify the Schedule article and the event that starts time running.
Calculate the last date. Record a provisional last date for each claim, invoice by invoice where needed.
Test each acknowledgment. Check its content, date, signature or authentication, and the signer's authority.
Test each payment. Check who paid, when, how it was allocated, and whether a signed acknowledgment of it exists.
Choose the route and act in time. Decide between mediation and suit, arbitration or another remedy, and start it before the earliest deadline.

Frequently asked questions

Does a reminder email or legal notice give me another three years?

No. Your own demand does not restart limitation. A reply from the debtor may, if it is a written, signed acknowledgment of the liability made before the period expires.

Does a WhatsApp message acknowledging the debt extend limitation?

Possibly. Section 18 needs a written acknowledgment of the liability, signed by the debtor or an authorised agent, before expiry. Whether a message meets the signature requirement depends on the facts, so preserve the whole conversation.

Is proof of a bank transfer enough under section 19?

Not always. The payment must be made before expiry by the person liable or their agent, and an acknowledgment of it must appear in their handwriting or in a writing they signed.

Does the time spent in pre-institution mediation count towards limitation?

No. Under section 12A of the Commercial Courts Act, the period during which the parties are in pre-institution mediation is not counted for limitation.

Can a court condone delay in filing a recovery suit?

No. Section 5 of the Limitation Act applies to appeals and applications, not suits, and section 3 requires a late suit to be dismissed even if limitation is not raised.

The takeaway

The clock runs from the claim, not from your last letter. Work out the last date for each claim, test any acknowledgment or payment against sections 18 and 19, and file before the earliest deadline.

To review a recovery claim and its limitation date, contact Saya & Associates with the invoices and the full correspondence.

This article provides general information as at 2 October 2026. Limitation depends on the transaction, the accrual event, the remedy, the documents and any recognised extension or exclusion. It is not legal advice.

Does a legal notice extend limitation for money recovery in India?