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Q. Discuss the effects of fraud, mistake, and Acknowledgment under Limitation Act, 1963. State the conditions for a valid acknowledgment.
Effect of fraud or mistake – Period of limitation starts only after fraud or mistake is discovered by affected party. [section 17(1)]. In Vidarbha Veneer Industries Ltd. v. UOI - 1992 (58) ELT 435 (Bom HC) , it was held that limitation starts from the date of knowledge of mistake of law. It may be even 100 years from date of payment.

The cardinal principal enshrined in section 17 of Limitation Act is that fraud nullifies everything. Thus, appeal against the party can be admitted beyond limitation, if party has committed fraud (in submitting non-genuine documents at adjudication in this case) – CC v. Candid Enterprises 2001(130) ELT 404 (SC 3 member bench).

Section 17 - Effect of fraud or mistake - (1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act-

(a)  The suit or application is based upon the fraud of the defendant or respondent or his agent; or
(b)  The knowledge of the right or title on which a suit or application is founded is concealed by the fraud of any such person as aforesaid; or
(c)  The suit or application is for relief from the consequences of a mistake; or
(d)  Where any document necessary to establish the right of the plaintiff or applicant has been fraudulently concealed from him;

The period of limitation shall not begin to run until the plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, has discovered it, or in the case of concealed document, until the plaintiff or the applicant first had the means of producing the concealed document or compelling its production:

Provided that nothing in this section shall enable any suit to be instituted or application to be made to recover or enforce any charge against or set aside any transaction affecting, any property which-

(i)  In the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know, or have reason to believe, that any fraud had been committed, or

(ii)  In the case of mistake, has been purchased for valuable consideration subsequently to the transaction in which the mistake was made, by a person who did not know, or have reason to believe, that the mistake had been made, or

(iii)  In the case of a concealed document, has been purchased for valuable consideration by a person who was not a party to the concealment and, did not at the time of purchase know, or have reason to believe, that the document had been concealed.

(2) Where a judgment-debtor has, by fraud or force, prevented the execution of a decree or order within the period of limitation, the court may, on the application of the judgment-creditor made after the expiry of the said period extend the period for execution of the decree or order:

Provided that such application is made within one year from the date of the discovery of the fraud or the cessation of force, as the case may be.

Effect of acknowledgment in writing – If acknowledgment of any property is right or liability is obtained in writing duly signed by the party against whom such property, right or liability is claimed, before the expiration of period of limitation, a fresh period of limitation is computed from date of acknowledgment. [section 18(1)], Acknowledgment can be signed either personally or by an agent duty authorized in this behalf. [section 18(2)]. [That is why Banks and Financial Institutions insist on confirmation of balance every year].

Section 18 - Effect of acknowledgment in writing -
(1) Where before the expiration of the prescribed period for a suit or application in respect or any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derived his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing thee acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act,1872 ( 1 of 1872), oral evidence of its contents shall not be received.

Explanation - For the purposes of this section, -

(a)  An acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by 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 a person entitled to the property or night;

(b)  The word "signed" means signed either personally or by an agent duly authorized in this behalf ; and

(c) An application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.

As held in Subbarsadya vs Narashimha, AIR 1936 It is not necessary that an acknowledgment within Section 18 must contain a promise pay or should amount to a promise to pay.