Source:  Kerala High Court    

Why in News? 

Recently, the bench of Justice Satish Ninan and Justice P. Krishna Kumar held that the benefit of Section 14(1) of the Limitation Act,1963 cannot be availed unless the earlier proceedings were pursued with due diligence and in good faith, and all statutory conditions are strictly satisfied. 

• The Kerala High Court held this in the matter of M/S. National Collateral Management Service Ltd. and another v. Valiyaparambil Traders (2025). 

What was the Background of M/S. National Collateral Management Service Ltd. and another v. Valiyaparambil Traders (2025) Case? 

• Valiyaparambil Traders, a registered partnership firm engaged in spice trading, along with its partners Shajahan V.E. and Majida Shajahan, filed a suit against National Collateral Management Service Ltd. for recovery of money allegedly due from business transactions. 
• National Collateral Management Service Ltd. is a company engaged in bulk purchase of hill produce from traders, with its second defendant being the Kerala State Head of the company. 
• The parties had entered into various business transactions on a credit basis, with the plaintiffs alleging that the accounts were running irregularly and that substantial amounts remained due and payable. 
• The defendants, while admitting to business dealings with the plaintiffs, denied any liability and contended that no amounts were due to the plaintiffs from their transactions. 
• Previously, the plaintiffs had filed an earlier suit bearing O.S.No.314 of 2013 against the same defendants seeking identical relief, but at that time the plaintiff firm was unregistered. 
• The earlier suit was dismissed by the court as it was barred under Section 69(2) of the Indian Partnership Act, which prohibits unregistered firms from instituting suits on contracts against third parties. 
• Following the dismissal of the first suit, the plaintiffs got their firm registered and subsequently filed the present suit in 2016 before the Additional Sub Court, North Paravur. 
• The defendants raised defences of res judicata based on the earlier judgment and limitation, arguing that the present suit was filed beyond the prescribed limitation period. 
• The trial court rejected the defendants' contentions regarding res judicata and limitation, holding that the suit was maintainable and within the limitation period. 
• The trial court decreed the suit in favour of the plaintiffs, leading to the present appeal by the defendants challenging the money decree dated 30th November 2016. 

What were the Court’s Observations? 

• The High Court identified the primary issue for determination as whether the trial court was correct in excluding the period during which the earlier suit O.S.No.314 of 2013 was pending while computing the limitation period under Section 14 of the Limitation Act. 
• The Court observed that Section 14(1) of the Limitation Act permits exclusion of time during which a plaintiff prosecutes another civil proceeding with due diligence and in good faith in a court unable to entertain it due to jurisdictional defect or other similar cause. 
• While acknowledging that dismissal under Section 69(2) of the Partnership Act falls within "other cause of like nature" as established in Haldiram Bhujiawala case, the Court emphasized that bonafide prosecution and due diligence are essential prerequisites for claiming such exclusion. 
• The Court observed that despite the defendants specifically pleading the bar under Section 69(2) in their written statement and a specific issue being framed on maintainability, the plaintiffs chose to proceed with the trial knowing the legal impediment. 
• Applying the principle from Madhavrao Narayanrao Patwardhan case, the Court noted that "good faith" under the Limitation Act requires due care and attention, and prosecution of a suit despite knowledge of its non-maintainability cannot be considered bonafide. 
• The Court concluded that the plaintiffs' conduct in pursuing the earlier suit despite clear notice of the legal bar demonstrated lack of bonafides and due diligence, thereby disentitling them from the benefit of Section 14 of the Limitation Act. 
• Consequently, the Court held that without the exclusion of the limitation period, the present suit was time-barred and liable to be dismissed, resulting in the allowance of the appeal and setting aside of the trial court's decree. 

What is Section 14 of the Act ? 

• Section 14 of the Limitation Act provides statutory protection to litigants by excluding the time period during which they have been prosecuting civil proceedings in good faith and with due diligence in a court that lacks jurisdiction or is otherwise unable to entertain the matter due to technical defects. 
• The provision operates on four essential ingredients that must be cumulatively satisfied: both proceedings must be civil proceedings in a court, the earlier proceeding must have been prosecuted with due diligence, the matter in issue must be the same in both proceedings, and the earlier proceeding must have been prosecuted in good faith in a jurisdictionally incompetent court. 
• The legislative intent behind Section 14 is to safeguard genuine litigants who have made honest attempts to seek judicial remedy through appropriate legal channels but approached an inappropriate forum due to jurisdictional limitations or similar technical impediments, ensuring their limitation period is not prejudicially affected. 
• The standard of "good faith" under Section 14 is stringently defined by Section 2(7) of the Limitation Act, which mandates that proceedings must be conducted with due care and attention, thereby establishing a higher threshold than mere honest intention and requiring demonstrable diligence in the prosecution of the earlier suit. 
• Section 14(1) and 14(2) create parallel frameworks for suits and applications respectively, both requiring that the time spent prosecuting earlier proceedings against the same defendant or party for identical relief shall be excluded from limitation computation when such proceedings were conducted in jurisdictionally defective courts. 
• Section 14(3) extends the protective scope to fresh suits instituted upon court permission under Order XXIII Rule 1 of the Civil Procedure Code, specifically when such permission is granted on grounds that the original suit failed due to jurisdictional defects or analogous causes. 
• The Explanation to Section 14 provides crucial operational guidelines including the counting methodology for excluded time periods, the deemed status of appellants as prosecuting parties, and the statutory recognition that misjoinder of parties or causes of action constitutes defects of similar nature to jurisdictional incompetence.