Rs 2.58 crore ITI machinery suit against Tamil Nadu Co-operative Union dismissed as time-barred
Justice A.D. Maria Clete held that a 2015 letter about serving a rejection order was not an acknowledgment of debt, that a 2019 promise to decide after permission from higher authorities was neither an acknowledgment nor a promise to pay, and that the machinery supplied to nine training institutes was defective.
A Coimbatore proprietor who supplied workshop machinery to nine co-operative training institutes in 2012 and was paid less than half the invoice value has lost his suit for the balance of Rs 2,57,91,638. The Madras High Court held that the three-year limitation period ran out on 30 June 2015 and that none of the five letters the supplier relied on to stretch it amounted to an acknowledgment of liability. Justice A.D. Maria Clete also found, on the evidence, that the machinery was defective and unfit for its purpose. The suit, which had once been thrown out at the plaint stage and then restored by a Division Bench, was dismissed with costs.
A Rs 6.87 crore order and a Rs 2.39 crore payment
M. Mohan, sole proprietor of Sivasakthi Corporation, describes his business as the supply of spares, scraps, tools, instruments and computer components. The Tamil Nadu Co-operative Union is a society registered under the Tamil Nadu Co-operative Societies Act, 1983, which promotes co-operative education and training. In 2012-13 the Union decided to introduce Fitter, Welder and Electrician trades at seven Institutes of Co-operative Management, at Kancheepuram, Vellore, Salem, Coimbatore, Madurai, Tirunelveli and Thanjavur, and two Industrial Training Institutes at Pattukottai and Burgur. Approval from the National Council for Vocational Training required machinery, tools and equipment, so a tender was floated on 17 May 2012. Mohan was the lowest bidder and received a work order dated 6 June 2012 for Rs 6,86,93,549.
According to Mohan, he supplied machinery worth Rs 4,97,14,956 during 2012 to NCVT specifications. The Union paid Rs 1,26,67,247, Rs 56,73,634 and Rs 55,82,437 in three instalments in June 2012, a total of Rs 2,39,23,318, and nothing after that. He also said he had ordered the remaining machinery, worth Rs 1,89,78,593, from his principal supplier, but the Union never took delivery.
The Union's account was different. It said the goods were inferior, substandard, non-branded, short in quantity and without ISI or BIS marks, and therefore unfit for vocational training. On the Registrar's directions, inspections were carried out and the Principals at Salem and Madurai reported serious defects on 23 August and 12 August 2012. Mohan was asked to install the machines and run trials to show they worked, and did not. The defective supplies, the Union said, prevented the institutions from obtaining NCVT approval. On 22 January 2014 it told the Principals to stop installation, return the machinery and recover the money paid, and between January and April 2014 the Principals wrote to Mohan asking him to take the machines back and refund the amounts. He did neither.
An enquiry under Section 81 of the Co-operative Societies Act followed, with an enquiry officer appointed on 13 May 2014. The Union relied on a report said to have found the machinery defective and to have put its loss at Rs 2,39,23,318, the sum it had paid. Surcharge proceedings under Section 87 ended in a Deputy Registrar's order of 9 December 2015 holding Mohan and four others responsible, though Mohan himself was not proceeded against because he was not a member of the society. The Union also said a sales-tax check in December 2014 showed Mohan's registered business was textile scrap, not industrial tools, and accused him of misrepresenting his credentials to win the tender.
Two writ petitions, a rejected plaint and a trip to the Supreme Court
The dispute had already been to court several times. In W.P. No. 11061 of 2014 the High Court directed the Union, on 4 July 2014, to dispose of Mohan's representation of 13 March 2014 on merits after hearing him. The Union rejected the representation on 7 January 2015. Mohan then filed W.P. No. 23443 of 2015 to quash that rejection and for payment of the balance with 18 per cent interest; it was dismissed on 3 August 2015 on the ground that the relief sought was in substance recovery of money under a private contract, and the court declined to appoint an arbitrator.
The suit itself was filed on 16 December 2019. The plaint was rejected under Order VII Rule 11(d) of the CPC on 19 August 2021; a Division Bench allowed Mohan's appeal, O.S.A.(CAD) No. 141 of 2021, on 12 March 2024 and restored the suit, and the Supreme Court dismissed the Union's special leave petition on 11 November 2024, clarifying that nothing said below would bind the trial. Eight issues were framed on 19 February 2025. Mohan gave evidence as P.W.1 and marked Exs. P1 to P37; G. Kamaraj, Assistant Director of the Union, gave evidence as D.W.1, and Exs. D1 to D8 were marked.
What each side argued
Mr K.V. Ananthakrushnan, for Mohan, said the contract, the supply, the payment and the balance were substantially admitted: D.W.1 had accepted the purchase order (Ex. P1), the invoices (Ex. P3) and the amount outstanding. The defect allegation rested on general letters from 2014 (Exs. D2 to D8) that identified and quantified nothing, and the enclosure referred to in Ex. D3 was never produced. Mohan's undertaking of 10 June 2012 (Ex. P2) had required defects to be notified within three months of supply. Inspection reports from the Directorate of Employment and Training in 2018 and early 2019 (Exs. P25 to P33) showed the machines in working condition, and D.W.1 had never inspected them himself. The surcharge proceedings against the Union's officials had been quashed on 11 August 2023 in W.P. No. 8444 of 2017.
On limitation, counsel relied on the Union's letters of 14 May 2015, 7 May 2018, 19 September 2018 and 3 June 2019 (Exs. P8, P10, P12 and P15) as successive acknowledgments under Section 18 of the Limitation Act, 1963, the first of them falling within three years of the last supply in November 2012. In the alternative, Ex. P15 was a written promise to pay a time-barred debt enforceable under Section 25(3) of the Contract Act, 1872.
Mr P.V. Balasubramanian, Additional Advocate General, assisted by Mr Arasu Sanga Tamil, Government Advocate, said the cause of action arose in 2012 and the three years under Article 113 ran out in 2015. Relying on Khan Bahadur Shapoor Fredoom Mazda v. Durga Prosad Chamaria, Shanti Conductors v. Assam State Electricity Board and J.C. Budhraja v. Orissa Mining Corporation, he argued that an acknowledgment under Section 18 only extends an existing right, and only if made before the period expires; Exs. P12 and P15 came after it. Neither contained an express, signed promise to pay a time-barred debt, Mohan had not proved the writers had authority to bind the Union, and the letters were conditional on the outcome of proceedings under the Co-operative Societies Act. On merits, the machines were defective, Mohan had admitted he never installed them, and no trial runs were conducted.
The May 2015 letter was about a locked door, not a debt
Justice Maria Clete took limitation first. The last payment was made on 30 June 2012; the suit came on 16 December 2019. Mohan relied on five letters: Ex. P20 of 7 January 2015, Ex. P8 of 14 May 2015, Ex. P10 of 7 May 2018, Ex. P12 of 19 September 2018 and Ex. P15 of 3 June 2019. The court explained why each acknowledgment had to be tested in sequence. Even if Ex. P20 counted, Ex. P10 came more than three years after it, so everything turned on Ex. P8. If it was a valid acknowledgment, a fresh period began on 14 May 2015 and Ex. P10 fell inside it; if not, the later letters could not revive a claim already dead.
Ex. P20 was the Union's order rejecting Mohan's representation. It admitted no liability; it said only that a Section 81 enquiry had begun and a decision would follow the enquiry report. That, the court held, is not an acknowledgment.
Ex. P8 was the Union's reply to a lawyer's notice of 8 May 2015 (Ex. P7) accusing it of disobeying the writ order and inviting contempt. The judgment reproduces the reply. It said the representation had been disposed of on 7 January 2015, that the order had been sent by registered post and come back endorsed “door locked”, that it was re-sent on 21 February 2015 to a second Coimbatore address Mohan had supplied, and that he had not collected it despite postal intimation. In the Union's words, “it may not be proper to say that we have not implemented the orders”. The letter enclosed the rejection order.
The court held that an acknowledgment under Section 18 need not state the amount or promise payment, but it must, expressly or by necessary implication, admit a subsisting liability. Ex. P8 did not. It concerned the disposal of a representation and the steps taken to serve the order; it asserted compliance with a court direction and disputed a charge of non-compliance. A statement that a representation has been disposed of cannot be read as an admission that the money claimed in it is due. The writ order of 4 July 2014 had itself only required the Union to consider the representation, and decided nothing about liability.
With Ex. P8 gone, the original period expired on 30 June 2015. Exs. P10, P12 and P15, all from 2018 and 2019, could not extend it under Section 18 even if they contained acknowledgments, because an acknowledgment made after expiry cannot revive a time-barred claim.
Permission from higher authorities is not a promise to pay
Ex. P15, the 3 June 2019 letter, got separate treatment because Mohan pleaded it two ways. As a Section 18 acknowledgment it failed for the same reason: it came four years after expiry. As a promise under Section 25(3) of the Contract Act it had to meet a different test. The court set out the distinction: a Section 18 acknowledgment must come before limitation expires, while a Section 25(3) promise is precisely a promise to pay a debt that limitation has already made unenforceable, and it must be an express promise, in writing, signed by the debtor or an authorised agent. A mere acknowledgment of debt is not enough. The two pleas may be raised in the alternative, the judge said, but Ex. P15 had to satisfy Section 25(3) on its own terms.
It did not. The letter said that “a decision regarding payment would be taken only after obtaining permission from the higher authorities”. The Union had neither expressly undertaken to pay the amount claimed nor unequivocally admitted that it was liable to. The question of payment was left to a future decision, and the letter does not constitute a concluded promise to pay. Issue 1 was answered against Mohan: the suit was barred by limitation. Issue 3 was answered in the negative.
The merits, decided anyway
Because both sides had led evidence on every issue, the court went on to decide the rest under Order XIV Rule 2(1) of the CPC. On Issue 2, the Union's argument that the dismissal of W.P. No. 23443 of 2015 barred the suit failed: that petition was dismissed because a money claim under a private contract was not fit for writ jurisdiction, and Mohan's entitlement was never decided on merits. The suit was not barred on that ground.
On Issue 4, whether the goods were defective, the court recorded that the Union wrote to the Regional Joint Registrar on 9 July 2012 to inspect the supplies and on 19 July 2012 asked the Principals to verify quality and report; the Principals reported the machinery defective and unsuitable. Mohan denied the defects and complained that the inspections happened in his absence, but he had not explained why he failed to attend and demonstrate the machines when asked, nor shown that he offered a joint inspection or any rectification. That failure would not by itself prove the defects, the court said, but it was a relevant circumstance read with the inspection reports. Ex. P2, the three-month defect window, was a photocopy of a letter Mohan himself issued, with no acknowledgment of receipt and no proof it formed part of the tender or was ever accepted; a supplier cannot impose a restriction on the buyer's right to complain by a unilateral letter, though the court declined to find the document fabricated. The Section 81 enquiry report had not been produced, so the court did not treat its adverse finding as conclusive. On the evidence, it found on a preponderance of probabilities that the machinery was defective and unfit for its intended purpose.
On Issue 5 the court found that the tender document, Ex. D1, contained no clause requiring Mohan to take the machinery back, and answered the issue in the negative to that limited extent, without disturbing the finding on Issue 4. Issues 6, 7 and 8, on the principal, interest at 18 per cent and other relief, were answered against Mohan in consequence of the limitation finding.
Order
CS No. 72 of 2020 was dismissed with costs. The court held the suit barred by limitation, the period having expired on 30 June 2015; held that the letter of 3 June 2019 was neither an acknowledgment under Section 18 of the Limitation Act nor a promise under Section 25(3) of the Contract Act; found the machinery supplied defective and unfit for purpose; and found no contractual obligation on the supplier to take it back. The judgment was reserved on 30 September 2026 and pronounced on 26 October 2026.