Shakti Bhog vs Central Bank: Supreme Court 05.06.2020 Clarifies Limitation For Bank Charge Disputes
The Supreme Court in M/S. Shakti Bhog Food Industries Ltd. vs The Central Bank Of India, Judgment delivered by A.M. Khanwilkar, J. on 05.06.2020, settled an important banking law question: When does limitation start for a suit against bank for excess interest/commission charges? The Court held that under Article 113 of Limitation Act 1963, cause of action accrues when Bank firmly refuses the claim, not when overcharging first started. Practically what we have seen is that Banks reject plaints saying suit is time barred. Supreme Court said correspondence + legal notice can keep cause of action alive. This blog explains Shakti Bhog Case on banking disputes, limitation, and Order VII Rule 11 CPC.
Facts: Bank Charged Excess Commission; Borrower Wrote Letters For 5 Years
Appellant Shakti Bhog had Current Account CCM 20225 with Central Bank from 01.04.1997 to 31.12.2000. In July 2000 it noticed Bank was charging interest/commission @ Rs.4 per thousand on local cheques arbitrarily. Appellant wrote letter dated 21.07.2000. Then wrote 9 more letters till 20.06.2001.Assistant General Manager vide letter dated 09.07.2001 assured matter being examined. No decision. Appellant wrote to Finance Minister 31.10.2001. Senior Manager replied 08.05.2002 saying cheques purchased at prevailing rates. Again wrote 12.07.2002, 22.09.2002, 24.03.2003. Senior Manager finally refused vide letter 19.09.2002 saying everything as per rules. Legal notices 28.11.2003 and 07.01.2005. Suit filed 23.02.2005 for rendition of accounts + refund of Rs.31,57,484/- with 18% interest. Trial Court rejected plaint under Order VII Rule 11(d) CPC saying barred by Article 113 Limitation Act. Right to sue accrued in Oct 2000. Suit filed beyond 3 years. District Court and High Court affirmed. Supreme Court reversed. A common mistake Banks make is calculating limitation from date of first overcharge. Shakti Bhog Case says no.
Article 113 Limitation Act: "When Right To Sue Accrues" Not "First Accrues"
The Supreme Court in Shakti Bhog Case held: Article 113 is residuary article. It says "Three years - When the right to sue accrues". It does NOT say "first accrues". Contrast with Article 58 "when right to sue first accrues".
Court relied on Union of India vs West Coast Paper Mills and Khatri Hotels vs Union of India. If right to sue accrues multiple times, limitation runs from last accrual. In banking disputes, cause of action accrues when Bank denies liability. Here Bank denied vide 08.05.2002 and firmly vide 19.09.2002. Legal notice reply 23.12.2003 also triggered cause. Suit filed 23.02.2005 was within 3 years.
In Our Experience: Order VII Rule 11 Cannot Be Used For Mixed Question
The Supreme Court in Shakti Bhog Case held: Rejection of plaint under Order VII Rule 11(d) is drastic. Court must read plaint as a whole. Limitation is mixed question of fact and law. Cannot decide at threshold without evidence. Trial Court erred by picking only para 8 "noticed in July 2000" and ignoring paras 11,14,15 showing Bank’s assurance and later refusal. For Banks: If you assure borrower "matter under examination", you cannot later claim limitation started earlier.
Conclusion
M/S. Shakti Bhog Food Industries Ltd. vs Central Bank of India establishes that shakti bhog vs central bank supreme court 2020 limitation law protects borrowers in banking disputes. Supreme Court 05.06.2020 held Article 113 limitation starts when right to sue actually accrues - i.e. on bank’s refusal. Correspondence and legal notices matter. As the law stands, Banks cannot get plaints rejected under Order VII Rule 11 just by saying "overcharge happened 3 years ago". The Supreme Court’s ruling ensures fair hearing in bank charge disputes.
