Article 37: (Art. 75 of the Act of 1908):
The period of limitation for a suit on a promissory note or bond payable by instalments, which provides that, if default be made in payment of one or more instalments, the whole shall be due is three years and the time starts to run when the default is made, unless where the payee or obligee waives the benefit of the provision and fit and then when fresh default is made in respect of which there is no such waiver.
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Both the Articles 36 and 37 deal with a promissory note or bond payable by instalments. But, the applicability of Article 36 or Article 37 depends upon the terms of the bond and the nature of the claim or the character of the suit.
There is a clear distinction between Art. 36 and Art. 37. Article 36 applies to an instalment bond which does not have the default clause that in case of default whole amount then due shall at once be recoverable. On such bond the plaintiff is entitled by the very terms of the bond to sue only for such instalments as remain unpaid. But where the document provides that in case of default the obligee has the right to sue for the whole sum then remaining due, Article 37 applies.
The following conditions must be fulfilled before the Article 37 applies—
(i) The suit should be on a promissory note or bond;
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(ii) The promissory note or the bond should be payable by instalments;
(iii) The note or bond should stipulate for the whole amount becoming payable in the event of default as to any instalment;
(iv) The default should have occurred; and
(v) The default should not have been waived.
ADVERTISEMENTS:
In Devidas Dhariram v. Parma Gokalia, (AIR 1959 Mad. 413), it is stated that the law as to instalment bond with default clause in Art. 37 is:
(a) As soon as the default clause comes into operation, the cause of action for the recovery of the whole amount due accrues and that is the starting point of limitation unless there is waiver.
(b) Waiver may be intentional.
(c) Waiver may be implied from conduct.
(d) The creditor’s intention to waive his right must be manifest by some over act, as for instance, acceptance and satisfaction of a particular defaulted instalment.
(e) Mere abstinence from swing for the who’s amount due on default or allowing benefit to pass unnoticed does not constitute waiver.
(f) Waiver must be specifically pleaded and proved, the onus being on the creditor.
(g) Waiver is a mixed question of law and fact and depends upon the facts and circumstances of each case.
The word ‘waiver’ has not been defined in the Limitation Act, 1963.
In Halsbury’s Laws of England, ‘waiver’ is defined as the abandonment of a right in such a way that the other party is entitled to plead abandonment by way of confusion and avoidance if the right is thereafter asserted and is either express or implied from conduct. Thus, waiver is an intentional relinquishment of a known right. In Sukhlal v. Bhoora, (AIR 1934 All. 1039), it has been held that the expression ‘waives the benefit’ in Article 37 is something exercised for the benefit of the credit or and not against him. So ‘waiver’ for the purpose of the Article 37 may be purely a one-sided act and need not be for consideration proceeding from the debtor. Such waiver under Article 37 may be by express of an intention to waive the benefit either by communication to the debtor or by any other overt act.
Under Art. 37, the period of limitation is three years when the default is made unless the payee or obligee waives the benefit of this provision and then the limitation starts from the date of fresh default in respect of which there is no waiver.
In Devidas v. Parma Gokalia, (AIR 1959 MP 413), it has been held that under the Article 37, the starting point would depend upon the provision made in the note or bond as to when the whole amount would become due whether on default of payment of one instalment or a number of instalments.
If the whole amount becomes due on default of any one instalment the amount will become due as soon as the first default is made, and the time begins to run from that default. In Bhagwati v. Chitrapal, (AIR 1947 All. 38), it has been held that if there was waiver of the first default then the whole amount will become due as soon as the debtor commits default for a second time unless there was also waiver of the second default and so on.