Apex Court interprets the term ‘First Learns’ under Limitation Act#indianlaws

The Hon’ble Supreme Court has interpreted the meaning of the term “first learns” as provided under Article 91(a) of the Limitation Act, 1963 and held that the provision of Article 91 (a) of the Limitation Act demands two things: First, knowledge on the part of the plaintiff; and second, the relevant fact is within his peculiar knowledge. The term “first learns” places a burden of knowledge which is rather specific in nature. Thus, the knowledge must be of the identity of a specific person in whose possession the bonds are and that he acquired the possession of the said bonds under an arrangement, which in law would constitute wrongful conversion.

The Apex Court had before it a question of law to answer on what is the meaning of the term “first learns” as provided under Article 91(a) of the Limitation Act, 1963?

The above question came up before the court in the matters arising out of Securities Scam that occurred in the Bombay Stock Exchange in 1992 resulting into Banks and Financial Institutions getting engulfed into various recovery related litigation claiming rightful damages.

Article 91(a) of the Limitation Act describes limitation period for suit for compensation in regard to claim of wrongful taking or detaining any specific movable property lost, or acquired by theft, or dishonest misappropriation, or conversion. The limitation provided is of three years when the person having the right to the possession of the property first learns in whose possession it is.

For the purposes of present matter, the question or claim was in regard to bonds. It was observed that the suit bonds, in the instant case, are movable properties which are capable of being possessed. The term movable property, as defined in Section 3(36) of the General Clauses Act, 1897 to mean as property of every description, except immovable property. Thus, everything that is not immovable is movable, and thus the suit bonds were also specific moveable property to which Article 91(a) of the Limitation Act would apply.

As per the relevant provision the period of limitation shall start running from the date when the person ‘first learns’ about the conversion of the moveable property. While it is true that the word used in the said Article is “first learns” and not knowledge, it was observed as difficult to construe the word “first learns” without attributing to it certain degree of knowledge and accordingly it was the degree or the extent of knowledge which in fact was the subject matter of controversy in the instant case.

It was held that the provision of Article 91 (a) of the Limitation Act demands two things:

First, knowledge on the part of the plaintiff; and second, the relevant fact is within his peculiar knowledge. The term “first learns” places a burden of knowledge which is rather specific in nature. Thus, the knowledge must be of the identity of a specific person in whose possession the bonds are and that he acquired the possession of the said bonds under an arrangement, which in law would constitute wrongful conversion. The knowledge of a specific person against whom the suit can be instituted is what is crucial. A mere suspicion or a whisper of knowledge is not enough for the period of limitation to start running.

Thus, the period of limitation according to Article 91(a) of the Limitation Act for filing a suit for compensation for conversion of property is three years from the date on which the person having the right to possession of the property learns in whose possession it is.

Standard Chartered Bank vs. Andhra Bank Financial Services Ltd. & Ors.

SC, 28.08.2015

Civil Appeal Nos. 9540-9541 of 2010