Bombay High Court’s interim view on whether TDS can extend limitation for debt recovery

Background of the dispute

In Kirtikumar Shantilal Chandan Vs Hitesh Pawanraj Mehta, Commercial Summary Suit No. 11 of 2022, the Bombay High Court was called upon to consider an important legal question:

Whether issuance of a TDS certificate, or deposit of TDS, can be treated as acknowledgment of liability or payment on account of debt so as to extend the limitation period under Sections 18 and 19 of the Limitation Act, 1963.

The suit was listed pursuant to an earlier order dated 18 January 2024. Justice Abhay Ahuja had, in a previous hearing, appointed Mr. Prathamesh Kamat as Amicus Curiae to assist the Court on the limitation issue specifically in the context of TDS certificates.

The order dated 25/01/2024 is not a final adjudication of the monetary claim in the suit. It is an interlocutory order that:

  • Records the rival legal positions and case law on TDS and limitation; and
  • Deals with the administrative aspect of likely transfer of the suit to the City Civil Court at Bombay.

Appointment and role of Amicus Curiae

The Court had earlier requested Mr. Prathamesh Kamat, a Counsel of the Court, to assist on a focused legal question:

  • Can a TDS certificate be regarded as an acknowledgment of liability for the purpose of extending limitation under Sections 18 and 19 of the Limitation Act, 1963?

In response, the Amicus Curiae relied upon and analysed three decisions:

  • S. P. Brothers Vs Biren Ramesh Kadakia – 2008 SCC OnLine Bom 1599
  • Actal Vs India Infoline Limited – 2012 SCC OnLine Bom 1507
  • **J. K. Engineering Pvt. Ltd. Vs ANE Industries Pvt. Ltd.`

He also referred to the Full Bench decision in:

  • Jyotsna K. Valia Vs T. S. Parekh and Co. – 2007(4) Mh. L. J.

These authorities collectively represent the settled Bombay High Court view that a mere TDS certificate, by itself, is not sufficient to qualify as an acknowledgment of debt.

Bombay High Court’s existing approach on TDS certificates

Position in S. P. Brothers and affirmed by Full Bench

The Division Bench decision in S. P. Brothers Vs Biren Ramesh Kadakia had held that issuance of a TDS certificate does not, by itself, amount to acknowledgment of a debt within the meaning of Section 25 of the Indian Evidence Act. According to that ruling:

  • A TDS certificate primarily confirms deduction of tax at source.
  • It does not typically specify:
    • The principal loan amount;
    • The rate of interest; or
    • The precise contractual obligation between the parties.

Therefore, such certificates were not treated as documents that could, automatically and independently, be used to prove acknowledgment of an enforceable debt.

This principle was later endorsed by the Full Bench in Jyotsna K. Valia Vs T. S. Parekh and Co., which reiterated:

  • A TDS certificate is essentially a tax compliance document;
  • It is not, in itself, a record that evidences a promise to pay, admission of debt, or other necessary details to extend limitation.

Relevance of Order 37 Rule 2

The Amicus Curiae also pointed out that:

  • A straightforward reading of Order 37 Rule 2 of the Code of Civil Procedure shows that the provisions relating to summary suits have limited and specific application;
  • A TDS certificate would not fall within the category of documents normally contemplated under Order 37 Rule 2 for purposes like instituting a summary suit based on written contracts or negotiable instruments.

This reinforces the idea that, under existing Bombay High Court jurisprudence, a TDS certificate is not automatically treated as either:

  • A document evidencing acknowledgment of debt, or
  • A standalone foundation for claiming extension of limitation.

Plaintiff’s reliance on Delhi High Court’s contrary view

Ansal Housing Ltd Vs Samyak Projects Pvt. Ltd.

On behalf of the plaintiff, Mr. Sharma, learned Counsel, invited the Court’s attention to the Delhi High Court decision in:

  • Ansal Housing Ltd Vs Samyak Projects Pvt. Ltd. – 2023 SCC OnLine Del 2387 (judgment dated 26 April 2023).

The Delhi High Court, in that case, had taken a different analytical route. Rather than treating TDS certificates as acknowledgment of liability, it considered whether: