Limitation Begins To Run From Date Of Cessation Of Breach In Case Of Continuous Breach Of Contract: Kerala High Court

The Kerala High Court has held that in case of breach of a contract, when the breach is continuous, limitation period begins to run from the date of cessation of the breach.

The Court was considering an Appeal against an order of the Trial Court whereby suit for damages for breach of a contract was dismissed.

The Division Bench of Justice Sathish Ninan and Justice Krishna Kumar observed, "In the case of continuing breach, every moment the breach continues, a fresh period of limitation commences. Article 55 provides that in the case of breach of a contract, when the breach is continuous, limitation begins to run from the date of cessation of the breach. When does the breach cease in the given case, is dealt with in the succeeding paragraph."

The Petitioner was represented by Advocate M.R. Anandakuttan, while the Respondent was represented by Advocate M.C. Siny.

Facts of the Case

The Plaintiff, a timber merchant entered into an agreement with the Defendants to cut and remove trees standing in the plaint schedule property belonging to the Defendants. The Defendants were to obtain passes from the Forest Department to enable the removal of the trees. The claim of the labourers of the estate were also to be settled by the Defendants. The Plaintiff constructed a motorable road through the property for a length of 25 kilometres and expended huge amounts for the same in addition to the amount expended for construction of stacking shed, arranging labourers etc. The period of the agreement was for one year. According to the Plaintiff, since the Defendant failed to procure the necessary passes, the agreement was further extended.

The Plaintiff alleged that on the failure of the Defendants to obtain passes, the Plaintiff was unable to remove the trees in its entirety and thus suffered damages under various heads. Thus, Suit was filed for realization of the same.

The Defendants, while admitting to the agreement, contended that the same had been performed in its entirety and that on such completion, yet another agreement was entered into between the parties for removal of the trees in yet another property belonging to the Defendants. They alleged suppression of such fact by the Plaintiff and prayed for dismissal of the Suit. 

The Trial Court found that the agreement has been performed and the suit was thus barred by limitation.

Reasoning By Court

The Court referred to Article 55 and stated that when the breach is a continuing one, limitation begins to run from the date on which the breach ceases. 

"When the term of Ext.A1 agreement obliging the defendants to obtain passes from the Forest Department is breached by them, there occurs a breach of the contract. That breach continues during the period fixed in the contract. On expiry of the period of the contract, the breach ceases. The breach was a continuing one, but, during the currency of the contract. The breach cannot be said to continue thereafter since, the period fixed by the parties have expired. A suit could be maintained within three years from the date of expiry, claiming the total damages consequent on the breach committed by the defendants", the Court ruled.

Upholding the Trial Court's decision that the suit was barred by limitation, the Court observed, "Ext.A1 agreement specified the period for performance as one year which expired in the year 1999. The plaintiff claims that the agreement has been extended till 03.04.2001. The alleged extension is disputed by the defendants. Even taking it to be that there had been such an extension, it was only for a specified period ie. up to 03.04.2001. There would have been continuous breaches within the period of the agreement. For breaches within the period stipulated, the plaintiff could have waited till the expiry of the period. But, once the period of the agreement expired, the time started to run. The plaintiff was obliged to institute the suit within three years therefrom. Having failed to do so, the present suit is barred by limitation."

The Appeal was accordingly dismissed.

Cause Title: V. Chandran v. Aliamma George (2025:KER:79909)

Appearances:

Appellant- Advocates M.R. Anandakuttan, Mahesh Anandakuttan, T. Saproo and M.A. Zohra

Respondent- Advocates M.C. Siny, R. Anas Muhammed Shamnad, Mohan Pulikkal, T.S. Rajasenan and R. Sudheer

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