'The Documents taken by Banks for a Credit Facility do not have prepetual life'. Explain the statement in detail and what the various modes to revive the Loan documents are.

Limitation period is the time limit within which the parties to a legal agreement, can take action in a Court of law to enforce their legal rights. A suit cannot be filed for recovery on the strength of a time barred document. Hence, if the documents are time barred, the bank's right of legal remedy is lost (expiry of limitation period does not take away the right of recovery of the debt, as it bars only the remedy of filing a suit). There are certain rights like lien, set-off, selling the securities which are pledged where remedy through Court is not required. As such there is no limitation period for these rights. In computing limitation for any suit, the date from which such period is to be reckoned, shall be excluded. The suit can be filed on the 'anniversary day'. The limitation period can not be shortened or lengthened by mutual agreement. A limitation period can be extended (to revive the loan documents) in following ways. (i) Acknowledgement of Debt: It is an acceptance of liability by the party liable by Letter of Acknowledgement of Debt (LAD), balance confirmation letter or even ordinary letter. It can be in form of signing of a balance sheet by authorized person. It has to be before expiry of limitation period. (ii) Part Payment: A credit entry by itself will not save limitation. If a debtor makes a part payment before expiry of limitation period, himself or if it is made by his authorized agent a fresh limitation period starts from the date of such payment. The pay in-slip has to be filled in by the debtor himself or signed by him or his agent. It cannot be signed by any other person including employee of the debtor. (iii) Obtaining fresh set of documents: When the bank obtains the fresh set of documents, fresh period of limitation starts from the date of execution of the fresh documents. A time barred debt can be revived under Section 25(3) of Indian Contract Act, 1872 only by fresh promise in writing and signed by the borrower or his authorized agent. A promissory note / fresh documents executed for the old or a barred debt will give rise to a fresh cause of action and a fresh limitation period will start from the date of such documents.