Articles 1–5 of the Schedule to the Limitation Act, 1963: Suits Relating to Accounts, Agents and a Dissolved Partnership

Articles 1 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Part I of the First Division of the Schedule is headed "Suits relating to accounts". It has five Articles, and each gives a period of three years. They cover a balance on a mutual, open and current account, a suit against a factor for an account, a principal's suits against an agent, and a suit for an account and share of profits of a dissolved partnership.

This article follows the consolidated text of the Act consulted (latest amendment shown: Act 46 of 1999). Later amendments should be checked before you rely on it.

All five Articles give three years, but the starting points differ: the close of the year of the last admitted or proved item (Article 1); demand and refusal during the agency, or end of the agency (Articles 2 and 3); when the neglect or misconduct becomes known (Article 4); and the date of the dissolution (Article 5). Time is then adjusted by sections such as 12, 18 and 19. A special or local law may fix its own period (section 29(2)).

The Articles as printed

Remember that a suit is a claim in the First Division. Section 2(l) says a suit does not include an appeal or an application. See how the Schedule is laid out.

If you have an unsettled account with a business partner or an agent, a recovery suit consultation helps you place the starting point correctly before the three years run.

Article 1: balance on a mutual, open and current account

Article 1 is for "the balance due on a mutual, open and current account, where there have been reciprocal demands between the parties". Three features appear in the words:

• The account is mutual, open and current.
• There have been reciprocal demands between the parties.
• Time runs from "the close of the year in which the last item admitted or proved is entered in the account", the year being computed as in the account.

The starting point is not the date of the balance but the close of a year, and that year follows the account's own method of reckoning: a calendar year, a financial year or another year in which the parties keep the account. The Act does not say which year applies; it says "as in the account".

A date illustration with invented facts: Nair Agencies and Bose Trading keep a running account with entries on both sides. The account runs on an April to March year. The last item admitted or proved is entered on 14 October 2023. The year in which it is entered ends on 31 March 2024. Three years from the close of that year run to 31 March 2027, with section 12(1) excluding the first day.

Articles 2 and 3: factor and principal against agent

Articles 2 and 3 share a starting point: "When the account is, during the continuance of the agency, demanded and refused or, where no such demand is made, when the agency terminates."

• Article 2: a suit "against a factor for an account".
• Article 3: a suit "by a principal against his agent for movable property received by the latter and not accounted for".

There are two possible starting points:

1. If the account is demanded and refused during the agency, time runs from the refusal.
2. If no such demand is made, time runs from when the agency terminates.

The text does not define "factor". The definitions of agent and principal for contract law are in the Indian Contract Act, 1872; see our post on agent and principal under section 182 and the agent's duties in sections 213 and 214. Those posts explain the Contract Act, not the periods here.

A date illustration: Verma Exports appoints an agent who receives goods on its behalf. Verma Exports demands the account on 1 February 2025 during the agency, and the agent refuses on 10 February 2025. Time under Article 3 runs from the refusal. Three years from 10 February 2025 run to 10 February 2028, with the first day excluded. If instead Verma Exports never demands the account and the agency ends on 30 June 2025, time runs from 30 June 2025.

Article 4: neglect or misconduct

Article 4 covers "other suits by principals against agents for neglect or misconduct". The word "other" means suits that are not already covered by Article 3. Time runs "when the neglect or misconduct becomes known to the plaintiff".

This starting point is knowledge, not the date of the neglect. A principal who learns of the misconduct on 20 August 2025 has three years from that date, counted with the first day excluded, so until 20 August 2028. The Act does not say how knowledge is to be shown, and this article does not add any rule on it.

Section 17 on fraud and mistake may also bear on when time begins where the agent's fraud is concealed; read section 17 with this Article rather than assuming either way.

Article 5: dissolved partnership

Article 5 is for "an account and a share of the profits of a dissolved partnership". Time runs from "the date of the dissolution".

The Schedule does not say how or when a partnership is dissolved; that is for the partnership law. Our posts on the Indian Partnership Act, 1932 cover dissolution on contingencies and by notice and settlement of accounts between partners.

A date illustration: a partnership is dissolved on 31 March 2026. A suit for an account and a share of the profits under Article 5 has three years from the date of the dissolution, until 31 March 2029, with the first day excluded.

Sections that change the count

The periods above are the starting figures. The sections that can change the count are:

• Section 12: the first day is excluded.
• Section 14: time spent in a wrong court in good faith.
• Section 18: a signed written acknowledgment before the period expires gives a fresh period.
• Section 6: disability of the person entitled.

Section 5 does not apply to suits; never treat a late suit on these Articles as one that section 5 can excuse.

Section 29(2) lets a special or local law fix its own period, so never apply these Articles to a proceeding under a tax, insolvency, company, arbitration, consumer, MSME or cheque dishonour law. Check that law.

Need help with an account that has not been settled?

When an account with an agent or a former partner remains open, the starting point under these Articles depends on a demand, a refusal or a date of dissolution. We can review your papers and plan a recovery suit with you.

Key takeaways

• Articles 1 to 5 each give three years.
• Article 1 runs from the close of the year in which the last item admitted or proved is entered, the year being computed as in the account.
• Articles 2 and 3 run from demand and refusal during the agency or, if no demand, from termination of the agency.
• Article 4 runs from when the neglect or misconduct becomes known to the plaintiff.
• Article 5 runs from the date of the dissolution.
• Sections 12, 14, 18 and others can change the count; section 5 does not apply to suits.
• A special or local law may fix a different period (section 29(2)).

Read next

• The Schedule: three Divisions and how to read the periods
• Articles 6–13: wages, hotel bills, carriers, hire and advance for goods
• Section 18: acknowledgment of liability in writing and fresh period of limitation
• Settlement of accounts between partners under the Indian Partnership Act, 1932

Disclaimer: Based on a consolidated text of the Limitation Act, 1963 and its Schedule whose latest amendment shown is Act 46 of 1999, as consulted on 2 October 2026. A special or local law may fix a different period; later amendments and the current procedural law should be checked. This article is general information, not legal advice; check the official text before acting.