M/S FROST INTERNATIONAL LIMITED versus M/S MILAN DEVELOPERS AND BUILDERS (P) LIMITED & ANR. on 1 April 2022

[2022] 14 S.C.R.

AM/S FROST INTERNATIONAL LIMITED

v.

M/S MILAN DEVELOPERS AND BUILDERS (P) LIMITED &ANR.

(Civil Appeal No. 1689 of 2022)

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APRIL 01, 2022

[M. R. SHAH AND B. V. NAGARATHNA, JJ.]

Code of Civil Procedure, 1908 : ss. 96, 115 and Or.VII r.11 -Negotiable Instruments Act - ss. 118, 138 - Specific Relief Act - ss.C34, 41 – Suit for declaration – Rejection of plaint - Respondentno.1 engaged in business of exporting iron ore from Paradeep Port,had a plot on licence from Paradeep Port Trust Authority for carryingits business - Respondent no.1 and appellant entered into aCooperation Agreement, however, as per respondent no.1, it wasnot given effect – Thereafter, appellant filed a complaint againstDrespondent no.1 with Paradeep Port Trust Authority for violatingterms and conditions of his license – Parties then entered into aMemorandum of understanding agreeing the appellant would takesteps to protect the license of the plot given to the respondent no.1from cancellation and that the respondent no.1 would issue a chequeEfor Rs.56 lakhs in favour of appellant and the same would remainin the custody of the respondent no.2 as security, which is equivalentto the cost of 3876 MT of iron ore, and if the appellant succeededin protecting the licence from being cancelled then respondent no.1 would supply iron ore fines to appellant - Accordingly chequewas given to the respondent no.2 as security, however, the appellantFtook no step to save the license of the plot and the license wascancelled, and the cheque of Rs.56 lakhs was handed over toappellant, who presented the same for encashment and it gotdishonoured – Appellant issued notice u/s. 138 of N.I. Act to therespondent no. 1 – Respondent no.1 then filed suit for declarationGagainst the appellant and the respondent no. 2 that the cheque whichwas dishonoured was handed over by him to respondent no.2 as asecurity and that appellant had not acquired any right over thesaid cheque as the respondent no.1 had no liability to discharge infavour of appellant – Appellant then filed an application u/Or. VIIRule 11seeking rejection of the plaint – Dismissed by trial court,H

however, the revisional court set aside the order of the trial courtand rejected the plaint – In writ petition, the High Court set asidethe order of the revisional court and remanded the matter holdingthat the revisional court had exceeded its jurisdiction in rejectingthe plaint – On appeal, held : High Court was not right in holdingthat the revisional court had exceeded its jurisdiction and it couldnot have allowed the application filed under Order VII Rule 11 andthereby reversed the order of the trial court and finally disposed ofthe suit - High Court failed to appreciate the second proviso to s.115 of CPC (Orissa amendment) in its true perspective - Revisionalcourt, being the High Court or the District Court, as the case maybe, can reverse an order which would finally dispose of the suit orother proceeding - Revisional court being the District Court, didthe same.

s.115 and Order VII Rule 11 - Specific Relief Act,1963 -ss.34,41 - Negotiable Instruments Act - ss. 118, 138 - Revisionalcourt-District Court allowing the application filed u/ord. VII r 11by the appellant and thereby rejecting the plaint filed by therespondent no.1 – Justification of – Appellant’s case that respondentno.2 has sought only declaratory that the cheque issued in the nameof the appellant was a security and the appellant had no right toencash it and has not sought further or consequential reliefs, thus,suit is barred under Specific Relief Act; and that the suit filed by therespondent no.1 is an attempt to frustrate the possibility of theappellant initiating action under the provisions of the N.I. Act forthe dishonour of cheque - Held : Omission on the part of therespondent no. 1 in praying for further consequential relief, wouldbecome relevant only at the time of final adjudication of the suit -Right of appellant to prosecute the respondent no. 1 owing to thedishonour of the cheque issued by the respondent no. 1 cannot befrustrated by seeking a declaration that the said cheque was handedover as a security – Such a declaration cannot be ex facie grantedas it would be contrary to the provisions of the N.I. Act andparticularly s.118(a) thereof – In these circumstances, while therespondent no. 1 has certain grievances arising from the MoU,against the appellants which may give rise to seek appropriateremedies in law, the declaratory reliefs sought in the plaint are barredby law - Hence, the plaint is liable to be rejected in exercise ofjurisdiction u/Or. VII r. 11 CPC.

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[2022] 14 S.C.R.

AOrder VII Rule 11 - Rejection of Plaint - Purpose/Object -Discussed.

Allowing the appeal, the Court

Held : 1.1 It is noted that the Orissa amendment differsfrom the main Section 115 of CPC. The first proviso to main SectionB115 of CPC restricts the revisional power of the High Courtinasmuch as a revision is maintainable only if it is filed by a partywho is aggrieved by an order passed by the court subordinate tothe High Court on an order deciding an issue which, had it beenmade in favour of the party applying for revision, would have finallyCdisposed of the suit or other proceeding. But as per the secondproviso to Section 115 of CPC (Orissa amendment), the HighCourt or the District Court, as the case may be, under the saidSection can vary or reverse any order including an order decidingan issue, made in the course of a suit or other proceeding only ifthe order if so varied or reversed would finally dispose of theDsuit or other proceeding or the order if allowed to stand wouldoccasion a failure of justice or cause irreparable injury to theparty against whom it was made. In other words, under Orissaamendment to Section 115 of CPC, an express power is conferredon the High Court or the District Court, as the case may be,Ebeing the revisional courts, to vary or reverse an order of thecourt subordinate thereto only when it would finally dispose ofthe suit or other proceedings or if the impugned order is allowedto stand would occasion a failure of justice or cause irreparableinjury to the party against whom it was made. [Para 18][1117-B-C; 1118-A-D]F

1.2 It would also be pertinent to mention that the instantsuit was filed in the year 2009 and therefore the Orissaamendment to Section 115 CPC vide Orissa Act 26 of1991, Section 2, would be applicable. However, by Orissa Act 14of 2010, Sub-Section 2, Section 115 was amended by the OrissaGLegislature and second proviso to Section 115 has been amendedand Sub- Section 2 of Section 115 has been added which statesthat the High Court or District Court, as the case may be, shallnot under this Section, vary or reverse any order including anorder deciding an issue, made in the course of a suit or otherHproceeding, except where the order, if it has been made in favour

of the party applying for revision, would finally dispose the suitor other proceeding. Further, clause 1 of the second provisoof Section 115 has been omitted by the amendment made in theyear 2010 and Sub-Section 3 has been added. This provision statesthat a revision shall not operate as a stay of suit or otherproceeding before the Court except where such suit or otherproceeding is stayed by the High Court or District Court, as thecase may be. Sub-Section 1 of Section 115 is in pari materia withthe Orissa Amendment of 1991 except its reference to the OrissaAmendment Act of 2010. [Paras 19, 20][1118-E-H; 1119-A]

1.3 The High Court was not right in observing that therevisional court had exceeded its jurisdiction and it could nothave allowed the application filed under Order VII Rule 11 ofCPC and thereby reversed the order of the trial court and finallydisposed of the suit. In fact, the High Court has failed to appreciatethe second proviso to Section 115 of CPC (Orissa amendment)in its true perspective. The revisional court, being the High Courtor the District Court, as the case may be, can reverse an orderwhich would finally dispose of the suit or other proceeding. Thatis exactly what has been done by the revisional court being theDistrict Court in the petition being C.R.P. No.5 of 2012. Hence,the High Court was not justified in setting aside the said orderand remanding the matter to the revisional court (District Court)to consider afresh, the application filed by defendant no.1/appellantherein under Order VII Rule 11 of CPC seeking rejection of theplaint. In fact, the exercise of jurisdiction by the revisional courtin the instant case is in accordance with second proviso to Section115 of CPC (Orissa amendment). Therefore, the High Court wasnot right in holding that the revisional court had no jurisdictionto reject the plaint filed under Order VII Rule 11 of CPC. Thereasoning of the High Court is contrary to the express proviso ofSection 115 (Orissa Amendment). [Paras 21, 22][1120-B-E; 1122-D-E]

1.4 No doubt rejection of a plaint is a decree within themeaning of Section 2(2) of CPC and an appeal lies from everydecree passed by any court exercising original jurisdiction to theCourt authorised to hear appeals from a decision of such court.

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AHowever, it must be borne in mind that when a revisional courtrejects a plaint, in substance, an application filed under OrderVII Rule 11 is being allowed. Under such circumstances, theremedy by way of a writ petition under Article 227 of theConstitution could be availed and respondent no.1/plaintiff hasresorted to the said remedy in the instant case; although if theBplaint had been rejected by the trial court i.e. court of originaljurisdiction, it would have resulted in a right of appeal underSection 96 of CPC. Having regard to the second proviso to Section115 of CPC (Orissa amendment), a revisional court while allowingthe application filed under Order VII Rule 11 of CPC would inCsubstance reject the plaint but since the said decree is not passedby the court of original jurisdiction, namely the trial court, theremedy by way of writ petition under Article 227 of the Constitutionwould be available to the aggrieved party and respondent no.1has availed the said remedy. [Paras 23, 24][1122-E-H; 1123-A]

D1.5 On a reading of the plaint, in the instant case it is notedthat it discloses a cause of action inasmuch as the MoU dated17th January, 2009, entered into between the plaintiff anddefendant no.1 in the presence of defendant no.2 and the actsdone pursuant to the said MoU is the basis for the grievance ofthe plaintiff. [Para 28][1128-C-D]

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1.6 At the outset, on perusal of the plaint averments, theplaintiff has indeed made out a cause of action for filing the suit.In fact, in para 2 of the application filed under Order VII Rule 11CPC, defendant no.1 has also encapsulated the averments madein the plaint. Therefore, on that score the plaint cannot be rejected.F[Para 29][1129-D-E]

1.7 The main thrust of the application seeking rejection ofthe plaint is that apart from the fact that the plaint does not disclosea cause of action which has been negated by the revisional courtand rightly so, plaintiff has sought only declaratory reliefs andGhas not sought further or consequential reliefs. In thecircumstances, the suit is barred under the provisions of the SRAct.The proviso to Section 34 states that no court can make anydeclaration where the plaintiff, being able to seek further reliefthan mere declaration of title, omits to do so. The said question H

will have to be considered at the time of final adjudication of thesuit as the question of granting further relief or consequentialrelief would arise only if the court grants a declaration. If theplaintiff is unsuccessful in seeking the main relief of declaration,then, the question of granting any further relief would not ariseat all. Therefore, omission on the part of the plaintiff in prayingfor further consequential relief, would become relevant only atthe time of final adjudication of the suit. Hence the plaint cannotbe rejected at this stage by holding that the plaintiff has onlysought declaratory reliefs and no further consequential reliefs.[Para 31][1129-H; 1130-A-B, E-G]

1.8 On a reading of ss. 118(a) and 138 of the NI Act, it isclear that there is a rebuttable presumption that every negotiableinstrument including a cheque was made or drawn for aconsideration and every such instrument when it has beenaccepted is for a consideration. [Para 33][1132-D-E]

1.9 On a reading of the plaint, it is evident that chequeissued had been dishonoured and defendant no.1 had issuednotice under Section 138 of N.I. Act on 10th June, 2009, to theplaintiff and its Managing Director replied to the same throughtheir advocate on 23rd June, 2009. Therefore, it is evident thatthe plaintiff by seeking the said reliefs is in substance frustratingthe right of defendant no.1 to take steps under the provisions ofN.I. Act for releasing the amount of cheque issued by the plaintiffto defendant no.1 for a sum of Rs. 56 lakhs by filing a civil suitand/or by initiating a criminal prosecution. In other words, byseeking such a declaration that the cheque was issued as asecurity and that the same was illegally handed over by defendantno.2 to defendant no.1 in violation of the terms and conditions ofthe MoU, the plaintiff in substance is making an attempt tofrustrate proceedings being initiated under Section 138 of theN.I. Act or for recovery of the amount by filing a civil suit. [Para34][1132-E-H]

1.10 On a holistic reading of the plaint and on considerationof the reliefs sought by the plaintiff, the said reliefs are barred bylaw inasmuch as no plaintiff can be permitted to seek relief in asuit which would frustrate the defendants from initiating a A

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Aprosecution against plaintiff or seeking any other remedyavailable in law. In fact, the attempt made by the plaintiff to seeksuch a declaratory relief is, in substance, to seek a relief ofinjunction against the defendants, particularly defendant no.1, butframed it in the nature of a declaratory relief. In other words, theplaintiff has sought an injunction against defendant no.1 fromBseeking remedies in law on account of the cheque issued by theplaintiff for a sum of Rs. 56 lakhs being dishonoured. Further,the nature of the declaratory reliefs sought already arises out ofthe MoU dated 17th January, 2009, between the plaintiff anddefendant no.1 in respect of which the plaintiff could seekCappropriate remedies, if there is a breach of the said MoU bydefendant no.1, but the plaintiff cannot seek declaratory reliefsto the effect that the plaintiff was not liable to carry out hisobligation under the terms of the MoU. If the plaintiff has failedto do so then the defendant no.1 would have a cause of actionagainst the plaintiff, but there cannot be a frustration of the rightDto seek a remedy in law by means of seeking declaration under acontract or MoU as in the instant case. [Paras 35, 36][1133-A-C;1135-F-H]

1.11 Moreover, the right of defendant no.1 to prosecutethe plaintiff owing to the dishonour of the cheque issued by theEplaintiff for a sum of Rs. 56 lakhs cannot be frustrated by seekinga declaration that the said cheque was handed over as a security.Such a declaration cannot be ex facie granted as it would becontrary to the provisions of the N.I. Act and particularly Section118(a) thereof. If the plaintiff is aggrieved on account of breachFof the terms and conditions of the MoU committed by defendantno.1 then it could seek appropriate reliefs in accordance withlaw. Whether the plaintiff was not liable to issue the cheque forRs. 56 lakhs to defendant no.1 under the terms of the MoU is amatter which has to be considered in an appropriate proceeding to be initiated by defendants on account of dishonour of the saidGcheque under Section 138 of the N.I. Act. The plaintiff can alwaysprove that it had no legal liability or debt to be discharged vis-a-visdefendant no.1 under the terms of the MoU, if any proceeding isto be initiated by defendant no.1 on account of the dishonour ofthe said cheque. Further, if defendant no.1 is to seek any reliefHfor the non-supply of 3876 MT of iron ore fines by the plaintiff under the very same MoU then the plaintiff is entitled to takeappropriate defences as are available in law. If the plaintiff has agrievance against the defendants and particularly defendant no.1,arising from the MoU, such prayers have not been sought by theplaintiff. Such reliefs could have been sought by the plaintiffinasmuch as there is no prayer seeking recovery of Rs. 21.50lakhs from defendant no.1 which according to the plaintiff is dueto it. [Para 37][1136-A-E]

1.12 In the circumstances, while the plaintiff has certaingrievances arising from the MoU, against the defendants whichmay give rise to seek appropriate remedies in law, the aforesaidthree declaratory reliefs sought in the plaint are barred by law.Hence, the plaint is liable to be rejected in exercise of jurisdictionunder Order VII Rule 11 CPC. The revisional court was justifiedin rejecting the plaint but the High Court has erroneously setaside the order of the revisional court without appreciating thefacts and circumstances of the case and has simply remanded thematter to the revisional court to reconsider the revision afreshon the premise that the revisional court did not have thejurisdiction to reject the plaint u/s. 115. The Order of the HighCourt is set aside and the Order of the revisional court is restored.The plaint is rejected. [Paras 38, 39][1136-E-H; 1137-A]

Pandurang Dhondi Chougule and Others v. Maruti HariJadhav and Others AIR 1966 SC 153 : [1966] 1 SCR102; Tek Singh v. Shashi Verma and Another (2019) 16SCC 678 : [2019] 3 SCR 697; T. Arivandandam v. T. V.Satyapal & Anr. (1977) 4 SCC 467 : [1978] 1 SCR742; Azhar Hussain v. Rajiv Gandhi (1986) Supp SCC315 : [1986] 2 SCR 782; Sopan Sukhdeo Sable andOrs. v. Assistant Charity Commissioner and Others(2004) 3 SCC 137 : [2004] 1 SCR 1004; I.T.C Ltd. v.Debts Recovery Appellate Tribunal and Ors. (1998) 2SCC 70 : [1997] 6 Suppl. SCR 683; Liverpool &London S.P. & I Assn. Ltd. v. M.V. Sea Success I & Anr.(2004) 9 SCC 512 : [2003] 5 Suppl. SCR 851;Madanuri Sri Rama Chandra Murthy v. Syed Jalal(2017) 13 SCC 174 : [2017] 5 SCR 294; Dahiben v.

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From the Judgment and Order dated 19.01.2016 of the High Courtof Orissa at Cuttack in WP (C) No. 7059 of 2013.

Mrs. Rajdipa Behura, A. Venayagam Balan, Philomin Kani, AshrayBehura, Ms. Neha Lingwal, Ms. Hansika Sahu, Swayamtosh Rath, Advs.for the Appellant.

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Anirudh Sanganeria, Adv. for the Respondents.

The Judgment of the Court was delivered by B

NAGARATHNA, J.

1. This appeal is preferred by defendant no.1 in C.S. No.1065 of2009 filed before the Court of Civil Judge (Senior Division) Bhubaneswar,by assailing order dated 19[th] January, 2016 passed by the High Court ofOrissa at Cuttack in WP(C) No.7059 of 2013. By the said order, theapplication filed by the appellant herein/defendant no.1 under Order VIIRule 11 of the Code of Civil Procedure 1908 (for short, the ‘CPC’) hasbeen ordered to be reconsidered by the District Court at Khurda,Bhubaneswar (revisional court) by restoring C.R.P. No.5 of 2012 filedby the defendant no.1 herein. The said revision was filed by defendantno.1 being aggrieved by the dismissal of the said application being C.S.No.1065 of 2009 by the trial court, namely, the Court of Civil Judge(Senior Division), Bhubaneswar, praying for rejection of the plaint underOrder VII Rule 11 of the CPC.

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2. For the sake of convenience, the parties herein shall be referredto in terms of their rank and status before the trial court.

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3. Briefly stated, the facts of the case are that, respondent no.1herein/plaintiff had filed a suit against the appellant herein/defendantno.1 and respondent no.2 herein/defendant no.2 seeking the followingreliefs:

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“(i)Let it be declared that the plaintiff had handed over thecheque to Sri Dilip Das, Advocate as a security;

(ii) Let it be declared that the said cheque has been illegallyhanded over by the defendant no.2 to the defendant no.1by violating term and condition of the memorandum ofGunderstanding dated 17.01.2009;

(iii) Let it be declared that the plaintiff is not liable to give deliveryof 3876 MT of iron ore fines to the defendant no.1 nor thecheque amount since the defendant no.1 has failed to savethe plaintiff’s plot from cancellation; H

1110SUPREME COURT REPORTS

A(iv)Let the cost of the suit be decreed in favour of the plaintiffand against the defendants;

(v) Let any other decree/decrees be passed in favour of theplaintiff to which the plaintiff is entitled to under law andequity.”

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4. According to the plaintiff, which is a Private Limited Company,incorporated under the provisions of the Companies Act, 1956, it isengaged in the business of export of iron ore from Paradeep Port whiledefendant no.1 is also a Company incorporated under the provisions ofthe Companies Act, 1956, having its registered office at Kanpur, UttarCPradesh, and also having its Branch at Kolkata in West Bengal. Defendantno.1 carries on business at Paradeep Port, Orissa in supplying andexporting iron ore from the said Port to various destinations overseas.That plaintiff had a plot namely Plot No.RS-4 on licence from ParadeepPort Trust Authority for the purpose of its export business in iron ore.That defendant no.1 and the plaintiff had entered into a CooperationDAgreement on 24[th] December, 2007 but according to the plaintiff, thesame was not given effect to. That defendant no.1, through its ManagingDirector Sunil Banna, tried to blackmail the plaintiff in various ways andthreatened him that he would intimate Paradeep Port Trust Authoritythat the plaintiff had sub-let his licence in respect of Plot No.RS-4 toEdefendant no.1 by violating the terms and conditions of licence.

According to the plaintiff, defendant no.1 in January 2009 statedthat plaintiff had illegally exported stock of 4000 MT of iron ore andwhen the plaintiff through its Managing Director refuted the claim ofdefendant no.1, a complaint was lodged at Paradeep Police Station onF8[th] January, 2009 and thereafter, on 10[th] January, 2009 alleging theft of4000 MT iron ore fines belonging to defendant no.1.

According to the plaintiff, defendant no.1 lodged another falsecomplaint with the Paradeep Port Trust Authority to the effect that theplaintiff was violating the terms and conditions of his licence in respectGof Plot No.RS-4 which had been sub-let to defendant no.1 and a copy ofthe Cooperation Agreement dated 24[th] December, 2007 which was infact not acted upon was also filed along with complaint. Acting on thesaid complaint, Paradeep Port Trust Authority had issued show causenotice to the plaintiff on 20[th] January, 2009 and thereafter, cancelled thelicence of the plaintiff vis-à-vis Plot No.RS-4 by letter dated 18[th] February,H2009.

5. Being apprehensive of the cancellation of the licence to PlotNo.RS-4, the Managing Director of the plaintiff Company agreed to theproposal of the representative of defendant no.1 viz., Rabindra Banthia,that in case plaintiff agreed to supply 3876 MT of iron ore fines todefendant no.1, they would manage to withdraw their complaint andwould save the licence of the plot from cancellation.

6. That in January, 2009, plaintiff had outstanding dues of Rs.21.50lakhs against defendant no.1 and at the behest of defendant no.2, aMemorandum of Understanding (for short, ‘MoU’) was arrived at on17[th] January, 2009 on certain terms and conditions that defendant no.1would take steps to protect the licence of the plot given to the plaintifffrom cancellation in seven days’ time and it was further agreed thatdefendant no.1 would give a cheque of Rs.21.50 lakhs to the plaintifftowards the outstanding dues to the plaintiff. Similarly, the plaintiff wouldissue a cheque for Rs.56 lakhs in favour of defendant no.1 and the samewould remain in the custody of Sri Dilip Das, Advocate - defendant no.2as security, which is equivalent to the cost of 3876 MT of iron ore. Theplaintiff would supply 3786 MT of iron ore fines to defendant no.1 ifdefendant no.1 succeeded in protecting the licence of the said plot of theplaintiff from being cancelled. Accordingly, plaintiff furnished a chequefor Rs.56 lakhs in favour of defendant no.1 and handed over the same toSri Dilip Das, Advocate - defendant no.2 in the suit, as security. Defendantno.2 wrote a letter to the Managing Director of the plaintiff on 20[th]January, 2009 intimating therein that both cheques would be in his custodyand the cheque drawn by the plaintiff amounting to Rs.56 lakhs wouldnot be handed over to defendant no.1 unless defendant no.1 fulfilled itsundertaking as per the MoU dated 17[th] January, 2009. Further, the chequewould be handed over to defendant no.1 only when the plot licence ofthe plaintiff was saved from cancellation by defendant no.1 and if theplaintiff failed to supply the iron ore to defendant no.1.

7. According to the plaintiff, defendant no.1 did not take any stepto save the licence of the plot of the plaintiff from cancellation and thelicence was cancelled on the complaint of defendant no.1 by letter dated18[th] February, 2009 by the Paradeep Port Trust Authority. According tothe plaintiff, the question of handing over the cheque to defendant no.1by defendant no.2 did not arise at all. Plaintiff had approached the HighCourt in a writ petition vis-à-vis the cancellation of the licence in respectof the plot and an order of stay on the cancellation was granted.

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AIt is the further case of the plaintiff that when the matter stoodthus, defendants no.1 and 2 colluded with each other and defendant no.2committed breach of trust and betrayed the plaintiff as the cheque forRs.56 lakhs was handed over by defendant no.2 to defendant no.1. Onreceipt of the cheque, defendant no.1 pressurized the plaintiff to eithersupply 3876 MT iron ore fines or they would present the cheque forBencashment. Since the plaintiff did not agree to supply iron ore, defendantno.1 presented the cheque for encashment but the same was dishonouredas the plaintiff had issued stop payment instructions to the Bank on comingto know about the collusion between defendant no.1 and defendant no.2.Thereafter, defendant no.1 issued notice under Section 138 of theCNegotiable Instruments Act, 1881 (for short, the ‘N.I. Act’) throughtheir advocate on 10[th] June, 2009 to the plaintiff through its ManagingDirector, to which a reply was sent on 23[rd] June, 2009. It was, interalia, stated in the reply that the defendants were trying to harass theplaintiff and having no other alternative, the plaintiff filed the suit seekinga declaration that the cheque which was dishonoured was handed overDby the plaintiff to defendant no.2 as a security and that defendant no.1had not acquired any right over the said cheque as the plaintiff had noliability to discharge vis-à-vis defendant no.1. It was averred in the plaintthat defendant no.1 was liable to pay a sum of Rs.21.50 lakhs to theplaintiff towards its outstanding dues for which a cheque was issued onE17[th] January, 2009 which was also kept with defendant no.2 and in respectof which the plaintiff reserved its right to initiate appropriate proceedingfor recovery of the said amount from defendant no.1. There were furthercorrespondences between the parties and ultimately the aforementionedsuit was filed by the plaintiff against the defendants.F8. On receipt of the summons sent by the trial court, defendantno.1 appeared and filed an application under Order VII Rule 11 of CPCseeking rejection of the plaint on the ground that the suit was notmaintainable being barred under the provisions of the Specific ReliefAct, 1963 (for short, the ‘SR Act’) and secondly, the suit was frivolousand instituted as a subterfuge to defeat the legitimate claim of defendantGno.1 without having any right to sue. Objection was filed to the saidapplication by the plaintiff. The said application was considered by thetrial court and dismissed by refusing to reject the plaint.

9. Being aggrieved, defendant no.1 preferred C.R.P. No.5 of 2012before the Court of District Judge, Khurda at Bhubaneswar under SectionH

115 of the CPC. By order dated 20[th] March, 2013, the revisional courtallowed the said revision petition, set aside the order of the trial courtrefusing to reject the plaint, and rejected the plaint. Being aggrieved, theplaintiff filed W.P.(C) No.7059 of 2013 before the High Court of Orissaat Cuttack which set aside the order of the revisional court and remandedthe matter to the said court for fresh consideration by holding that therevisional court had exceeded its jurisdiction in rejecting the plaint. Beingdissatisfied with the order of the High Court defendant no.1 has preferredthis appeal.

10. We have heard Mrs. Rajdipa Behura, learned counsel for theappellant and Sri Anirudh Sanganeria, learned counsel for the respondentsand perused the material on record.

11. Learned counsel for the appellant submitted that the HighCourt was not right in setting aside the order passed by the revisionalcourt and remanding the matter to the said court for reconsideration ofthe application filed by the appellant under Order VII Rule 11 of CPC onthe premise that revisional court had exceeded its jurisdiction. It wascontended that the application under Order VII Rule 11 of the CPC wasfiled by the appellant/defendant no.1 in the suit filed by respondent no.1/plaintiff seeking rejection of the plaint on the ground that the prayerssought in the suit could not have been granted and the suit as such wasnot maintainable and was barred under the provision of Section 41 of theSR Act. Further there was no cause of action for the plaintiff to file thesuit against the defendants. The trial court did not appreciate the reasonsas to why an application was filed by defendant no.1 seeking rejectionof the plaint and dismissed the same. Being aggrieved the appellant/defendant no.1 filed revision petition in C.R.P. No.5 of 2012 before theDistrict Court having regard to Section 115 of the CPC and particularlyproviso thereto as, if the application filed by defendant no.1 under OrderVII Rule 11 of CPC was to be allowed by the revisional court, then, theproceedings before the trial court would conclude. The revisional courtrightly appreciated the case of appellant herein and rejected the plaint.However, the High Court on a writ petition filed by the plaintiff held thatthe revisional court while exercising its power of revision had exceededits jurisdiction by rejecting the plaint instead of remanding the matter tothe trial court to do so. While adverting to Section 115 of the CPC [videOrissa Act 26 of 1991, Section 2 (w.e.f. 7[th] November, 1991)], learnedcounsel for the appellant contended that when the trial court failed to A

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Aexercise jurisdiction vested in it and refused to reject the plaint by allowingthe application filed under Order VII Rule 11 of the CPC by the appellantherein, the revisional court rightly allowed the said revision and rejectedthe plaint which finally disposed of the suit in terms of the second provisoto the said Section. It was contended that the High Court has not takeninto consideration the Orissa amendment and has further misconstruedBthe object and import of Section 115 of the CPC vis-à-vis the provisionsof the revisional court and has erroneously set aside the order of therevisional court rejecting the plaint and remanding the matter to therevisional court for fresh consideration.

12. Drawing our attention to the order of the High Court, it wasCcontended that the said order is contrary to Section 115 of CPC (Orissaamendment) and hence the impugned order may be set aside and theorder of the revisional authority may be restored. It was contended bylearned counsel for the appellant that as against the order of the revisionalauthority rejecting the plaint, respondent no.1 herein/plaintiff could notDhave filed a writ petition.

13. Per contra, learned counsel for respondent no.1/plaintiffsupported the impugned order passed by the High Court and contendedthat when a plaint is rejected by allowing an application filed under OrderVII Rule 11 of CPC, it results in a decree being passed within the meaningEof Section 2(2) of the CPC and hence the High Court directed therevisional court to consider the matter afresh and if necessary, to remandthe matter to the trial court for considering the aspect regarding rejectionof plaint. Learned counsel for respondent no.1/plaintiff contended thatthere is no merit in this appeal and the same may be dismissed.

F14. Having heard learned counsel for the respective parties thefollowing points would arise for our consideration:

(a) Whether the High Court was justified in setting aside the orderpassed by the revisional court in C.R.P. No.5 of 2012 andthereby remanding the matter to the said court forGreconsideration on the premise that the revisional court hadexceeded its jurisdiction in rejecting the plaint?

(b) What order?

The reliefs sought by the plaintiff in the suit have been extractedabove.H

15. Having regard to the averments in the plaint summarised aboveand the reliefs sought in the plaint, defendant no.1/appellant herein filedan application under Order VII and Rule 11 of CPC seeking rejection ofthe plaint. The rejection of the plaint was sought for three reasons :-firstly, the suit was barred under the provisions of the SR Act; secondly,the suit was frivolous and was filed as a subterfuge to defeat the legitimateclaim of defendant no.1; and thirdly, the suit has been deliberatelyundervalued. Objections were filed to the said application of defendantno.1. By order dated 19[th] May, 2012, the trial court dismissed the saidapplication. Being aggrieved, defendant no.1 filed C.R.P. No.5 of 2012under Section 115 (Orissa amendment).

16. The revisional court considered the revision and allowed theapplication filed under Order VII Rule 11 of CPC which had the effectof finally disposing of the suit. It is against the said order that the plaintifffiled the writ petition before the High Court which was allowed and thematter was remanded to the revisional court for fresh consideration withan observation that the revisional court may, in turn, remand the matterto the trial court if necessary. This was on the premise that the revisionalcourt had exceeded the jurisdiction vested in it by acting illegally in allowingthe application filed under Order VII Rule 11 of CPC.

17. In order to consider the correctness of the impugned orderpassed by the High Court, it would be useful to refer to Section 115 ofthe CPC as well as the Orissa Amendment. For immediate reference,the same are extracted as under:

“115. Revision — (1) The High Court may call for the recordof any case which has been decided by any Court subordinate tosuch High Court and in which no appeal lies thereto, and if suchsubordinate Court appears—

(a) to have exercised a jurisdiction not vested in it by law, or (b) to have failed to exercise a jurisdiction so vested, or

(c) to have acted in the exercise of its jurisdiction illegally or withmaterial irregularity, the High Court may make such order in thecase as it thinks fit:

Provided that the High Court shall not, under this Section, vary orreverse any order made, or any order deciding an issue, in thecourse of a suit or other proceeding, except where the order, if it A

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had been made in favour of the party applying for revision wouldhave finally disposed of the suit or other proceedings.

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(2) The High Court shall not, under this Section, vary or reverseany decree or order against which an appeal lies either to theHigh Court or to any Court subordinate thereto.

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(3) A revision shall not operate as a stay of suit or other proceedingbefore the Court except where such suit or other proceeding isstayed by the High Court.

Explanation.—In this Section, the expression “any case whichhas been decided” includes any order made, or any order decidingan issue in the course of a suit or other proceeding.”

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ORISSA AMENDMENT

“115. Revision - The High Court, in cases arising out of originalsuits or other proceedings of the value exceeding one lakh rupees,Dand the District Court, in any other case including a case arisingout of an original suit or other proceedings instituted before thecommencement of the Code of Civil Procedure (OrissaAmendment) Act, 1991 may call for the record of any case whichhas been decided by any Court subordinate to the High Court orthe District Court, as the case may be, and in which no appeal liesEthereto, and if such Subordinate Court appears - D

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(a) to have exercised a jurisdiction not vested in it by law; or (b) to have failed to exercise a jurisdiction so vested; or

(c) to have acted in the exercise of its jurisdiction illegally or withFmaterial irregularity; the High Court or the District Court, as the case may be, maymake such order in the case as it thinks fit; Provided that in respect of cases arising out of original suits orother proceedings of any valuation decided by the District Court,the High Court alone shall be competent to make an order underthis Section; G

Provided further that the High Court or the District Court shallnot, under this Section, vary or reverse any order, including anorder deciding an issue, made in the course of a suit or otherHproceedings, except where -

(i) the order, if so varied or reversed would finally dispose ofthe suit or other proceedings; or

(ii) the order, if allowed to stand, would occasion a failure ofjustice or cause irreparable injury to the party against whom itwas made.

Explanation - In this Section, the expression ‘any case whichhas been decided’ includes any order deciding an issue in thecourse of a suit or other proceeding”.”

18. On a perusal of the same it is noted that the Orissa amendmentdiffers from the main Section 115 of CPC in the following ways:

(i) Firstly, the main Section 115 deals with revisional powersof the High Court only, whereas, Section 115 of CPC(Orissa amendment) confers the power of revision not onlyon the High Court but also on the District Court which maycall for the record of any case which has been decided byany court subordinate to the High Court or the District Court,as the case may be, and in which no appeal lies thereto, ifsuch subordinate court appears - (a) to have exercised ajurisdiction not vested in it by law; or (b) to have failed toexercise a jurisdiction, so vested; or (c) to have acted in theexercise of its jurisdiction illegally or with material irregularity.In such a case, the High Court or the District Court, as thecase may be, may make such order in the case as it thinksfit.

(ii) Secondly, sub-section (2) of Section 115 of the mainprovision, states that the High Court shall not, under thesaid Section, vary or reverse any decree or order againstwhich an appeal lies either to the High Court or to anyCourt subordinate thereto. But under the second proviso toSection 115 of CPC (Orissa amendment), the High Courtor the District Court shall not under the said Section, varyor reverse any order, including an order deciding an issue,made in the course of a suit or other proceeding, exceptwhere – (i) the order, if so varied or reversed would finallydispose of the suit or other proceedings; or

(ii) the order, if allowed to stand, would occasion a failureof justice or cause irreparable injury to the party againstwhom it was made.

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AThus, the first proviso to main Section 115 of CPC restricts therevisional power of the High Court inasmuch as a revision is maintainableonly if it is filed by a party who is aggrieved by an order passed by thecourt subordinate to the High Court on an order deciding an issue which,had it been made in favour of the party applying for revision, would havefinally disposed of the suit or other proceeding. But as per the secondBproviso to Section 115 of CPC (Orissa amendment), the High Court orthe District Court, as the case may be, under the said Section can varyor reverse any order including an order deciding an issue, made in thecourse of a suit or other proceeding only if the order if so varied orreversed would finally dispose of the suit or other proceeding or theCorder if allowed to stand would occasion a failure of justice or causeirreparable injury to the party against whom it was made. In other words,under Orissa amendment to Section 115 of CPC, an express power isconferred on the High Court or the District Court, as the case may be,being the revisional courts, to vary or reverse an order of the courtsubordinate thereto only when it would finally dispose of the suit or otherDproceedings or if the impugned order is allowed to stand would occasiona failure of justice or cause irreparable injury to the party against whomit was made.

19. It would also be pertinent to mention that the instant suit wasfiled in the year 2009 and therefore the Orissa amendment to SectionE115 CPC vide Orissa Act 26 of 1991, Section 2, would be applicable.However, by Orissa Act 14 of 2010, Sub-Section 2, Section 115 wasamended by the Orissa Legislature and second proviso to Section 115has been amended and Sub-Section 2 of Section 115 has been addedwhich states that the High Court or District Court, as the case may be,Fshall not under this Section, vary or reverse any order including an orderdeciding an issue, made in the course of a suit or other proceeding,except where the order, if it has been made in favour of the party applyingfor revision, would finally dispose the suit or other proceeding.

20. Further, clause 1 of the second proviso of Section 115 hasGbeen omitted by the amendment made in the year 2010 and Sub-Section3 has been added. This provision states that a revision shall not operateas a stay of suit or other proceeding before the Court except wheresuch suit or other proceeding is stayed by the High Court or DistrictCourt, as the case may be. Sub-Section 1 of Section 115 is in pari materiawith the Orissa Amendment of 1991 except its reference to the OrissaH

Amendment Act of 2010. For immediate reference, Section 115 of theCPC as per the 2010 amendment made (Orissa Amendment) is extractedas under:

“Amendment of Section 115. - In the Code of Civil Procedure,1908 (5 of 1908), for Section 115, the following Section shall besubstituted, namely:—

115. Revision.—(1) The High Court, in cases arising out oforiginal suits or other proceedings of the value exceeding fivelakhs rupees and the District Court, in any other cases, includinga case arising out of an original suit or other proceedings institutedbefore the commencement of the Code of Civil Procedure ( OrissaAmendment) Act, 2010, may call for the record of any case whichhas been decided by any Court subordinate to the High Court orthe District Court, as the case may be, and in which no appeal liesthereto, and if such subordinate Court appears—

(a) to have exercised a jurisdiction not vested in it by law; or (b) to have failed to exercise a jurisdiction so vested; or

(c) to have acted in the exercise of its jurisdiction illegally or withmaterial irregularity, the High Court or the District Court, as the case may be, maymake such order in the case as it thinks fit:

Provided that in respect of cases arising out of original suits orother proceedings of any valuation decided by the District Court,the High Court alone shall be competent to make an order underthis Section

(2) The High Court or the District Court, as the case may be,shall not under this Section, vary or reverse any order, includingan order deciding an issue, made in the course of a suit or otherproceedings, except where the order, if it had been made in favorof the party applying for revision, would have finally disposed ofthe suit or other proceedings.

(3) A revision shall not operate as a stay of suit or other proceedingbefore the Court except where such suit or other proceeding isstayed by the High Court or District Court, as the case may be.

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AExplanation—In this Section, the expression, “any case whichhas been decided” includes any order deciding an issue in thecourse of a suit or other proceeding.”.

[Vide the Orissa Act 14 of 2010, s. 2]”

21. Therefore, we hold that the High Court was not right inBobserving that the revisional court had exceeded its jurisdiction and itcould not have allowed the application filed under Order VII Rule 11 ofCPC and thereby reversed the order of the trial court and finally disposedof the suit. In fact, the High Court has failed to appreciate the secondproviso to Section 115 of CPC (Orissa amendment) in its true perspective.CThe revisional court, being the High Court or the District Court, as thecase may be, can reverse an order which would finally dispose of thesuit or other proceeding. That is exactly what has been done by therevisional court being the District Court in the petition being C.R.P. No.5of 2012.

D22. Hence, we find that the High Court was not justified in settingaside the said order and remanding the matter to the revisional court(District Court) to consider afresh, the application filed by defendantno.1/appellant herein under Order VII Rule 11 of CPC seeking rejectionof the plaint. In fact, we would observe that exercise of jurisdiction bythe revisional court in the instant case is in accordance with secondEproviso to Section 115 of CPC (Orissa amendment).In this regard, we could also usefully refer to the followingdecisions: - (a) Gajendragadkar, CJ., in a judgment passed by the five JudgesFBench of this Court in Pandurang Dhondi Chougule andOthers vs. Maruti Hari Jadhav and Others – [AIR 1966SC 153] dealt with the question of jurisdiction under Section115 CPC, as follows:- “10. The provisions of Section 115 of the Code have beenexamined by judicial decisions on several occasions. WhileGexercising its jurisdiction under Section 115, it is notcompetent to the High Court to correct errors of facthowever gross they may, or even errors of law, unless thesaid errors have relation to the jurisdiction of the court totry the dispute itself. As clauses (a), (b) and (e) of SectionH115 indicate, it is only in cases where the subordinate court

has exercised a jurisdiction not vested in it by law, or hasfailed to exercise a jurisdiction so vested, or has acted inthe exercise of its jurisdiction illegally or with materialirregularity that the revisional jurisdiction of the High Courtcan be properly invoked. It is conceivable that points oflaw may arise in proceedings instituted before subordinatecourts which are related to questions of jurisdiction. It iswell settled that a plea of limitation or a plea of res judicatais a plea of law which concerns the jurisdiction of the courtwhich tries the proceedings. A finding on these pleas infavour of the party raising them would oust the jurisdictionof the court, and so, an erroneous decision on these pleascan be said to be concerned with questions of jurisdictionwhich fall within the purview of Section 115 of the Code.But an erroneous decision on a question of law reached bythe subordinate court which has no relation to questions ofjurisdiction of that court, cannot be corrected by the HighCourt under Section 115.”

(b) Nariman, J. while discussing Section 115 CPC and provisothereto held that revision petitions filed under Section 115 CPCare not maintainable against interlocutory orders in the caseof Tek Singh vs. Shashi Verma and Another – [(2019) 16SCC 678]. The following observations were made in the saidcase:- “6. Even otherwise, it is well settled that the revisionaljurisdiction under Section 115 CPC is to be exercised tocorrect jurisdictional errors only. This is well settled. In DLFHousing & Construction Co. (P) Ltd. v. Sarup Singh[DLF Housing & Construction Co. (P) Ltd. v. SarupSingh, (1969) 3 SCC 807 : (1970) 2 SCR 368] this Courtheld: (SCC pp. 811-12, para 5)

“5. The position thus seems to be firmly established thatwhile exercising the jurisdiction under Section 115, it is notcompetent to the High Court to correct errors of facthowever gross or even errors of law unless the said errorshave relation to the jurisdiction of the court to try the disputeitself. Clauses (a) and (b) of this section on their plainreading quite clearly do not cover the present case. It was AB

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not contended, as indeed it was not possible to contend,that the learned Additional District Judge had eitherexercised a jurisdiction not vested in him by law or hadfailed to exercise a jurisdiction so vested in him, in recordingthe order that the proceedings under reference be stayedtill the decision of the appeal by the High Court in theproceedings for specific performance of the agreement inquestion. Clause (c) also does not seem to apply to thecase in hand. The words “illegally” and “with materialirregularity” as used in this clause do not cover either errorsof fact or of law; they do not refer to the decision arrived atbut merely to the manner in which it is reached. The errorscontemplated by this clause may, in our view, relate eitherto breach of some provision of law or to material defects ofprocedure affecting the ultimate decision, and not to errorseither of fact or of law, after the prescribed formalities havebeen complied with.”

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Therefore, in the instant case the High Court was not right inholding that the revisional court had no jurisdiction to reject the plaintfiled under Order VII Rule 11 of CPC. The reasoning of the High Courtis contrary to the express proviso of Section 115 (Orissa Amendment).

E23. No doubt rejection of a plaint is a decree within the meaningof Section 2(2) of CPC and an appeal lies from every decree passed byany court exercising original jurisdiction to the Court authorised to hearappeals from a decision of such court. However, it must be borne inmind that when a revisional court rejects a plaint, in substance, anapplication filed under Order VII Rule 11 is being allowed. Under suchFcircumstances, the remedy by way of a writ petition under Article 227of the Constitution could be availed and respondent no.1/plaintiff hasresorted to the said remedy in the instant case; although if the plaint hadbeen rejected by the trial court i.e. court of original jurisdiction, it wouldhave resulted in a right of appeal under Section 96 of CPC.

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24. Having regard to the second proviso to Section 115 of CPC(Orissa amendment), a revisional court while allowing the applicationfiled under Order VII Rule 11 of CPC would in substance reject theplaint but since the said decree is not passed by the court of originaljurisdiction, namely the trial court, the remedy by way of writ petition H

under Article 227 of the Constitution would be available to the aggrievedparty and respondent no.1 has availed the said remedy.

25. Having held as above, we now proceed to consider, whether,the revisional court (District Court) was justified in allowing the applicationfiled under Order VII Rule 11 of CPC and thereby rejecting the plaintfiled by the plaintiff/respondent no.1 herein. Before proceeding further,it would be useful to refer to the following judgments of this Court inrespect with Order VII Rule 11 CPC:

a) In T. Arivandandam vs. T.V. Satyapal & Anr. – [(1977) 4SCC 467], this Court observed, in the following words, thatwhile considering an application under Order VII Rule 11 CPCwhat is required to be decided is whether the plaint disclosesa real cause of action, or something purely illusory:- “5. We have not the slightest hesitation in condemning thepetitioner for the gross abuse of the process of the courtrepeatedly and unrepentently resorted to. From thestatement of the facts found in the judgment of the HighCourt, it is perfectly plain that the suit now pending beforethe First Munsif’s Court, Bangalore, is a flagrant misuse ofthe mercies of the law in receiving plaints. The learnedMunsif must remember that if on a meaningful — not formal— reading of the plaint it is manifestly vexatious, andmeritless, in the sense of not disclosing a clear right to sue,he should exercise his power under Order 7, Rule 11 CPCtaking care to see that the ground mentioned therein isfulfilled. And, if clever drafting has created the illusion of acause of action, nip it in the bud at the first hearing byexamining the party searchingly under Order 10, CPC. Anactivist Judge is the answer to irresponsible law suits. Thetrial courts would insist imperatively on examining the partyat the first hearing so that bogus litigation can be shot downat the earliest stage. The Penal Code is also resourcefulenough to meet such men, (Cr. XI) and must be triggeredagainst them. In this case, the learned Judge to his costrealised what George Bernard Shaw remarked on theassassination of Mahatma Gandhi: “It is dangerous to betoo good.”

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Ab) In Azhar Hussain vs. Rajiv Gandhi – [1986 Supp SCC315], this Court discussed the very purpose of the powerconferred under Order VII Rule 11 CPC by observing thus: -

“12. The whole purpose of conferment of such power is toensure that a litigation which is meaningless, and bound toprove abortive should not be permitted to occupy the timeof the Court, and exercise the mind of the respondent. Thesword of Damocles need not be kept hanging over his headunnecessarily without point or purpose. Even if an ordinarycivil litigation, the Court readily exercises the power to rejecta plaint, if it does not disclose any cause of action.”

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c) In Sopan Sukhdeo Sable and Ors. vs. Assistant CharityCommissioner and Others - [(2004) 3 SCC 137], it washeld that Rule 11 of Order VII lays down an independentremedy made available to the defendant to challenge themaintainability of the suit itself, irrespective of his right toDcontest the same on merits. The law ostensibly does notcontemplate any stage when the objections can be raised, andalso does not say in express terms about the filing of a writtenstatement. It was held that the word ‘shall’ is used to clearlyimply that a duty is cast on the Court to perform its obligationsEin rejecting the plaint when the same is hit by any of theinfirmities provided in the four clauses of Rule 11, even withoutintervention of the defendant. Elaborating on the aspect ofcause of action by quoting I.T.C Ltd. vs. Debts RecoveryAppellate Tribunal and Ors. – [(1998) 2 SCC 70], it washeld that the basic question to be decided while dealing withFan application filed under Order VII Rule 11 of the Code iswhether a real cause of action has been set out in the plaint orsomething purely illusory has been stated with a view to getout of Order VII Rule 11 of the Code.

d) This Court in Liverpool & London S.P. & I Assn. Ltd. vs.GM.V. Sea Success I & Anr. - [(2004) 9 SCC 512] held thata plaint must be construed as it stands without anyamendments. The same is extracted herein as follows- “139. Whether a plaint discloses a cause of action or not isessentially a question of fact. But whether it does or does H

not, must be found out from reading the plaint itself. For thesaid purpose the averments made in the plaint in their entiretymust be held to be correct. The test is as to whether if theaverments made in the plaint are taken to be correct in itsentirety, a decree would be passed.”

e) We could allude to the exposition of this Court in MadanuriSri Rama Chandra Murthy vs. Syed Jalal – [(2017) 13SCC 174], wherein it was held as under:- “7. …..The averments of the plaint have to be read as awhole to find out whether the averments disclose a causeof action or whether the suit is barred by any law. It isneedless to observe that the question as to whether the suitis barred by any law, would always depend upon the factsand circumstances of each case. The averments in thewritten statement as well as the contentions of thedefendant are wholly immaterial while considering the prayerof the defendant for rejection of the plaint. Even when, theallegations made in the plaint are taken to be correct as awhole on their face value, if they show that the suit is barredby any law, or do not disclose cause of action, the applicationfor rejection of plaint can be entertained and the powerunder Order VII Rule 11 of CPC can be exercised. If cleverdrafting of the plaint has created the illusion of a cause ofaction, the court will nip it in the bud at the earliest so thatbogus litigation will end at the earlier stage.”

f)In Dahiben vs. Arvindbhai Kalyanji Bhanusali (Gajra)Dead through Legal Representatives and Others – [(2020)7 SCC 366], Indu Malhotra, J., while dealing with an appealagainst an order allowing rejection of a suit at the threshold,had an occasion to consider various precedents discussingthe intent and purpose of Order VII Rule 11 CPC while settingout principles in relation to the same. It was held that theprovision of Order VII Rule 11 is mandatory in nature andthat the plaint “shall” be rejected if any of the grounds specifiedin clause (a) to (e) is made out. If the Court finds that theplaint does not disclose a cause of action, or that the suit isbarred by any law, the Court has no option, but to reject the A

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plaint. The relevant portion of the judgment is extracted asbelow:- “23.1 X X X X X

23.2 The remedy under Order 7 Rule 11 CPC is anindependent and special remedy wherein the court isempowered to summarily dismiss a suit at the threshold,without proceedings to record evidence, and conducting atrial, on the basis of the evidence adduced, if it is satisfiedthat the action should be terminated on any of the groundscontained in this provision.

23.3 The underlying object of Order VII Rule 11 (a) is thatif in a suit, no cause of action is disclosed, or the suit isbarred by limitation under Rule 11 (d), the Court would notpermit the plaintiff to unnecessarily protract the proceedingsin the suit. In such a case, it would be necessary to put anend to the sham litigation, so that further judicial time is notwasted.

23.4 In Azhar Hussain v. Rajiv Gandhi, this Court heldthat the whole purpose of conferment of powers under thisprovision is to ensure that a litigation which is meaningless,and bound to prove abortive, should not be permitted towaste judicial time of the court.

23.5 The power conferred on the court to terminate a civilaction is, however, a drastic one, and the conditionsenumerated in Order VII Rule 11 are required to be strictlyadhered to.

23.6 Under Order VII Rule 11, a duty is cast on the Courtto determine whether the plaint discloses a cause of actionby scrutinizing the averments in the plaint, read inconjunction with the documents relied upon, or whether thesuit is barred by any law.

23.7 X X X X X

23.8 Having regard to Order 7 Rule 14, the documents filedwith the plaint, are required to be taken into considerationfor deciding the application under Order 7 Rule 11(a). When a document referred to in the plaint, forms the basis of theplaint, it should be treated as a part of the plaint.

23.9 In exercise of power under this provision, the Courtwould determine if the assertions made in the plaint arecontrary to statutory law, or judicial dicta, for decidingwhether a case for rejecting the plaint at the threshold ismade out.

23.10 At this stage, the pleas taken by the defendant in thewritten statement and application for rejection of the plainton the merits, would be irrelevant, and cannot be advertedto, or taken into consideration.”

g) In a recent judgment of Rajendra Bajoria and Others vs.Hemant Kumar Jalan and Others - [2021 SCC OnlineSC 764], this Court while elucidating on the underlying objectof Order VII Rule 11 CPC and considering various precedentsof this Court, held as under : -

“20. It could thus be seen that this Court has held that thepower conferred on the court to terminate a civil action is adrastic one, and the conditions enumerated under OrderVII Rule 11 of CPC are required to be strictly adhered to.However, under Order VII Rule 11 of CPC, the duty iscast upon the court to determine whether the plaint disclosesa cause of action, by scrutinizing the averments in the plaint,read in conjunction with the documents relied upon, orwhether the suit is barred by any law. This Court has heldthat the underlying object of Order VII Rule 11 of CPC isthat when a plaint does not disclose a cause of action, thecourt would not permit the plaintiff to unnecessarily protractthe proceedings. It has been held that in such a case, it willbe necessary to put an end to the sham litigation so thatfurther judicial time is not wasted.”

26. Relying on the case of Hardesh Ores (P.) Ltd. vs. Hede &Co. – [(2007) 5 SCC 614], it was held that it is not permissible to cullout a sentence or a passage, and to read it in isolation. It is the substance,and not merely the form, which has to be looked into. The plaint has tobe construed as it stands, without addition or subtraction of words. Furtherdelving upon the ratio in D. Ramachandran vs. R.V. Janakiraman –

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A[(1999) 3 SCC 367], it was held that if the allegations in the plaintprima facie show a cause of action, the court cannot embark upon anenquiry whether the allegations are true in fact.

27. It was further held that if on a meaningful reading of theplaint, it is found that the suit is manifestly vexatious and without anyBmerit, and does not disclose a right to sue, the court would be justified inexercising the power under Order VII Rule 11 CPC. Placing reliance onSaleem Bhai vs. State of Maharashtra – [(2003) 1 SCC 557], it washeld that the power under Order VII Rule 11 CPC may be exercised bythe Court at any stage of the suit, either before registering the plaint orafter issuing summons to the defendant, or before conclusion of the trial.C

28. On a reading of the plaint, in the instant case it is noted that itdiscloses a cause of action inasmuch as the MoU dated 17[th] January,2009, entered into between the plaintiff and defendant no.1 in the presenceof defendant no.2 and the acts done pursuant to the said MoU is thebasis for the grievance of the plaintiff. According to the plaintiff, a chequeDfor Rs. 56 lakhs was issued by him in favour of defendant no.1 andhanded over to Sri Dilip Das, Advocate – defendant no.2 as securitywith an understanding that the said cheque will not be handed over bydefendant no.2 to defendant no.1 unless defendant no.1 fulfils itsundertaking and carries out the responsibility of saving the licence toEplot No. RS-4, issued in favour of the plaintiff by the Paradeep PortTrust Authority, from being cancelled. As a result, the plaintiff wouldcontinue to remain as the licensee of the Paradeep Port Trust Authorityvis-a-vis the said plot. According to the plaintiff, defendant no.1 did nottake any step to save licence of the plaintiff from cancellation and it wascancelled on the basis of the complaint made by defendant no.1 videFletter dated 18[th] February, 2009, by the Paradeep Port Trust Authority.Hence, the question of defendant no.2 handing over the cheque for Rs.56 lakhs to defendant no.1 did not arise. Further, plaintiff was pressurizedto either supply 3876 MT of iron ore fines to defendant no.1 or elsedefendant no.1 would present the cheque for encashment. Since plaintiffGdid not agree to the illegal demand of defendant no.1, the cheque forRs.56 lakhs which had been handed over by defendant no.2 to defendantno.1, was presented by defendant no.1 and it was dishonoured. Accordingto the Plaintiff, defendant no.2 and defendant no.1 colluded with eachother to make an illegal gain and defendant no.2 could not have handedover the cheque to defendant no.1. Hence, a letter was written to theH

Bank directing them to stop the payment of the cheque and the samewas conveyed to the defendants. The said cheque was dishonoured.Defendant no.1 issued notice under Section 138 of NI Act dated 10[th]June, 2009, to the plaintiff through its Managing Director, to which areply was given on 23[rd] June, 2009. According to the plaintiff, defendantno.1 owes the plaintiff Rs. 21.50 lakhs but the plaintiff does not have topay anything to defendant no.1. Hence, defendant no.1 is duty bound toreturn the cheque to the plaintiff but, on the other hand, the defendantsare trying to harass the plaintiff by presenting the cheque and hencecertain reliefs were sought in the suit. The relief of declaration wassought to the effect that the cheque handed over by the plaintiff todefendant no.2 was as a security; that the cheque had been illegallyhanded over by defendant no.2 to defendant no.1 in violation of theterms and conditions of the MoU dated 17[th] January, 2009 and that theplaintiff is neither liable to deliver 3876 MT of iron ore fines to defendantno.1 nor to pay an amount of Rs. 56 lakhs since defendant no.1 hadfailed to save the licence of plaintiff’s plot from cancellation by theParadeep Port Trust Authority.

29. At the outset, we hold that on perusal of the plaint averments,the plaintiff has indeed made out a cause of action for filing the suit. Infact, in para 2 of the application filed under Order VII Rule 11 CPC,defendant no.1 has also encapsulated the averments made in the plaint.Therefore, on that score the plaint cannot be rejected.

30. The other contention of defendant no.1 is that from thepleadings and averments in the plaint and the prayers sought therein, itappears that only certain declaratory reliefs have been sought and further,consequential reliefs have been omitted to be prayed. Hence, the suit isbarred under the provisions of the SR Act and is liable to be dismissedand the plaint is liable to be rejected under Order VII Rule 11 CPC.

31. In the objections filed to the application under order VII Rule11 CPC, it has been averred that the plaint averments would clearlyshow a cause of action for filing the suit and further that the suit is notbarred by any law. Further, the declaratory reliefs have been valuedproperly and appropriate court fee has been paid. Hence, the applicationis liable to be rejected.

Thus, the main thrust of the application seeking rejection of theplaint is that apart from the fact that the plaint does not disclose a cause AB

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Aof action which has been negated by the revisional court and rightly so,plaintiff has sought only declaratory reliefs and has not sought further orconsequential reliefs. In the circumstances, the suit is barred under theprovisions of the SR Act.

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“34. Discretion of court as to declaration of status or right.—Anyperson entitled to any legal character, or to any right as to anyproperty, may institute a suit against any person denying, orinterested to deny, his title to such character or right, and thecourt may in its discretion make therein a declaration that he is soCentitled, and the plaintiff need not in such suit ask for any furtherrelief:

Provided that no court shall make any such declarationwhere the plaintiff, being able to seek further relief than a meredeclaration of title, omits to do so.

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Explanation.—A trustee of property is a “person interestedto deny” a title adverse to the title of some one who is not inexistence, and whom, if in existence, he would be a trustee.”

The proviso to Section 34 states that no court can make anydeclaration where the plaintiff, being able to seek further relief thanEmere declaration of title, omits to do so. The said question will have to beconsidered at the time of final adjudication of the suit as the question ofgranting further relief or consequential relief would arise only if the courtgrants a declaration. If the plaintiff is unsuccessful in seeking the mainrelief of declaration, then, the question of granting any further reliefFwould not arise at all. Therefore, omission on the part of the plaintiff inpraying for further consequential relief, would become relevant only atthe time of final adjudication of the suit. Hence, in view of the above, theplaint cannot be rejected at this stage by holding that the plaintiff hasonly sought declaratory reliefs and no further consequential reliefs.

32. The other reason cited for rejection of the plaint is that the suitGis an attempt on the part of the plaintiff to deprive defendant no.1 of itslegitimate dues. In other words, the plaintiff is seeking a declaration thatthe cheque for Rs. 56 lakhs issued in the name of defendant no.1 andhanded over to defendant no.2 in turn to be handed over to defendantno.1 at the appropriate time was only as a security. According to theHplaintiff it was not liable to pay the cheque amount to defendant no.1

since defendant no.1 had not fulfilled its obligations under the terms ofthe MoU. The declaratory reliefs sought are worded as under:

“(i)Let it be declared that the plaintiff had handed over thecheque to Sri Dilip Das, Advocate as a security;

(ii) Let it be declared that the said cheque has been illegallyhanded over by the defendant no.2 to the defendant no.1by violating term and condition of the memorandum ofunderstanding dated 17.01.2009;

(iii) Let it be declared that the plaintiff is not liable to give deliveryof 3876 MT of iron ore fines to the defendant no.1 nor thecheque amount since the defendant no.1 has failed to savethe plaintiff’s plot from cancellation;”

Hence, it is contended by defendant no.1 that the suit filed by theplaintiff is an attempt to frustrate the possibility of the defendant no.1initiating action under the provisions of the N.I. Act for the dishonour ofcheque. In this regard, reference could be made to Sections 118 (a) and138 of N.I. Act, which reads as under:

“118. Presumptions as to negotiable instruments. —Until thecontrary is proved, the following presumptions shall be made:—

(a) of consideration —that every negotiable instrument was madeor drawn for consideration, and that every such instrument, whenit has been accepted, indorsed, negotiated or transferred, wasaccepted, indorsed, negotiated or transferred for consideration; XXX XXX XXX

138. Dishonour of cheque for insufficiency, etc., of funds in theaccount.—Where any cheque drawn by a person on an accountmaintained by him with a banker for payment of any amount ofmoney to another person from out of that account for the discharge,in whole or in part, of any debt or other liability, is returned by thebank unpaid, either because of the amount of money standing tothe credit of that account is insufficient to honour the cheque orthat it exceeds the amount arranged to be paid from that accountby an agreement made with that bank, such person shall be deemedto have committed an offence and shall, without prejudice to anyother provision of this Act, be punished with imprisonment for [a A

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term which may be extended to two years’], or with fine whichmay extend to twice the amount of the cheque, or with both:

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Provided that nothing contained in this section shall apply unless—(a) the cheque has been presented to the bank within a period ofsix months from the date on which it is drawn or within the periodBof its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as thecase may be, makes a demand for the payment of the said amountof money by giving a notice; in writing, to the drawer of the cheque,[within thirty days] of the receipt of information by him from theCbank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of thesaid amount of money to the payee or, as the case may be, to theholder in due course of the cheque, within fifteen days of thereceipt of the said notice.

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Explanation.—For the purposes of this section, “debt of otherliability” means a legally enforceable debt or other liability.”

33. On a reading of the same, it is clear that there is a rebuttablepresumption that every negotiable instrument including a cheque wasmade or drawn for a consideration and every such instrument when itEhas been accepted is for a consideration.

34. In the instant case, on a reading paragraph 13 of the plaint, itis evident that cheque issued had been dishonoured and defendant no.1had issued notice under Section 138 of N.I. Act on 10[th] June, 2009, tothe plaintiff and its Managing Director replied to the same through theirFadvocate on 23[rd] June, 2009. Therefore, it is evident that the plaintiff byseeking the aforesaid reliefs is in substance frustrating the right ofdefendant no.1 to take steps under the provisions of N.I. Act for releasingthe amount of cheque issued by the plaintiff to defendant no.1 for a sumof Rs. 56 lakhs by filing a civil suit and/or by initiating a criminalGprosecution. In other words, by seeking such a declaration that the chequewas issued as a security and that the same was illegally handed over bydefendant no.2 to defendant no.1 in violation of the terms and conditionsof the MoU, the plaintiff in substance is making an attempt to frustrateproceedings being initiated under Section 138 of the N.I. Act or forrecovery of the amount by filing a civil suit.H

35. On a holistic reading of the plaint and on consideration of thereliefs sought by the plaintiff, we find that the said reliefs are barred bylaw inasmuch as no plaintiff can be permitted to seek relief in a suitwhich would frustrate the defendants from initiating a prosecution againstplaintiff or seeking any other remedy available in law. In fact, the attemptmade by the plaintiff to seek such a declaratory relief is, in substance, toseek a relief of injunction against the defendants, particularly defendantno.1, but framed it in the nature of a declaratory relief. In other words,the plaintiff has sought an injunction against defendant no.1 from seekingremedies in law on account of the cheque issued by the plaintiff for asum of Rs. 56 lakhs being dishonoured.

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36. We may refer to Sections 41 (b) and (d) of SR Act which areextracted as under: - “41. Injunction when refused. - xxx (b) to restrain any person from instituting or prosecuting anyproceeding in a Court not subordinate to that from whichDthe injunction is sought; xxxxxxxxx (d) to restrain any person from instituting or prosecuting anyproceeding in a criminal matter;”

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In the above context, following decisions are useful to be referred to:- (a) In the case of Cotton Corporation of India Limited vs. UnitedIndustrial Bank Limited and Ors. - [(1983) 4 SCC 625], this Courthighlighted the equitable principle underlying Section 41 (b) of the SpecificRelief Act, 1963 as under: - F

“8. It is, therefore, necessary to unravel the underlying intendmentof the provision contained in Section 41(6). It must at once beconceded that Section 41 deals with perpetual injunction and itmay as well be conceded that it has nothing to do with interim ortemporary injunction which as provided by Section 37 are dealtwith by the Code of Civil Procedure. To begin with, it can be saidwithout fear of contradiction that anyone having a right that is alegally protected interest complains of its infringement and seeksrelief through court must have an unhindered, uninterrupted accessto law courts. The expression ‘court’ here is used in its widest G

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SUPREME COURT REPORTS

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SUPREME COURT REPORTS

Aamplitude comprehending every forum where relief can be obtainedin accordance with law. Access to justice must not be hamperedeven at the hands of judiciary. Power to grant injunction vests inthe court unless the legislature confers specifically such poweron some other forum. Now access to court in search of justiceaccording to law is the right of a person who complains ofBinfringement of his legally protected interest and a fortioritherefore, no other court can by its action impede access to justice.This principle is deducible from the Constitution which seeks toset up a society governed by ride of law. As a corollary, it mustyield to another principle that the superior court can injunct a personCby restraining him from instituting or prosecuting a proceedingbefore a subordinate court. Save this specific carving out of thearea where access to justice may be impeded by an injunction ofthe court, the legislature desired that the courts ordinarily shouldnot impede access to justice through court. This appears to us tobe the equitable principle underlying Section 41(b). Accordingly,Dit must receive such interpretation as would advance theintendment, and thwart the mischief it was enacted to suppress,and to keep the path of access to justice through courtunobstructed.”

(b) In the case of Ratna Commercial Enterprises Ltd. vs.EVasutech Ltd. – [AIR 2008 Del 99], it was held: - “29. The other issue concerns the maintainability of the suit itselfin terms of the Section 41(d) of the Specific Relief Act, 1963(‘SRA’) which reads as under:

“41. An injunction cannot be granted …. (d) to restrain anyperson from instituting or prosecuting any proceeding in a criminalmatter.”

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The law concerning the interpretation of Section 41(d) ofthe SRA is fairly well settled. It has been held In Re N.P. EssappaChettiar AIR 1942 Mad. 756 and in Gauri Shanker v. DistrictGBoard AIR 1947 All. 81 that a suit to restrain criminalproceedings being initiated is not maintainable. In Aristo PrintersPvt. Ltd. v. Purbanchal Trade Centre AIR 1992 Gau. 81 aDivision Bench of the Gauhati High Court was dealing with acase where cheques issued by the plaintiff to the defendant hadHbeen dishonoured and notice had been issued to the defendant under Section 138 NI Act. The plaintiff then filed a suit to restrainthe defendant from instituting proceedings under the NI Act. TheCourt referred to a judgment of the Hon’ble Supreme Courtin State of Orissa v. Madan Gopal Rungta AIR 1952 SC 12and Cotton Corporation of India Ltd. v. United Industrial BankLtd. AIR 1983 SC 1272 and held that “an order of injunctionof the nature issued in this case cannot be granted and the handsof the criminal court cannot be fettered by the civil court.”

30. The decision of this Court in Atul Kumar Singh v. JalveenRosha AIR 2000 Del 38 was in a case where the plaintiff hadissued four cheques issued in favour for the defendant for a valueof Rs. 7 lakhs. The cheques when presented were dishonoured.After service of notice under Section 138 NI Act, the plaintifffiled a suit for a declaration that “the defendant is not entitled toany benefit on account of holding the cheques” and to injunct thedefendant “from using or claiming any benefit by virtue ofpossessing the instruments.” This Court, while allowing thedefendant’s application for rejecting the plaint, held that (AIR,p.40):

“The reliefs claimed in this suit are in substance for an injunctionrestraining the defendant from prosecuting the criminal caseinstituted against the plaintiff. Section 41(b) of the SRA deniesto the Court the jurisdiction to grant an injunction restrainingany person from prosecuting any proceedings in a Court.Consequently, the injunction sought by the plaintiff cannot begranted since it would have the effect of preventing thedefendant from prosecuting the criminal case against theplaintiff.”

Further, the nature of the declaratory reliefs sought already arisesout of the MoU dated 17[th] January, 2009, between the plaintiff anddefendant no.1 in respect of which the plaintiff could seek appropriateremedies, if there is a breach of the said MoU by defendant no.1, but theplaintiff cannot seek declaratory reliefs to the effect that the plaintiffwas not liable to carry out his obligation under the terms of the MoU. Ifthe plaintiff has failed to do so then the defendant no.1 would have acause of action against the plaintiff, but there cannot be a frustration ofthe right to seek a remedy in law by means of seeking declaration undera contract or MoU as in the instant case.

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A37. Moreover, the right of defendant no.1 to prosecute the plaintiffowing to the dishonour of the cheque issued by the plaintiff for a sum ofRs. 56 lakhs cannot be frustrated by seeking a declaration that the saidcheque was handed over as a security. Such a declaration cannot be exfacie granted as it would be contrary to the provisions of the N.I. Actand particularly Section 118(a) thereof. If the plaintiff is aggrieved onBaccount of breach of the terms and conditions of the MoU committed bydefendant no.1 then it could seek appropriate reliefs in accordance withlaw. Whether the plaintiff was not liable to issue the cheque for Rs. 56lakhs to defendant no.1 under the terms of the MoU is a matter whichhas to be considered in an appropriate proceeding to be initiated byCdefendants on account of dishonour of the said cheque under Section138 of the N.I. Act. The plaintiff can always prove that it had no legalliability or debt to be discharged vis-a-vis defendant no.1 under the termsof the MoU, if any proceeding is to be initiated by defendant no.1 onaccount of the dishonour of the said cheque. Further, if defendant no.1 isto seek any relief for the non-supply of 3876 MT of iron ore fines by theDplaintiff under the very same MoU then the plaintiff is entitled to takeappropriate defences as are available in law. If the plaintiff has agrievance against the defendants and particularly defendant no.1, arisingfrom the MoU, such prayers have not been sought by the plaintiff. Suchreliefs could have been sought by the plaintiff inasmuch as there is noEprayer seeking recovery of Rs. 21.50 lakhs from defendant no.1 whichaccording to the plaintiff is due to it.

38. In the circumstances, we hold that while the plaintiff has certaingrievances arising from the MoU, against the defendants which maygive rise to seek appropriate remedies in law, the aforesaid threeFdeclaratory reliefs sought in the plaint are barred by law. Hence, theplaint is liable to be rejected in exercise of jurisdiction under Order VIIRule 11 CPC. In our view, the revisional court was justified in rejectingthe plaint but the High Court has erroneously set aside the order of therevisional court without appreciating the facts and circumstances of thecase and has simply remanded the matter to the revisional court toGreconsider the revision afresh on the premise that the revisional courtdid not have the jurisdiction to reject the plaint under Section 115 of theCPC.

39. In the result, the impugned Order of the High Court is setaside and the Order of the revisional court passed in C.R.P. No.5 ofH

2012 dated 23.02.2013 is restored. The plaint in C.S. No. 1065 of 2009is rejected. This appeal is accordingly allowed.

40. However, it is clarified that the rejection of the plaint wouldnot come in the way of the plaintiff filing a suit against defendant no.1for seeking appropriate reliefs in accordance with law, if so advised.

Parties to bear their respective costs.

Nidhi Jain

Appeal allowed.

(Assisted by : Tamana, LCRA)

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