CANARA BANK versus P. SELATHAL AND ORS. ETC.ETC. on 28 February 2020

[2020] 2 S.C.R. 944

SUPREME COURT REPORTS

[2020] 2 S.C.R.

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CANARA BANK

v.

P. SELATHAL AND ORS. ETC.ETC.

(Civil Appeal Nos. 1863-1864 of 2020)

BFEBRUARY 28, 2020

[UDAY UMESH LALIT, INDIRA BANERJEE ANDM. R. SHAH, JJ.]

Code of Civil Procedure, 1908 – Or.7, r.11 – Rejection ofPlaint – The appellant-bank sanctioned and granted a term loan toCa partnership firm – The said loan was secured by mortgage ofimmovable property belonging to the said firm and land of aGuarantor – The land of the guarantor are subject matter of dispute– A Guarantor had signed Guarantee Deed and created a equitablemortgage by deposit of title deeds – The original borrower failed toDrepay the loan amount – The DRT proceeded ex- parte against theGuarnator and directed the principal borrower, its partners andthe Guarantor pay the sum of the term loan with interest – TheGuarantor filed an I.A. in 2008 against the order of the DRT, forsetting aside the ex-parte decree dated 27.8.2003, however, the samewas dismissed – After seven years from the date of the decree datedE27.8.2003 passed by the DRT, the respondents-plaintiffs filed twosuits to declare the order dated 27.8.2003 as non- est, ultra-vires,null and void and not binding on the suit property – In the saidsuits, the bank filed application u/Or. 7, r.11 to reject the respectiveplaints – The bank contended that as per s.20(1) of Recovery ofFDebts due to Banks and Financial Institutions Act, 1993 the appealis provided to DRAT against the order of DRT and therefore, theCivil Court had no jurisdiction to entertain the suits – Therespondents-plaintiffs opposed the applications stating that theyhave purchased the suit property from the original owner and thatthey are in possession and enjoyment of the suit property – TheGapplications u/Or.7,r.11(d) were dismissed by the Trial Court – TheHigh Court confirmed the orders passed by the Trial Court – Onappeal, held: The decree passed by the DRT and even the orderpassed by the Recovery Officer are appealable u/s. 20 of theRDDBFI Act – The averments in suits, allege fraud with respect toHthe partnership deed and there are no allegations at all with respect to mortgage created by the guarantor – The suits are vexatious andare filed with malafide intention to get out of the judgment anddecree passed by the DRT – The plaintiffs are claiming right, titleon the basis of the sale deeds executed by the guarantor as powerof attorney holder of the original vendor/original owner – Accordingto the averments in the plaints that they have purchased the suitproperty from their vendor/original owner is factually incorrect –Before, the execution of sale deeds, the lands were already put as asecurity by way of mortgage – Further, the guarantor had filed I.A.in 2008 against the judgment and decree by the DRT, he did notdisclose that he had already sold the property in favour of plaintiffs– Thus, considering the overall facts and circumstances of the casethe suits filed by the plaintiffs are vexatious, frivolous and an abuseof process of law and Court – Therefore, considering the law laiddown by the Supreme Court, the plaints are rejected u/Or. 7, r. 11 –Both the Courts below, materially erred in not rejecting the plaintsin exercise of powers u/or. 7, r. 11(d) of the CPC.

Allowing the appeals, the Court

HELD:1. The short question which is posed forconsideration of this Court is, whether the suits filed by theplaintiffs were liable to be rejected in exercise of powers underOrder 7 Rule 11(d) of the CPC or not? [Para 7.1][957 D-E]

Conclusion

2. Applying the law laid down by this Court on exercise ofpowers under Order 7 Rule 11 of the CPC to the facts of the caseon hand and the averments in the plaints, this Court is of theopinion that both the courts below have materially erred in notrejecting the plaints in exercise of powers under Order 7 Rule11 of the CPC. As observed, the main prayer in the suits ischallenging the decree passed by the DRT. The decree passedby the DRT and even the order passed by the Recovery Officerare appealable under Section 20 of the Recovery of Debts due toBanks and Financial Institutions Act, 1993. In the case of O.C.Krishnan and others, this Court has observed and held that inview of the alternate remedy of preferring the appeal before theDRAT, the petition under Article 227 challenging the order passedby the DRT shall not be maintainable, without exhaustion of suchremedy. In the case of O.C. Krishnan and others, decree passed AB

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Aby the DRT was challenged in a petition under Article 227 of theConstitution of India. The High Court allowed the petition. Whileallowing the appeal of the bank – Punjab National Bank, this Courthas observed that without exhaustion of the remedies under theRDDBFI Act, the High Court ought not to have exercised itsjurisdiction under Article 227. [Para 8][960 D-G]B

3. Having considered the pleadings and the averments inthe suits, more particularly the allegations of fraud, this Courtfinds that the allegations of fraud are with respect to thepartnership deed and there are no allegations at all with respectto mortgage created by the Guarantor and that too with respectCto the deed of guarantee executed by the Guarantor. Muchreliance is placed upon the judgment and order passed by theMagistrate holding the partners of the firm guilty. However, it isrequired to be noted that even in the said judgment passed bythe Magistrate there is no reference to the deed of guaranteeDand/or the mortgage created by the Guarantor. Even the bank isnot a party to the said proceedings. It is reported that against thejudgment and order passed by the learned Magistrate, furtherappeal is pending. Be that as it may, considering the pleadings/averments in the suits and the allegations of fraud, this Court isof the opinion that the allegations of fraud are illusory and onlyEwith a view to get out of the judgment and decree passed by theDRT. This Court is of the opinion that therefore the suits arevexatious and are filed with a mala fide intention to get out of thejudgment and decree passed by the DRT. As observedhereinabove, the plaintiffs are claiming right, title on the basis ofFthe sale deeds dated 30.01.1996 and 10.03.1997 respectivelyexecuted by the guarantor as power of attorney holder of theoriginal owner. However, according to the averments in theplaints, they have purchased the suit property from their vendorwhich is factually incorrect. On a bare reading of the sale deeds, it appears that the sale deeds are executed by the guarantor asGpower of attorney holder of the original vendor. As observedhereinabove, even in the year 2008, when the guarantor filedinterlocutory application before the DRT to quash and set asidethe ex-parte judgment and decree passed by the DRT, he did notdisclose that he has already sold the property in favour of theH

original plaintiffs. As observed, even the sale consideration isalleged to have been paid in cash. Before the execution of thesale deeds dated 30.01.1996 and 10.03.1997, the lands werealready put as a security by way of mortgage with the appellant-bank by the guarantor. Thus, considering the overall facts andcircumstances of the case, the suits filed by the original plaintiffsare vexatious, frivolous and nothing but an abuse of process oflaw and court. Therefore, considering the law laid down by thisCourt in the aforesaid decisions, more particularly in the case ofT. Arivandandam, the suits being vexatious and frivolous, theplaints are required to be rejected in exercise of powers underOrder 7 Rule 11 of the CPC. As pointed out by Krishna Iyer, J. inT. Arivandandam, the ritual of repeating a word or creation of anillusion in the plaint can certainly be unravelled and exposed bythe court while dealing with an application under Order 7 Rule11(a). As observed by this Court, such proceedings are requiredto be nipped in the bud. Even otherwise as observed hereinabove,without exhausting the remedy of appeal provided under theRDDBFI Act, the suits with the basic relief of challenging thedecree passed by the DRT were liable to be dismissed, asobserved and held by this Court in the case of O.C. Krishnan andothers. [Para 10][961 F-H; 962 A-G]

4. At this stage, it is also required to be noted that the suitshave been filed after a period of 15 years from the date of mortgageand after a period of 7 years from the date of passing of the decreeby the DRT. In the plaints, it is averred that the plaintiffs came toknow about the mortgage and the judgment and decree passedby the DRT only six months back. However, the said avermentscan be said to be too vague. Nothing has been averred when andhow the plaintiffs came to know about the judgment and decreepassed by the DRT and the mortgage of the property. Only with aview to get out of the law of limitation and only with a view tobring the suits within the period of limitation, such vagueaverments are made. On such vague averments, plaintiffs cannotget out of the law of limitation. There must be specific pleadingsand averments in the plaints on limitation. Thus, on this groundalso, the plaints were liable to be rejected. As observedhereinabove, the plaints are vexatious, frivolous, meritless andnothing but an abuse of process of law and court. Therefore, this ABC

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Ais a fit case to exercise the powers under Order 7 Rule 11 (d) ofthe CPC. Both the courts below have materially erred in notrejecting the plaints in exercise of powers under Order 7 Rule11(d) of the CPC. Both the courts below have materially erred innot exercising the jurisdiction vested in them. [Para 11][962 G-H; 963 A-D]B

Sopan Sukhdeo Sable v. Assistant Charity Commissioner(2004) 3 SCC 137 : [2004] 1 SCR 1004; T.Arivandandam v. T.V. Satyapal (1977) 4 SCC 467 :[1978] 1 SCR 742; Church of Christ Charitable Trustand Educational Charitable Society v. PonniammanCEducational Trust (2012) 8 SCC 706 : [2012] 6 SCR404; Punjab National Bank v. O.C. Krishnan and Ors.(2001) 6 SCC 569 : [2001] 1 Suppl. SCR 466 – reliedon.

M/s. Cambridge Solutions Limited, Bangalore v. GlobalDsoftware Limited, Chennai 2016-5-L.W. 45; A.B.C.Laminart Pvt. Ltd. v. A.P. Agencies (1989) 2 SCC 163;Madanuri Sri Rama Chandra Murthy v. Syed Jalal(2017) 13 SCC 174 : [2017] 5 SCR 294; Ram Singh v.Gram Panchayat Mehal Kalan (1986) 4 SCC 364 –Ereferred to.

Case Law Reference

From the Judgment and Order dated 09.11.2017 of the High Courtof Madras in CRP (PD) Nos. 2586 and 2587 of 2013.H

Rajesh Kumar-I, Anant Gautam, Ms. Sakshi Gaur, Sorabh Dahiya,Vibhu Sharma, Nipun Sharma, Ms. Garvita, Anmol Mehta, Advs. for theAppellant.

Robin R. David, Febin V. Mathew, Dhiraj A. Philip, Samuel David,M/s. Dua Associates, Advs. for the Respondents.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Leave granted.

2. Feeling aggrieved and dissatisfied with the impugned commonjudgment and order dated 09.11.2017 passed by the High Court ofJudicature at Madras in C.R.P.(PD) No. 2586/2013 and C.R.P.(PD)No. 2587/2013, by which the High Court has dismissed the said revisionapplications preferred by the appellant herein – Canara Bank and hasconfirmed the orders passed by the learned trial Court dismissing theapplications preferred by the appellant herein to reject the respectiveplaints in exercise of powers under Order 7 Rule 11 of the CPC, originaldefendant no.5 – Canara Bank in O.S. No. 1269/2010, who is originaldefendant no.6 in O.S. No.233/2011, has preferred the present appeals.

3. The facts leading to the present appeals in nutshell are as under:

That the appellant – bank sanctioned and granted a term loan ofRs.49,50,000/- to M/s Coimbatore Hatcheries, a partnership firm in whichone Shri Ravichandran and G. Suresh Babu were the partners, in theyear 1995. That the said loan was secured by mortgage of immovableproperty belonging to the said firm and the land situated at Survey Nos.472 and 488 of Sanganur Village of one Shri M.C. Kallikutty – Guarantor.That the land bearing Survey Nos. 472 and 488 of Sanganur Village ofone Shri M.C. Kallikutty – Guarantor is the subject matter of dispute.At this stage, it is required to be noted that the said Shri M.C. Kallikuttystood as a Guarantor. That the said Shri M.C. Kallikutty (hereinafterreferred to as the ‘Guarantor’) signed Guarantee Deed dated 28.09.1995and created equitable mortgage by deposit of Title Deeds of the disputedlands in question.

3.1 That as the original borrower failed to repay the loan amountdue to the appellant-bank, the appellant-bank filed O.A. No. 489 of 2001before the Debt Recovery Tribunal, Chennai in the month of October,1997 against the principal borrower, its partners as well as against the A

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AGuarantor. That on 31.10.2001, DRT, Chennai passed an order in O.A.No. 489/2001 to proceed ex-parte against the Guarantor. That O.A. No.489/2001 was transferred to DRT, Coimbatore and was re-numbered asT.A. No. 822/2002. That T.A. No. 822/2002 (previously O.A. No. 489/2001) filed by the appellant-bank came to be decreed by the DRT forRs.57,35,770/- with 18% interest per annum in favour of the appellant-Bbank and against the principal borrower as well as Guarantor. That aRecovery Certificate dated 16.09.2003 was issued in favour of theappellant-bank for a sum of Rs.57,35,770/- with 18% interest per annum.

3.2 That Recovery Officer, DRT, Coimbatore issued a DemandNotice dated 11.11.2003 in R.P. No. 141/2003 to the principal borrower,Cits partners and the Guarantor directing them to pay the sum ofRs.1,55,75,443/- as decreed in T.A. No. 822/2002. That the Guarantorfiled a writ petition before the High Court of Madras denying his guaranteeand creation of EMT and sought direction to the Crime Branch-CID toregister an FIR and investigate into the matter. That on directions of theDHigh Court of Madras, FIR No. 152/2010 came to be registered on2.11.2005. The CB-CID, Coimbatore filed a final report under Section173(2) of Cr.P.C. for the offences under Sections 120B read with 465,466, 467, 468, 471, 420 and 419 of the IPC against the partners of theprincipal borrower and also against one K.V. Roshan Babu, AgriculturalExtension Officer of the appellant – bank. It appears that thereafter theEcriminal proceedings against the officer of the bank – Roshan Babucame to be quashed by the High Court vide judgment and order dated28.06.2011.

3.3 That in the year 2007 and in pursuance of the RecoveryCertificate in favour of the appellant-bank, the bank auctioned and soldFthe properties of the partnership firm and recovered Rs.38 lacs. Thatthereafter after a period of five years from the date of the order passedby the DRT dated 27.08.2003, the Guarantor filed I.A. No. 1821 of 2008in the year 2008 for setting aside the ex-parte decree dated 27.08.2003before the DRT, Coimbatore. That vide order dated 12.06.2009, DRT,GCoimbatore dismissed the said I.A filed by the Guarantor and refused tocondone the delay of 1337 days in challenging the ex-parte decree dated27.08.2003 and for condonation of delay of 2392 days in filing the petitionto set aside the ex-parte order dated 31.10.2001.

3.4 That thereafter after a period of 15 years from the date ofHmortgage and after seven years from the date of the decree dated 27.08.2003 passed by the DRT, the respondents herein filed O.S. No.1269/2010 and O.S. No. 233/2011 respectively in the Court of learnedSecond Additional Subordinate Court, Coimbatore against the Guarantor,principal borrower and its partners and the appellant-bank for a declarationto declare the order dated 27.08.2003 passed by the DRT in T.A. No.822/2002 as non-est, ultra vires, null and void and not binding on the suitproperty and also for a consequential permanent injunction restrainingthe Recovery Officer from interfering with their peaceful possessionand enjoyment of the suit property by taking any action as against thesuit property by way of attachment, sale or otherwise. That in the aforesaidtwo suits, the appellant-bank was joined as defendant no.5 in O.S. No.1269/2010 and defendant no.6 in O.S. No. 233/2011 and was servedwith the summons/notices of the suits. That the appellant-bank filed I.A.No.431/2011 in O.S. No. 1269/2010 and I.A. No. 122/2012 in O.S. No.233/2011 to reject the respective plaints in exercise of powers underOrder 7 Rule 11(d) of the CPC. It was the case on behalf of the appellant-bank that in view of the specific bar of jurisdiction under Sections 18 and20(1) of the Recovery of Debts due to Banks and Financial InstitutionsAct, 1993 (for short ‘RDDBFI Act’), the suits are not maintainable andthe civil court has no jurisdiction. It was the case on behalf of theappellant-bank that as per Section 20(1) of the RDDBFI Act, the appealis provided to Debt Recovery Appellate Tribunal against the order ofDRT and therefore the civil court has no jurisdiction to entertain thesuits challenging the decree passed by the DRT.

3.5 That the said applications were opposed by the original plaintiffssubmitting inter alia that they have purchased the suit property from theoriginal owner and that they are in possession and enjoyment of the suitproperty. It was the case on behalf of the original plaintiffs that thevendor did not create any equitable mortgage in favour of the bank andthe officials of the bank in collusion with the promoters of the principalborrower created and fabricated equitable mortgage, as though the originalowner, their vendor created a mortgage. It was submitted that on acomplaint given by the Guarantor – Shri M.C. Kallikutty, the originalowner of the suit property, an FIR was registered on 02.11.2005 and acharge sheet dated 18.08.,2007 has been filed which is pending. It wasalleged that the bank and promoters of the principal borrower playedfraud and obtained decree in the DRT. It was submitted that the fraudplayed by the bank and others can be proved only by the civil forum andthe same cannot be decided by the DRT. It was also submitted that the AB

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Aplaintiffs are third parties and therefore they cannot approach the DRTand the DRAT. Therefore, it was prayed to dismiss the said applications.

3.6 That the learned trial Court dismissed the said applicationsand refused to reject the respective plaints in exercise of powers underOrder 7 Rule 11(d) of the CPC.B

3.7 Feeling aggrieved and dissatisfied with the orders passed bythe learned trial Court dismissing the aforesaid applications and refusingto reject the respective plaints under Order 7 Rule 11(d) of the CPC, theappellant-bank preferred two separate revision applications before theHigh Court. By the impugned common judgment and order, the HighCCourt has dismissed the said revision applications and has confirmed theorders passed by the learned trial Court rejecting the applications toreject the respective plaints in exercise of powers under Order 7 Rule11 CPC by observing that the issue of either fraud or impersonation orwhether mortgage created by the Guarantor, vendor of the originalplaintiffs, in favour of the bank is legal or not is a matter to be adjudicatedDin the civil suits and in criminal case.

3.8 Feeling aggrieved and dissatisfied with the impugned commonjudgment and order passed by the High Court in refusing to reject therespective plaints in exercise of powers under Order 7 Rule 11 CPC, theappellant-bank – original defendant no. 5 in O.S. No. 1269/2010 andEoriginal defendant no.6 in O.S. No. 233/2011 has preferred the presentappeals.

4. Shri Rajesh Kumar, learned Advocate appearing on behalf ofthe appellant-bank has vehemently submitted that in the facts andcircumstances of the case, the High Court has materially erred in rejectingFthe respective applications and confirming the orders passed by thelearned trial Court rejecting the applications preferred by the appellant-bank and refusing to reject the respective plaints in exercise of powersunder Order 7 Rule 11(d) of the CPC. It is vehemently submitted by thelearned Advocate that both, the High Court as well as the learned trialGCourt have not properly appreciated and/or considered the relevantprovisions of RDDBFI Act, more particularly Sections 18, 19 and 20 ofthe said Act.

4.1 It is further submitted by the learned Advocate appearing onbehalf of the appellant-bank that in substance the original plaintiffs arechallenging the decree passed by the DRT, Coimbatore dated 27.08.2003H

passed in T.A. No. 822/2002. It is submitted that under the RDDBFIAct against the decree passed by the DRT, the remedy of appeal isavailable under Section 20 of the said Act before the DRAT. It is submittedthat therefore RDDBFI Act being a Special Act, the procedure providedunder the said Act has to be followed. It is submitted that therefore thecivil suit challenging the decree passed by the DRT shall not bemaintainable and therefore the case squarely falls within Order 7 Rule11(d) of the CPC and therefore the learned trial Court as well as theHigh Court ought to have rejected the respective plaints in exercise ofpowers under Order 7 Rule 11(d) of the CPC. In support of the abovesubmission, learned Advocate appearing on behalf of the appellant –bank has heavily relied upon the decision of this Court in the case ofPunjab National Bank v. O.C. Krishnan and others, (2001) 6 SCC569. It is submitted that even in the said decision, as held by this Court,even the petitions under Articles 226 and 227 of the Constitution of Indiaare held to be not maintainable.

4.2 Learned Advocate appearing on behalf of the appellant-bankhas also heavily relied upon the decision of the Division Bench of theMadras High Court in the case of M/s Cambridge Solutions Limited,Bangalore v. Global Software Limited, Chennai, 2016-5-L.W. 45. Itis submitted that in the said case also the plaintiff filed a suit allegingfraud while challenging the order passed by the Recovery Officer anddespite the allegation of fraud the suit challenging the order passed bythe Recovery Officer is held to be not maintainable. It is submitted thatin the aforesaid decision, the Division Bench of the High Court has foundthe allegation of fraud to be illusory. It is submitted that special leavepetition against the said decision has been dismissed by this Court.

4.3 It is further submitted by the learned Advocate appearing onbehalf of the appellant-bank that in the present case also the allegationof fraud is not with respect to the Guarantee Deed executed by theGuarantor – Shri M.C. Kallikutty, but with respect to Partnership Deed.It is submitted that therefore the suits filed by the original plaintiffs arefrivolous and abuse of a process of law and therefore the plaints areliable to be rejected on that ground also and in exercise of powers underOrder 7 Rule 11(d) of the CPC. In support of his above submission,learned Advocate appearing on behalf of the appellant – bank has heavilyrelied upon the decisions of this Court in the cases of T. Arivandandamv. T.V. Satyapal (1977) 4 SCC 467; A.B.C. Laminart Pvt. Ltd. v. A.P.

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AAgencies (1989) 2 SCC 163; Sopan Sukhdeo Sable v. AssistantCharity Commissioner (2004) 3 SCC 137 and Madanuri Sri RamaChandra Murthy v. Syed Jalal (2017) 13 SCC 174.

4.4 Making the above submissions and relying upon the abovedecisions, it is prayed to allow the present appeals.B

5. The present appeals are vehemently opposed by Shri Robin R.David, learned Advocate appearing on behalf of the original plaintiffs. Itis vehemently submitted that in the facts and circumstances of the case,more particularly when there are specific allegations of fraud in therespective suits which can be decided only by the civil court, both, theClearned trial Court as well as the High Court have rightly refused toreject the plaints in exercise of powers under Order 7 Rule 11(d) of theCPC.

5.1 It is further submitted by the learned Advocate appearing onbehalf of the original plaintiffs that as such they are the bona fideDpurchasers of the suit properties which were alleged to have beenmortgaged by their vendor – Shri M.C. Kallikutty. It is submitted that inthe criminal proceedings initiated by the said Shri Kallikutty, there arespecific allegations of fraud and in fact charge-sheets have been filed inthe criminal proceedings initiated by the said Shri M.C. Kallikutty. It issubmitted that in fact thereafter in the criminal proceedings the trialECourt has convicted the partners of the partnership firm – G SureshBabu and Ravi Chandran for the offences under Sections 120B readwith 465, 466, 468, 471, 419 and 420 of the IPC. It is submitted that thelearned Magistrate has specifically observed and held that accusedentered into a criminal conspiracy and created a forged Partition DeedFof Shri M.C. Kallikutty by forging the signatures and thumb impressionsof witnesses and obtained the loan from the bank. It is submitted that thelearned trial Court as well as the High Court have rightly refused toreject the respective plaints under Order 7 Rule 11 (d) of the CPC.

5.2 Making the above submissions, it is prayed to dismiss theGpresent appeals.

6. In reply, learned Advocate appearing on behalf of the appellant-bank has submitted that so far as the criminal proceedings are concerned,the bank is not a party to the said criminal proceedings and thereforeany observations/finding of the Magistrate shall not bind the bank.

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6.1 It is further submitted by the learned Advocate appearing onbehalf of the appellant – bank that even the criminal proceedings werewith respect to the partnership deed and not with respect to the guaranteedeed executed by Shri M.C. Kallikutty – Guarantor. It is submitted thateven the guarantee deed executed by Shri M.C. Kallikutty – Guarantorwas not even before the learned Magistrate. It is submitted that thereforethe plaintiffs cannot rely upon the said criminal proceedings and/or cannottake the shelter under the word “fraud” used in the plaints. It is submittedthat therefore the allegations of fraud in the plaints are illusory and thesuits are vexatious and have been filed with mala fide intention andtherefore this is a fit case to exercise powers under Order 7 Rule 11(d)of the CPC.

7. We have heard the learned Advocates appearing on behalf ofthe respective parties at length.

7.1 At the outset, it is required to be noted that there is already anorder passed by the DRT against the principal borrower and the Guarantorand the recovery certificate issued by the Recovery Officer. That theappellant-bank sanctioned the term loan in favour of the principalborrower – partnership firm and its partners. The partners of thepartnership firm – principal borrower executed a Memorandum ofAgreement for Agricultural Loans, thereby agreeing to abide by the termsand conditions depicted therein. The Guarantor – Shri M.C. Kallikutty,who was defendant no.4 in the application before the DRT, also signedthe said agreement as co-obligant, making himself jointly and severallyliable to pay the loan amount due to the bank in respect of the said termloan. The term loan was further secured by the partners of the partnershipfirm – principal borrower by mortgaging the lands of the firm and alsoby the Guarantor – Shri M.C. Kallikutty by mortgaging the lands ownedby him. That the judgment and decree came to be passed by the DRTas far back as on 27.08.2003 and even the recovery certificate wasissued in favour of the bank on 16.09.2003. That after a period of 5years the said Shri Kallikutty filed an interlocutory application before theDRT to set aside the ex-parte decree dated 27.08.2003, which came tobe dismissed by the DRT on 12.06.2009. However, in the meantime, thesaid Kallikutty initiated the criminal proceedings against the partners ofthe partnership firm – principal borrower alleging forgery with respectto the partnership deed. That thereafter after a period of 15 years fromthe date of mortgage and after seven years from the date of decree A

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Apassed by the DRT, the original plaintiffs filed the present suits basicallychallenging the decree passed by the DRT dated 27.08.2003 allegingfraud. That in the said suits, it is the case on behalf of the original plaintiffsthat they have purchased the suit property, which have been mortgagedwhile taking the term loan, from their vendor vide sale deeds dated30.01.1996 and 10.03.1997 respectively and as the suit lands purchasedBby them vide sale deeds dated 30.01.1996 and 10.03.1997 respectivelywere put to mortgage by fraud by the principal borrower – partners ofthe partnership firm and therefore the decree passed by the DRT shallnot bind them. In the suits, the original plaintiffs have prayed inter aliafor the following reliefs:C“a) declaring that the alleged order dated 27.8.03 passed by theDebt Recovery Tribunal, Coimbatore in T.A. No. 822/2002 is non-est, ultra vires, null and void, and not binding on the suit propertyand for a consequential permanent injunction restraining the 6[th]defendant from interfering with the plaintiff peaceful possessionDand enjoyment of the suit property by taking any action as againstthe suit property by way of attachment or sale or otherwise;

b) declaring the alleged mortgage said to have been created bythe first defendant was the 5[th] defendant in respect of the suitproperty is non est, null and void and binding on the same and forEa consequent permanent injunction restraining the 5[th] defendantfrom interfering with the plaintiff’s possession and enjoyment ofthe suit property by taking any action as against the suit propertyby way of sale or otherwise.”

Thus, basically the plaintiffs are challenging the decree passed byFthe DRT being purchasers. At this stage, it is required to be noted that infact the suit property was mortgaged in the month of September, 1995and the original plaintiffs have claimed that they have purchased the suitproperty on 30.01.1996 and 10.03.1997 respectively. It is also requiredto be noted at this stage that at no point of time and even when theGuarantor – Shri Kallikutty filed an interlocutory application before theGlearned DRT in the year 2008 for quashing and setting aside the ex-parte decree passed by the DRT, he did not disclose that he had alreadysold the suit properties to the plaintiffs. It is also required to be noted atthis stage that even the sale deeds dated 30.01.1996 and 10.03.1997respectively, as per the averments in the sale deeds, were executed byHShri Kallikutty as power of attorney holder of the original owners and even the sale consideration was paid in cash. As observed hereinaboveand as mentioned in the judgment and decree passed by the learnedDRT dated 27.08.2003, not only Kallikutty – Guarantor signed theMemorandum of Agreement of Agricultural Loans dated 28.09.1995 bywhich the partners of the firm agreed to make themselves jointly andseverally liable to pay the loan and became co-obligant, even the saidKallikutty also mortgaged the lands owned by him. On considering theaverments in the plaints there are allegations of fraud with respect topartnership deed and that too by the partners of the partnership firm –principal borrower. However, there is no reference at all in the plaintswith respect to properties mortgaged by Shri Kallikutty even after theperiod of 15 years from the date of the mortgage and after 7 years fromthe date of decree passed by the DRT, basically challenging the decreepassed by the DRT. As the suits were filed challenging the decree passedby the DRT, the appellant-bank – one of the defendants filed applicationsto reject the plaints in exercise of powers under Order 7 Rule 11(d) ofthe CPC on the ground that considering the provisions of RDDBFI Act,more particularly Sections 18, 19 and 20 of the Act, the suits are notmaintainable. Both the applications are dismissed by the learned trialCourt and which are further confirmed by the High Court. Therefore,the short question which is posed for consideration of this Court is, whetherthe suits filed by the plaintiffs were liable to be rejected in exercise ofpowers under Order 7 Rule 11(d) of the CPC or not?

7.2 While considering the aforesaid issue/question, few decisionsof this Court on exercise of powers under Order 7 Rule 11(d) of theCPC are required to be referred to and considered.

7.3 In the case of T.Arivandandam(supra),while consideringthe very same provision i.e. Order 7 Rule 11 of the CPC and the decreeof the trial Court in considering such application, this Court in para 5 hasobserved and held as under:

“5. We have not the slightest hesitation in condemning the petitionerfor the gross abuse of the process of the court repeatedly andunrepentantly resorted to. From the statement of the facts foundin the judgment of the High Court, it is perfectly plain that the suitnow pending before the First Munsif’s Court, Bangalore, is aflagrant misuse of the mercies of the law in receiving plaints.The learned Munsif must remember that if on a meaningful – notformal – reading of the plaint it is manifestly vexatious, and AB

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Ameritless, in the sense of not disclosing a clear right to sue, heshould exercise his power under Order 7, Rule 11 CPC takingcare to see that the ground mentioned therein is fulfilled. And, ifclever drafting has created the illusion of a cause of action, nip itin the bud at the first hearing by examining the party searchinglyunder Order 10, CPC. An activist Judge is the answer toBirresponsible law suits….”

7.4 In the case of Church of Christ Charitable Trust andEducational Charitable Society v. Ponniamman Educational Trust(2012) 8 SCC 706, this Court in paras 13 has observed and held asunder:C

“13. While scrutinizing the plaint averments, it is the bounden dutyof the trial Court to ascertain the materials for cause of action.The cause of action is a bundle of facts which taken with the lawapplicable to them gives the plaintiff the right to relief against thedefendant. Every fact which is necessary for the plaintiff to proveDto enable him to get a decree should be set out in clear terms. It isworthwhile to find out the meaning of the words “cause of action”.A cause of action must include some act done by the Defendantsince in the absence of such an act no cause of action can possibleaccrue.”

E7.5 In A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem(supra), this Court explained the meaning of ”cause of action” asfollows:

“12.A cause of action means every fact, which if traversed, itwould be necessary for the plaintiff to prove in order to supportFhis right to a judgment of the court. In other words, it is a bundleof facts which taken with the law applicable to them gives theplaintiff a right to relief against the defendant. It must includesome act done by the defendant since in the absence of such anact no cause of action can possibly accrue. It is not limited to theGactual infringement of the right sued on but includes all the materialfacts on which it is founded. It does not comprise evidencenecessary to prove such facts, but every fact necessary for theplaintiff to prove to enable him to obtain a decree. Everythingwhich is not proved would give the defendant a right to immediatejudgment must be part of the cause of action. But it has no relationHwhatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for bythe plaintiff.”

7.6 In the case of Sopan Sukhdeo Sable (supra) in paras 11and 12, this Court has observed as under:

“11. In I.T.C. Ltd. v. Debts Recovery Appellate Tribunal[(1998)2SCC70] it was held that the basic question to be decidedwhile dealing with an application filed under Order 7 Rule 11 ofthe Code is whether a real cause of action has been set out in theplaint or something purely illusory has been stated with a view toget out of Order 7 Rule 11 of the Code.

12. The trial Court must remember that if on a meaningful and notformal reading of the plaint it is manifestly vexatious and meritlessin the sense of not disclosing a clear right to sue, it should exercisethe power under Order 7 Rule 11 of the Code taking care to seethat the ground mentioned therein is fulfilled. If clever draftinghas created the illusion of a cause of action, it has to be nipped inthe bud at the first hearing by examining the party searchinglyunder Order 10 of the Code. (See T. Arivandandam (supra).”

7.7 In the case of Madanuri Sri Rama Chandra Murthy (supra),this Court has observed and held as under:

“7. The plaint can be rejected under Order 7 Rule 11 if conditionsenumerated in the said provision are fulfilled. It is needless toobserve that the power under Order 7 Rule 11 CPC can beexercised by the Court at any stage of the suit. The relevant factswhich need to be looked into for deciding the application are theaverments of the plaint only. If on an entire and meaningful readingof the plaint, it is found that the suit is manifestly vexatious andmeritless in the sense of not disclosing any right to sue, the courtshould exercise power under Order 7 Rule 11 CPC. Since thepower conferred on the court to terminate civil action at thethreshold is drastic, the conditions enumerated under Order 7 Rule11 CPC to the exercise of power of rejection of plaint have to bestrictly adhered to. The averments of the plaint have to be read asa whole to find out whether the suit is barred by any law. It isneedless to observe that the question as to whether the suit isbarred by any law, would always depend upon the facts andcircumstances of each case. The averments in the written A

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Astatement as well as the contentions of the defendant are whollyimmaterial while considering the prayer of the defendant forrejection of the plaint. Even when the allegations made in theplaint are taken to be correct as a whole on their face value, ifthey show that the suit is barred by any law, or do not disclosecause of action, the application for rejection of plaint can beBentertained and the power under Order 7 Rule 11 CPC can beexercised. If clever drafting of the plaint has created the illusionof a cause of action, the court will nip it in the bud at the earliestso that bogus litigation will end at the earlier stage.”

7.8 In the case of Ram Singh v. Gram Panchayat Mehal KalanC(1986) 4 SCC 364, this Court has observed and held that when the suitis barred by any law, the plaintiff cannot be allowed to circumvent thatprovision by means of clever drafting so as to avoid mention of thosecircumstances, by which the suit is barred by law of limitation.

8. Applying the law laid down by this Court in the aforesaidDdecisions on exercise of powers under Order 7 Rule 11 of the CPC tothe facts of the case on hand and the averments in the plaints, we are ofthe opinion that both the courts below have materially erred in not rejectingthe plaints in exercise of powers under Order 7 Rule 11 of the CPC. Asobserved hereinabove, the main prayer in the suits is challenging theEdecree passed by the DRT. The decree passed by the learned DRT andeven the order passed by the Recovery Officer are appealable underSection 20 of the RDDBFI Act. In the case of O.C. Krishnan andothers (supra), this Court has observed and held that in view of thealternate remedy of preferring the appeal before the DRAT, the petitionunder Article 227 challenging the order passed by the DRT shall not beFmaintainable, without exhaustion of such remedy. In the case of O.C.Krishnan and others (supra), decree passed by the DRT was challengedin a petition under Article 227 of the Constitution of India. The HighCourt allowed the petition. While allowing the appeal of the bank – PunjabNational Bank, this Court has observed that without exhaustion of theGremedies under the RDDBFI Act, the High Court ought not to haveexercised its jurisdiction under Article 227. While holding so, in paragraph6, this Court has observed and held as under:

“6. The Act has been enacted with a view to provide a specialprocedure for recovery of debts due to the banks and the financialHinstitutions. There is a hierarchy of appeal provided in the Act,

namely, filing of an appeal under Section 20 and this fast-trackprocedure cannot be allowed to be derailed either by takingrecourse to proceedings under Articles 226 and 227 of theConstitution or by filing a civil suit, which is expressly barred.Even though a provision under an Act cannot expressly oust thejurisdiction of the court under Articles 226 and 227 of theConstitution, nevertheless, when there is an alternative remedyavailable, judicial prudence demands that the Court refrains fromexercising its jurisdiction under the said constitutional provisions.This was a case where the High Court should not have entertainedthe petition under Article 227 of the Constitution and should havedirected the respondent to take recourse to the appeal mechanismprovided by the Act.”

9. Relying upon and following the decision of this Court in thecase of O.C. Krishnan and others (supra), thereafter the DivisionBench of the Madras High Court in the case of M/s Cambridge SolutionsLimited (supra), has rejected the plaint in which the order passed bythe DRT was challenged, in exercise of powers under Order 7 Rule 11(d) of the CPC. It is required to be noted that in the said case also therewere allegations of fraud in the plaint and considering the averments inthe plaint, it was found that the allegations of fraud are illusory. It isobserved by the Division Bench in the said decision that specific instancesand acts of fraud with evidence have to be pleaded in the plaint. It isfurther observed that mere statements are not enough. It is furtherobserved that it is not sufficient if just fraud is pleaded and there must bematerial to show that the fraud is committed.

10. Having considered the pleadings and the averments in thesuits, more particularly the allegations of fraud, we find that the allegationsof fraud are with respect to the partnership deed and there are noallegations at all with respect to mortgage created by the Guarantor –Shri Kallikutty and that too with respect to the deed of guarantee executedby the Guarantor. Much reliance is placed upon the judgment and orderpassed by the learned Magistrate holding the partners of the firm guilty.However, it is required to be noted that even in the said judgment passedby the learned Magistrate there is no reference to the deed of guaranteeand/or the mortgage created by the Guarantor. Even the bank is not aparty to the said proceedings. It is reported that against the judgmentand order passed by the learned Magistrate, further appeal is pending.

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ABe that as it may, considering the pleadings/averments in the suits andthe allegations of fraud, we are of the opinion that the allegations offraud are illusory and only with a view to get out of the judgment anddecree passed by the DRT. We are of the opinion that therefore thesuits are vexatious and are filed with a mala fide intention to get out ofthe judgment and decree passed by the DRT. As observed hereinabove,Bthe plaintiffs are claiming right, title on the basis of the sale deeds dated30.01.1996 and 10.03.1997 respectively executed by Shri Kallikutty aspower of attorney holder of the original owner. However, according tothe averments in the plaints, they have purchased the suit property fromtheir vendor which is factually incorrect. On a bare reading of the saleCdeeds, it appears that the sale deeds are executed by Shri Kallikutty aspower of attorney holder of the original vendor. As observed hereinabove,even in the year 2008, when the said Kallikutty filed interlocutoryapplication before the DRT to quash and set aside the ex-parte judgmentand decree passed by the DRT, he did not disclose that he has alreadysold the property in favour of the original plaintiffs. As observedDhereinabove, even the sale consideration is alleged to have been paid incash. Before the execution of the sale deeds dated 30.01.1996 and10.03.1997, the lands were already put as a security by way of mortgagewith the appellant-bank by Shri Kallikutty. Thus, considering the overallfacts and circumstances of the case, the suits filed by the original plaintiffsEare vexatious, frivolous and nothing but an abuse of process of law andcourt. Therefore, considering the law laid down by this Court in theaforesaid decisions, more particularly in the case of T. Arivandandam(supra), the suits being vexatious and frivolous, the plaints are requiredto be rejected in exercise of powers under Order 7 Rule 11 of the CPC.As pointed out by Krishna Iyer, J. in T. Arivandandam (supra), theFritual of repeating a word or creation of an illusion in the plaint cancertainly be unravelled and exposed by the court while dealing with anapplication under Order 7 Rule 11(a). As observed by this Court, suchproceedings are required to be nipped in the bud. Even otherwise asobserved hereinabove, without exhausting the remedy of appeal providedGunder the RDDBFI Act, the suits with the basic relief of challenging thedecree passed by the DRT were liable to be dismissed, as observed andheld by this Court in the case of O.C. Krishnan and others (supra).

11. At this stage, it is also required to be noted that the suits havebeen filed after a period of 15 years from the date of mortgage and afterHa period of 7 years from the date of passing of the decree by the DRT.

In the plaints, it is averred that the plaintiffs came to know about themortgage and the judgment and decree passed by the DRT only sixmonths back. However, the said averments can be said to be too vague.Nothing has been averred when and how the plaintiffs came to knowabout the judgment and decree passed by the DRT and the mortgage ofthe property. Only with a view to get out of the law of limitation and onlywith a view to bring the suits within the period of limitation, such vagueaverments are made. On such vague averments, plaintiffs cannot getout of the law of limitation. There must be specific pleadings andaverments in the plaints on limitation. Thus, on this ground also, the plaintswere liable to be rejected. As observed hereinabove, the plaints arevexatious, frivolous, meritless and nothing but an abuse of process oflaw and court. Therefore, this is a fit case to exercise the powers underOrder 7 Rule 11 (d) of the CPC. Both the courts below have materiallyerred in not rejecting the plaints in exercise of powers under Order 7Rule 11(d) of the CPC. Both the courts below have materially erred innot exercising the jurisdiction vested in them.

12. In view of the above and for the reasons stated above, boththese appeals succeed. The impugned common judgment and orderpassed by the High Court in dismissing the revision applications and theorders passed by the learned trial Court rejecting the applications preferredby the appellant-bank to reject the respective plaints in exercise of powersunder Order 7 Rule 11(d) of the CPC are hereby quashed and set aside.Consequently, the plaints filed by the original plaintiffs being O.S. No.1269/2010 and O.S. No. 233/2011 pending in the Court of AdditionalSubordinate Court, Coimbatore are rejected. The instant appeals areallowed accordingly. No costs.

Ankit Gyan

Appeals allowed.

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