TaxTMI 
TaxTMI 
2022 (4) TMI 195
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....d 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 under Order VII Rule 11 of the CPC. 2. For the sake of convenience, the parties herein shall be referred to in terms of their rank and status before the trial court. 3. Briefly stated, the facts of the case are that, respondent no.1 herein/plaintiff had filed a suit against the appellant herein/defendant no.1 and respondent no.2 herein/defendant no.2 seeking the following reliefs: "(i) Let it be declared that the plaintiff had handed over the cheque to Sri Dilip Das, Advocate as a security; (ii) Let it be declared that the said cheque has been illegally handed over by the defendant no.2 to the defendant no.1 by violating term and condition of the memorandum of understanding dated 17.01.2009; (iii) Let it be declared that the plaintiff is not liable to give delivery of 3876 MT of iron ore fines to the defendant no.1 nor the cheque amount since the defendant no.1 has failed to save the plaintiff's plot from cancellation; (iv) Let the cost of the suit be decreed in favour of the plain....
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....ruary, 2009. 5. Being apprehensive of the cancellation of the licence to Plot No.RS4, the Managing Director of the plaintiff Company agreed to the proposal of the representative of defendant no.1 viz., Rabindra Banthia, that in case plaintiff agreed to supply 3876 MT of iron ore fines to defendant no.1, they would manage to withdraw their complaint and would save the licence of the plot from cancellation. 6. That in January, 2009, plaintiff had outstanding dues of Rs. 21.50 lakhs against defendant no.1 and at the behest of defendant no.2, a Memorandum of Understanding (for short, 'MoU') was arrived at on 17th January, 2009 on certain terms and conditions that defendant no.1 would take steps to protect the licence of the plot given to the plaintiff from cancellation in seven days' time and it was further agreed that defendant no.1 would give a cheque of Rs. 21.50 lakhs to the plaintiff towards the outstanding dues to the plaintiff. Similarly, the plaintiff would issue a cheque for Rs. 56 lakhs in favour of defendant no.1 and the same would remain in the custody of Sri Dilip Das, Advocate defendant no.2 as security, which is equivalent to the cost of 3876 MT of iron ore. The plaint....
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....tiff through its Managing Director, to which a reply was sent on 23rd June, 2009. It was, inter alia, stated in the reply that the defendants were trying to harass the plaintiff and having no other alternative, the plaintiff filed the suit seeking a declaration that the cheque which was dishonoured was handed over by the plaintiff to defendant no.2 as a security and that defendant no.1 had not acquired any right over the said cheque as the plaintiff had no liability to discharge visàvis defendant no.1. It was averred in the plaint that defendant no.1 was liable to pay a sum of Rs. 21.50 lakhs to the plaintiff towards its outstanding dues for which a cheque was issued on 17th January, 2009 which was also kept with defendant no.2 and in respect of which the plaintiff reserved its right to initiate appropriate proceeding for recovery of the said amount from defendant no.1. There were further correspondences between the parties and ultimately the aforementioned suit was filed by the plaintiff against the defendants. 8. On receipt of the summons sent by the trial court, defendant no.1 appeared and filed an application under Order VII Rule 11 of CPC seeking rejection of the plain....
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....ed revision petition in C.R.P. No.5 of 2012 before the District Court having regard to Section 115 of the CPC and particularly proviso thereto as, if the application filed by defendant no.1 under Order VII Rule 11 of CPC was to be allowed by the revisional court, then, the proceedings before the trial court would conclude. The revisional court rightly appreciated the case of appellant herein and rejected the plaint. However, the High Court on a writ petition filed by the plaintiff held that the revisional court while exercising its power of revision had exceeded its jurisdiction by rejecting the plaint instead of remanding the matter to the trial court to do so. While adverting to Section 115 of the CPC [vide Orissa Act 26 of 1991, Section 2 (w.e.f. 7th November, 1991)], learned counsel for the appellant contended that when the trial court failed to exercise jurisdiction vested in it and refused to reject the plaint by allowing the application filed under Order VII Rule 11 of the CPC by the appellant herein, the revisional court rightly allowed the said revision and rejected the plaint which finally disposed of the suit in terms of the second proviso to the said Section. It was con....
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....claim of defendant no.1; and thirdly, the suit has been deliberately undervalued. Objections were filed to the said application of defendant no.1. By order dated 19th May, 2012, the trial court dismissed the said application. Being aggrieved, defendant no.1 filed C.R.P. No.5 of 2012 under Section 115 (Orissa amendment). 16. The revisional court considered the revision and allowed the application filed under Order VII Rule 11 of CPC which had the effect of finally disposing of the suit. It is against the said order that the plaintiff filed the writ petition before the High Court which was allowed and the matter was remanded to the revisional court for fresh consideration with an observation that the revisional court may, in turn, remand the matter to the trial court if necessary. This was on the premise that the revisional court had exceeded the jurisdiction vested in it by acting illegally in allowing the application filed under Order VII Rule 11 of CPC. 17. In order to consider the correctness of the impugned order passed by the High Court, it would be useful to refer to Section 115 of the CPC as well as the Orissa Amendment. For immediate reference, the same are extracted as un....
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....the District Court, the High Court alone shall be competent to make an order under this Section; Provided further that the High Court or the District Court shall not, under this Section, vary or reverse any order, including an order deciding an issue, made in the course of a suit or other proceedings, except where (i) the order, if so varied or reversed would finally dispose of the suit or other proceedings; or (ii) the order, if allowed to stand, would occasion a failure of justice or cause irreparable injury to the party against whom it was made. Explanation In this Section, the expression 'any case which has been decided' includes any order deciding an issue in the course of a suit or other proceeding"." 18. On a perusal of the same it is noted that the Orissa amendment differs from the main Section 115 of CPC in the following ways: (i) Firstly, the main Section 115 deals with revisional powers of the High Court only, whereas, Section 115 of CPC (Orissa amendment) confers the power of revision not only on the High Court but also on the District Court which may call for the record of any case which has been decided by any court subordinate to the High Cour....
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....it would finally dispose of the suit or other proceedings or if the impugned order is allowed to stand would occasion a failure of justice or cause irreparable injury to the party against whom it was made. 19. It would also be pertinent to mention that the instant suit was filed in the year 2009 and therefore the Orissa amendment to Section 115 CPC vide Orissa Act 26 of 1991, Section 2, would be applicable. However, by Orissa Act 14 of 2010, SubSection 2, Section 115 was amended by the Orissa Legislature and second proviso to Section 115 has been amended and SubSection 2 of Section 115 has been added which states that the High Court or District Court, as the case may be, shall not under this Section, vary or reverse any order including an order deciding 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 applying for revision, would finally dispose the suit or other proceeding. 20. Further, clause 1 of the second proviso of Section 115 has been omitted by the amendment made in the year 2010 and SubSection 3 has been added. This provision states that a revision shall not operate as a stay of suit or other p....
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....e the Orissa Act 14 of 2010, s. 2]" 21. Therefore, we hold that the High Court was not right in observing that the revisional court had exceeded its jurisdiction and it could not have allowed the application filed under Order VII Rule 11 of CPC and thereby reversed the order of the trial court and finally disposed of the suit. In fact, the High Court has failed to appreciate the second proviso to Section 115 of CPC (Orissa amendment) in its true perspective. The revisional court, being the High Court or the District Court, as the case may be, can reverse an order which would finally dispose of the suit or other proceeding. That is exactly what has been done by the revisional court being the District Court in the petition being C.R.P. No.5 of 2012. 22. Hence, we find that the High Court was not justified in setting aside the said order and remanding the matter to the revisional court (District Court) to consider afresh, the application filed by defendant no.1/appellant herein under Order VII Rule 11 of CPC seeking rejection of the plaint. In fact, we would observe that exercise of jurisdiction by the revisional court in the instant case is in accordance with second proviso to Sec....
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....ruction Co. (P) Ltd. v. Sarup Singh [DLF Housing & Construction Co. (P) Ltd. v. Sarup Singh, (1969) 3 SCC 807 : (1970) 2 SCR 368] this Court held: (SCC pp. 81112, para 5) "5. The position thus seems to be firmly established that while exercising the jurisdiction under Section 115, it is not competent to the High Court to correct errors of fact however gross or even errors of law unless the said errors have relation to the jurisdiction of the court to try the dispute itself. Clauses (a) and (b) of this section on their plain reading quite clearly do not cover the present case. It was not contended, as indeed it was not possible to contend, that the learned Additional District Judge had either exercised a jurisdiction not vested in him by law or had failed to exercise a jurisdiction so vested in him, in recording the order that the proceedings under reference be stayed till the decision of the appeal by the High Court in the proceedings for specific performance of the agreement in question. Clause (c) also does not seem to apply to the case in hand. The words "illegally" and "with material irregularity" as used in this clause do not cover either errors of fact or of law; they do n....
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....ds, that while considering an application under Order VII Rule 11 CPC what is required to be decided is whether the plaint discloses a real cause of action, or something purely illusory: " 5. We have not the slightest hesitation in condemning the petitioner for the gross abuse of the process of the court repeatedly and unrepentently resorted to. From the statement of the facts found in the judgment of the High Court, it is perfectly plain that the suit now pending before the First Munsif's Court, Bangalore, is a flagrant misuse of the mercies of the law in receiving plaints. The learned Munsif must remember that if on a meaningful - not formal - reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, he should exercise his power under Order 7, Rule 11 CPC taking care to see that the ground mentioned therein is fulfilled. And, if clever drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order 10, CPC. An activist Judge is the answer to irresponsible law suits. The trial courts would insist imperatively on examining the party at the ....
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...."139. Whether a plaint discloses a cause of action or not is essentially a question of fact. But whether it does or does not, must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is as to whether if the averments made in the plaint are taken to be correct in its entirety, a decree would be passed." e) We could allude to the exposition of this Court in Madanuri Sri Rama Chandra Murthy vs. Syed Jalal - [(2017) 13 SCC 174], wherein it was held as under: " 7. .....The averments of the plaint have to be read as a whole to find out whether the averments disclose a cause of action or whether the suit is barred by any law. It is needless to observe that the question as to whether the suit is barred by any law, would always depend upon the facts and circumstances of each case. The averments in the written statement as well as the contentions of the defendant are wholly immaterial while considering the prayer of the defendant for rejection of the plaint. Even when, the allegations made in the plaint are taken to be correct as a whole on their face value, if they show that the suit is....
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....nder Order VII Rule 11, a duty is cast on the Court to determine whether the plaint discloses a cause of action by scrutinizing the averments in the plaint, read in conjunction with the documents relied upon, or whether the suit is barred by any law. 23.7 X X X X X 23.8 Having regard to Order 7 Rule 14, the documents filed with the plaint, are required to be taken into consideration for deciding the application under Order 7 Rule 11(a). When a document referred to in the plaint, forms the basis of the plaint, it should be treated as a part of the plaint. 23.9 In exercise of power under this provision, the Court would determine if the assertions made in the plaint are contrary to statutory law, or judicial dicta, for deciding whether a case for rejecting the plaint at the threshold is made out. 23.10 At this stage, the pleas taken by the defendant in the written statement and application for rejection of the plaint on the merits, would be irrelevant, and cannot be adverted to, or taken into consideration." g) In a recent judgment of Rajendra Bajoria and Others vs. Hemant Kumar Jalan and Others [ 2021 SCC Online SC 764], this Court while elucidating on the underlying ob....
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.... the acts done pursuant to the said MoU is the basis for the grievance of the plaintiff. According to the plaintiff, a cheque for Rs. 56 lakhs was issued by him in favour of defendant no.1 and handed over to Sri Dilip Das, Advocate - defendant no.2 as security with an understanding that the said cheque will not be handed over by defendant no.2 to defendant no.1 unless defendant no.1 fulfils its undertaking and carries out the responsibility of saving the licence to plot No. RS4, issued in favour of the plaintiff by the Paradeep Port Trust Authority, from being cancelled. As a result, the plaintiff would continue to remain as the licensee of the Paradeep Port Trust Authority visavis the said plot. According to the plaintiff, defendant no.1 did not take any step to save licence of the plaintiff from cancellation and it was cancelled on the basis of the complaint made by defendant no.1 vide letter dated 18th 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 pressurized to either supply 3876 MT of iron ore fines to defendant no.1 or else defendant n....
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....be dismissed and the plaint is liable to be rejected under Order VII Rule 11 CPC. 31. In the objections filed to the application under order VII Rule 11 CPC, it has been averred that the plaint averments would clearly show a cause of action for filing the suit and further that the suit is not barred by any law. Further, the declaratory reliefs have been valued properly and appropriate court fee has been paid. Hence, the application is liable to be rejected. Thus, the main thrust of the application seeking rejection of the plaint is that apart from the fact that the plaint does not disclose a cause of action which has been negated by the revisional court and rightly so, plaintiff has sought only declaratory reliefs and has not sought further or consequential reliefs. In the circumstances, the suit is barred under the provisions of the SR Act. Section 34 of the SR Act reads as under: "34. Discretion of court as to declaration of status or right.-Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make therei....
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....ore fines to the defendant no.1 nor the cheque amount since the defendant no.1 has failed to save the plaintiff's plot from cancellation;" Hence, it is contended by defendant no.1 that the suit filed by the plaintiff is an attempt to frustrate the possibility of the defendant no.1 initiating action under the provisions of the N.I. Act for the dishonour of cheque. In this regard, reference could be made to Sections 118 (a) and 138 of N.I. Act, which reads as under: "118. Presumptions as to negotiable instruments. -Until the contrary is proved, the following presumptions shall be made:- (a) of consideration -that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration; XXX XXX XXX 138. Dishonour of cheque for insufficiency, etc., of funds in the account.-Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money 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 the b....
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....cheque was issued as a security and that the same was illegally handed over by defendant no.2 to defendant no.1 in violation of the terms and conditions of the MoU, the plaintiff in substance is making an attempt to frustrate proceedings being initiated under Section 138 of the N.I. Act or for recovery of the amount by filing a civil suit. 35. On a holistic reading of the plaint and on consideration of the reliefs sought by the plaintiff, we find that the said reliefs are barred by law inasmuch as no plaintiff can be permitted to seek relief in a suit which would frustrate the defendants from initiating a prosecution against plaintiff or seeking any other remedy available in law. In fact, the attempt made by the plaintiff to seek such a declaratory relief is, in substance, to seek a relief of injunction against the defendants, particularly defendant no.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 seeking remedies in law on account of the cheque issued by the plaintiff for a sum of Rs. 56 lakhs being dishonoured. 36. We may refer to Sections 41 (b) and (d) of SR Act which are extracted as....
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....it must receive such interpretation as would advance the intendment, and thwart the mischief it was enacted to suppress, and to keep the path of access to justice through court unobstructed." (b) In the case of Ratna Commercial Enterprises Ltd. vs. Vasutech Ltd. - [AIR 2008 Del 99], it was held: " 29. The other issue concerns the maintainability of the suit itself in 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 any person from instituting or prosecuting any proceeding in a criminal matter." The law concerning the interpretation of Section 41(d) of the SRA is fairly well settled. It has been held In Re N.P. Essappa Chettiar AIR 1942 Mad. 756 and in Gauri Shanker v. District Board AIR 1947 All. 81 that a suit to restrain criminal proceedings being initiated is not maintainable. In Aristo Printers Pvt. Ltd. v. Purbanchal Trade Centre AIR 1992 Gau. 81 a Division Bench of the Gauhati High Court was dealing with a case where cheques issued by the plaintiff to the defendant had been dishonoured and notice had been issued to the defendant under Section 138 NI Act. The plainti....
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....e dishonour of the cheque issued by the plaintiff for a sum of Rs. 56 lakhs cannot be frustrated by seeking a declaration that the said cheque was handed over as a security. Such a declaration cannot be ex facie granted as it would be contrary to the provisions of the N.I. Act and particularly Section 118(a) thereof. If the plaintiff is aggrieved on account of breach of the terms and conditions of the MoU committed by defendant no.1 then it could seek appropriate reliefs in accordance with law. Whether the plaintiff was not liable to issue the cheque for Rs. 56 lakhs to defendant no.1 under the terms of the MoU is a matter which has to be considered in an appropriate proceeding to be initiated by defendants on account of dishonour of the said cheque under Section 138 of the N.I. Act. The plaintiff can always prove that it had no legal liability or debt to be discharged visavis defendant no.1 under the terms of the MoU, if any proceeding is to be initiated by defendant no.1 on account of the dishonour of the said cheque. Further, if defendant no.1 is to seek any relief for the nonsupply of 3876 MT of iron ore fines by the plaintiff under the very same MoU then the plaintiff is entit....