Code of Civil Procedure, 1908 : ss. 96, 115 and Or.VII r.11 Negotiable Instruments Act - ss. 118, 138 - Specific Relief Act - ss. 34, 41 – Suit for declaration – Rejection of plaint - Respondent no.1 engaged in business of exporting iron ore from Paradeep Port, had a plot on licence from Paradeep Port Trust Authority for carrying its business - Respondent no.1 and appellant entered into a Cooperation Agreement, however, as per respondent no.1, it was not given effect – Thereafter, appellant filed a complaint against respondent no.1 with Paradeep Port Trust Authority for violating terms and conditions of his license – Parties then entered into a Memorandum of understanding agreeing the appellant would take steps to protect the license of the plot given to the respondent no.1 from cancellation and that the respondent no.1 would issue a cheque for Rs.56 lakhs in favour of appellant and the same would remain in the custody of the respondent no.2 as security, which is equivalent to the cost of 3876 MT of iron ore, and if the appellant succeeded in protecting the licence from being cancelled then respondent no.
1 would supply iron ore fines to appellant - Accordingly cheque was given to the respondent no.2 as security, however, the appellant took no step to save the license of the plot and the license was cancelled, and the cheque of Rs.56 lakhs was handed over to appellant, who presented the same for encashment and it got dishonoured – Appellant issued notice u/s. 138 of N.I. Act to the respondent no. 1 – Respondent no.1 then filed suit for declaration against the appellant and the respondent no. 2 that the cheque which was dishonoured was handed over by him to respondent no.2 as a security and that appellant had not acquired any right over the said cheque as the respondent no.1 had no liability to discharge in favour of appellant – Appellant then filed an application u/Or. VII Rule 11seeking rejection of the plaint – Dismissed by trial court, DEVELOPERS AND BUILDERS (P) LTD.
however, the revisional court set aside the order of the trial court and rejected the plaint – In writ petition, the High Court set aside the order of the revisional court and remanded the matter holding that the revisional court had exceeded its jurisdiction in rejecting the plaint – On appeal, held : High Court was not right in holding that the revisional court had exceeded its jurisdiction and it could not have allowed the application filed under Order VII Rule 11 and thereby reversed the order of the trial court and finally disposed of the suit - High Court failed to appreciate the second proviso to s.
115 of CPC (Orissa amendment) in its true perspective - 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 - Revisional court being the District Court, did the same.
s.115 and Order VII Rule 11 - Specific Relief Act,1963 ss.34,41 - Negotiable Instruments Act - ss. 118, 138 - Revisional court-District Court allowing the application filed u/ord. VII r 11 by the appellant and thereby rejecting the plaint filed by the respondent no.1 – Justification of – Appellant’s case that respondent no.2 has sought only declaratory that the cheque issued in the name of the appellant was a security and the appellant had no right to encash it and has not sought further or consequential reliefs, thus, suit is barred under Specific Relief Act; and that the suit filed by the respondent no.1 is an attempt to frustrate the possibility of the appellant initiating action under the provisions of the N.I. Act for the dishonour of cheque - Held : Omission on the part of the respondent no. 1 in praying for further consequential relief, would become relevant only at the time of final adjudication of the suit Right of appellant to prosecute the respondent no. 1 owing to the dishonour of the cheque issued by the respondent no. 1 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 s.118(a) thereof – In these circumstances, while the respondent no. 1 has certain grievances arising from the MoU, against the appellants which may give rise to seek appropriate remedies in law, the declaratory reliefs sought in the plaint are barred by law - Hence, the plaint is liable to be rejected in exercise of jurisdiction u/Or. VII r. 11 CPC.
Order VII Rule 11 - Rejection of Plaint - Purpose/Object Discussed. Allowing the appeal, the Court
Held : 1.1 It is noted that the Orissa amendment differs from the main Section 115 of CPC. The first proviso to main Section
115 of CPC restricts the revisional power of the High Court inasmuch as a revision is maintainable only if it is filed by a party who is aggrieved by an order passed by the court 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 have finally disposed of the suit or other proceeding. But as per the second proviso to Section 115 of CPC (Orissa amendment), the High Court or the District Court, as the case may be, under the said Section can vary or reverse any order including an order deciding an issue, made in the course of a suit or other proceeding only if the order if so varied or reversed would finally dispose of the suit or other proceeding or the order if allowed to stand would occasion a failure of justice or cause irreparable injury to the party against whom it was made. In other words, under Orissa amendment to Section 115 of CPC, an express power is conferred 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 court subordinate thereto only when 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. [Para 18][1117-BC; 1118-A-D]
1.2 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, Sub-Section 2, Section 115 was amended by the Orissa Legislature and second proviso to Section 115 has been amended and Sub- Section 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 DEVELOPERS AND BUILDERS (P) LTD.
of the party applying for revision, would finally dispose the suit or other proceeding. Further, clause 1 of the second proviso of Section 115 has been omitted by the amendment made in the year 2010 and Sub-Section 3 has been added. This provision states that a revision shall not operate as a stay of suit or other proceeding before the Court except where such suit or other proceeding is stayed by the High Court or District Court, as the case may be. Sub-Section 1 of Section 115 is in pari materia with the Orissa Amendment of 1991 except its reference to the Orissa Amendment Act of 2010. [Paras 19, 20][1118-E-H; 1119-A]
1.3 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. Hence, 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, the exercise of jurisdiction by the revisional court in the instant case is in accordance with second proviso to Section
115 of CPC (Orissa amendment). Therefore, the High Court was not right in holding that the revisional court had no jurisdiction to reject the plaint filed under Order VII Rule 11 of CPC. The reasoning of the High Court is contrary to the express proviso of Section 115 (Orissa Amendment). [Paras 21, 22][1120-B-E; 1122D-E]
1.4 No doubt rejection of a plaint is a decree within the meaning of Section 2(2) of CPC and an appeal lies from every decree passed by any court exercising original jurisdiction to the Court authorised to hear appeals from a decision of such court. However, it must be borne in mind that when a revisional court rejects a plaint, in substance, an application filed under Order VII Rule 11 is being allowed. Under such circumstances, the remedy by way of a writ petition under Article 227 of the Constitution could be availed and respondent no.1/plaintiff has resorted to the said remedy in the instant case; although if the plaint had been rejected by the trial court i.e. court of original jurisdiction, it would have resulted in a right of appeal under Section 96 of CPC. Having regard to the second proviso to Section
115 of CPC (Orissa amendment), a revisional court while allowing the application filed under Order VII Rule 11 of CPC would in substance reject the plaint but since the said decree is not passed by the court of original jurisdiction, namely the trial court, the remedy by way of writ petition under Article 227 of the Constitution would be available to the aggrieved party and respondent no.1 has availed the said remedy. [Paras 23, 24][1122-E-H; 1123-A]
1.5 On a reading of the plaint, in the instant case it is noted that it discloses a cause of action inasmuch as the MoU dated 17th January, 2009, entered into between the plaintiff and defendant no.1 in the presence of defendant no.2 and the acts done pursuant to the said MoU is the basis for the grievance of the plaintiff. [Para 28][1128-C-D]
1.6 At the outset, on perusal of the plaint averments, the plaintiff 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 11 CPC, defendant no.1 has also encapsulated the averments made in the plaint. Therefore, on that score the plaint cannot be rejected. [Para 29][1129-D-E]
1.7 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.The proviso to Section 34 states that no court can make any declaration where the plaintiff, being able to seek further relief than mere declaration of title, omits to do so. The said question DEVELOPERS AND BUILDERS (P) LTD.
will have to be considered at the time of final adjudication of the suit as the question of granting further relief or consequential relief would arise only if the court grants a declaration. If the plaintiff is unsuccessful in seeking the main relief of declaration, then, the question of granting any further relief would not arise at all. Therefore, omission on the part of the plaintiff in praying for further consequential relief, would become relevant only at the time of final adjudication of the suit. Hence the plaint cannot be rejected at this stage by holding that the plaintiff has only sought 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 is clear that there is a rebuttable presumption that every negotiable instrument including a cheque was made or drawn for a consideration and every such instrument when it has been accepted is for a consideration. [Para 33][1132-D-E]
1.9 On a reading of the plaint, it is evident that cheque issued had been dishonoured and defendant no.1 had issued notice under Section 138 of N.I. Act on 10th June, 2009, to the plaintiff and its Managing Director replied to the same through their advocate on 23rd June, 2009. Therefore, it is evident that the plaintiff by seeking the said reliefs is in substance frustrating the right of defendant no.1 to take steps under the provisions of N.I. Act for releasing the amount of cheque issued by the plaintiff to defendant no.1 for a sum of Rs. 56 lakhs by filing a civil suit and/or by initiating a criminal prosecution. In other words, by seeking such a declaration that the 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. [Para 34][1132-E-H]
1.10 On a holistic reading of the plaint and on consideration of the reliefs sought by the plaintiff, 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. Further, the nature of the declaratory reliefs sought already arises out of the MoU dated 17th January, 2009, between the plaintiff and defendant no.1 in respect of which the plaintiff could seek appropriate remedies, if there is a breach of the said MoU by defendant no.1, but the plaintiff cannot seek declaratory reliefs to the effect that the plaintiff was not liable to carry out his obligation under the terms of the MoU. If the plaintiff has failed to do so then the defendant no.1 would have a cause of action against the plaintiff, but there cannot be a frustration of the right to seek a remedy in law by means of seeking declaration under a contract 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 prosecute the plaintiff owing to the 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 vis-a-vis 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 non-supply of 3876 MT of iron ore fines by the plaintiff DEVELOPERS AND BUILDERS (P) LTD.
under the very same MoU then the plaintiff is entitled to take appropriate defences as are available in law. If the plaintiff has a grievance against the defendants and particularly defendant no.1, arising from the MoU, such prayers have not been sought by the plaintiff. Such reliefs could have been sought by the plaintiff inasmuch as there is no prayer seeking recovery of Rs. 21.50 lakhs from defendant no.1 which according to the plaintiff is due to it. [Para 37][1136-A-E]
1.12 In the circumstances, while the plaintiff has certain grievances arising from the MoU, against the defendants which may give rise to seek appropriate remedies in law, the aforesaid three declaratory reliefs sought in the plaint are barred by law. Hence, the plaint is liable to be rejected in exercise of jurisdiction under Order VII Rule 11 CPC. The revisional court was justified in rejecting the plaint but the High Court has erroneously set aside the order of the revisional court without appreciating the facts and circumstances of the case and has simply remanded the matter to the revisional court to reconsider the revision afresh on the premise that the revisional court did not have the jurisdiction to reject the plaint u/s. 115. The Order of the High Court 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 Hari Jadhav and Others AIR 1966 SC 153 : [1966] 1 SCR 102; Tek Singh v. Shashi Verma and Another (2019) 16 SCC 678 : [2019] 3 SCR 697; T. Arivandandam v. T. V. Satyapal & Anr. (1977) 4 SCC 467 : [1978] 1 SCR 742; Azhar Hussain v. Rajiv Gandhi (1986) Supp SCC
315 : [1986] 2 SCR 782; Sopan Sukhdeo Sable and Ors. 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) 2 SCC 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. Arvindbhai Kalyanji Bhanusali (Gajra) Dead through Legal Representatives and Others (2020) 7 SCC 366; Rajendra Bajoria and Others v. Hemant Kumar Jalan and Others 2021 SCC Online SC 764; Hardesh Ores (P.) Ltd. v. Hede & Co. (2007) 5 SCC 614 : [2007]
6 SCR 608; D. Ramachandran v. R. V. Janakiraman (1999) 3 SCC 367; Saleem Bhai v. State of Maharashtra (2003) 1 SCC 557 : [2002] 5 Suppl. SCR 491; Cotton Corporation of India Limited v. United Industrial Bank Limited and Ors. (1983) 4 SCC 625 : [1983] 3 SCR 962; Ratna Commercial Enterprises Ltd. v. Vasutech Ltd. AIR 2008 Del 99 - referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.