Allowed

M/S Patel- Gammon Jv v. Sjvn Ltd.

Himachal Pradesh HC23 Dec 2024FAO(OS)/23/2024

Case brief

AI extract

What is this about?

The High Court allowed the appellant's appeal against the rejection of the defendant's application to reject the plaint. The court held that the plaint failed to disclose a clear right to sue or enforceable cause of action, as no legal basis for refunding the 'Hydro Allowance' was pleaded, thereby also barring the suit by limitation.

What did the court decide?

The impugned order is set aside; the application for rejection of plaint is allowed; the plaint is rejected.

M/S Patel- Gammon Jv Vs Sjvn Ltd. — Contract and Commercial Disputes | Himachal Pradesh HC (2024)

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2024:HHC:16451

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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA FAO(OS) No. 23 of 2024 Decided on: 23.12.2024. _____ ___________________________________________________ M/s Patel-Gammon JV .... Appellant/Defendant Versus SJVN Limited …Respondent/Plaintiff ______________________________________________________ Coram_

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The Hon’ble Mr. Justice Tarlok Singh Chauhan, Acting Chief Justice The Hon'ble Mr. Justice Satyen Vaidya, Judge

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1 Whether approved for reporting? Yes

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________________ For the appellant	________________________________________ : Mr. Neeraj Gupta, Senior Advocate, with Mr. Janesh Gupta, Advocate.
For the respondent:	Mr. K.S. Banyal, Senior Advocate, with
	Mr. Uday Singh Banyal, Advocate.

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Satyen Vaidya, Judge (Oral)

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By way of this appeal, the appellant has assailed order dated 15.12.2023 passed by learned Single Judge in OMP No.189 of 2021 in Civil Suit No. 83 of 2019 whereby the application of the appellant under Order VII Rule 11 of the Code of Civil Procedure (for short “Code”) seeking rejection of the plaint has been dismissed.

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The parties hereafter shall be referred to by the same status as they hold in Civil Suit No. 83 of 2019. The appellant is the

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1 Whether reporters of Local Papers may be allowed to see the judgment?

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defendant and the respondent herein is the plaintiff.

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The plaintiff has filed a suit for recovery of Rs.129.51

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crores along with interest pendent lite and future @ Rs.12% per annum against the defendant.

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The premise of the suit as culled out from the contents of plaint is that the plaintiff had awarded major civil works being Package-I and Package-II relating to execution of 412 MW Rampur Hydro Electric Project (for short, “RHEP”) on 01.02.2007 to the defendant, after due evaluation by the Tender Evaluation Committee. It is averred that in pursuance to the notification dated 28.05.2008 issued by the Government of Himachal Pradesh, the labourers engaged in the construction of Hydro Electric Projects (for short, “HEPs”) being constructed in non-tribal areas of Himachal Pradesh were made entitled to additional 25% over and above prevalent minimum wages. Such allowance was popularly known as “Hydro Allowance”.

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4.1 The labourers engaged in RHEP by the defendant staged dharna/strike in the project area on 28.09.2009 under the aegis of Labour Unions. The defendant had taken a stand that such allowance

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was not permissible to the labour employed in RHEP. Since, the

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labour strike continued, resulting in obstruction to the progress of the project work, plaintiff in order to resolve the issue, had constituted a committee on 05.03.2010. The Committee had submitted its recommendation on 19.03.2010. As a result, plaintiff issued an order for release of payment on account of additional component of 25% “Hydro Allowance”, subject to execution of an undertaking by the defendant that modality of the order would be agreeable to it and no claim would be raised on this account in any forum in future against the plaintiff. The said decision was said to have been made subject to further undertaking that actual payment on account of “Hydro Allowance” would not be less than the amount claimed by the defendant. In this way, a total sum of Rs.79.02 crore was released to the defendant.

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4.2 It is further submitted that the Auditors vide annual report for the year 2016-2017, made observations with respect to the omission of defendant in passing on the benefit of “Hydro Allowance” to the labour in its totality and had found reimbursement of an amount of Rs.72,04,20,580/- due from the defendant.

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4.3 As per the plaintiff, the Chief Vigilance Officer (for short, “CVO”) of plaintiff vide a communication dated 10.05.2018

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addressed to the project authorities, required them to recover from the defendant the excess payment. To similar extents were the instructions

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imparted by the Deputy Chief Vigilance Officer (‘DCVO’) of the plaintiff on 31.07.2019.

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4.4 The plaintiff also issued a communication to the defendant on 12.07.2018 claiming the entire amount of “Hydro Allowance” to the extent of Rs.74.00 crores including interest thereon, but the defendant remained silent till 16.10.2018, when the claim of plaintiff was refuted vide a written communication of defendant.

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4.5 The plaintiff has raised the suit claim by alleging that despite opportunity offered to defendant to refund the excess amount, the defendant has failed to refund the same, hence the suit.

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The defendant, during the pendency of the suit, filed OMP No. 189 of 2021 under Order VII Rule 11 of the Code, with a prayer to reject the plaint on the grounds firstly that no cause of action was made out and, secondly , the suit was barred by law of limitation.

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The plaintiff contested the prayer made in OMP NO.189 of 2021 by asserting the averments made in the plaint.

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Learned Single Judge has dismissed the application of the

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defendant for rejection of plaint, hence the instant appeal.

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Learned Single Judge by noticing the contents of following extract from para 10 of the plaint and the notice dated 12.07.2018 issued by the plaintiff to the defendant, has held that plaintiff has every right to prove the averments by leading evidence when the trial commences:

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Para 10 of plaint:

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“10. That the cause of action has accrued in favour of the plaintiff and against the defendant firstly when the civil works were awarded on 1.2.2007 and thereafter , in the month of October, 2017 , when Auditors submitted Annual Report for the year 2017 and Annual Report was approved by the shareholders and thereafter cause of action has accrued on 10.05.2018, when office of Chief Vigilance Officer issued communication for recovery of the said amount and , thereafter on 12.07.2018 , when notice issued and opportunity was granted to the defendant to refund the amount and lastly on 16.10.2018 , when by way of filing reply, defendant refused to refund the amount and raised dispute. Cause of action is still continuing because defendant has failed to make payment of amount, which was received by it in excess and which has not been further paid as pointed out in the Audit report as well as by the Chief Vigilance Officer, who is supposed to keep an eye over the proper utilization of

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public money.”

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Extract from notice dated 12.7.2018

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“The management has not provided justification of payment of Hydro Allowance to Patel Gammon Joint Venture (PGJV) amounting to Rs. 928437602. As per Govt. Order hydro allowance was to be paid @25% minimum wages as additional wages. Actual records of minimum wages paid by the contractors were available with SJVN which are required to submitted by the contractors along with each running account bill and also the same could have been verified with PF amount deducted and deposited by the contractor which is required to be submitted by the contactor. As per our assessment based on the actual wages paid by the contractor. An amount of Rs.57883509 was payable as Hydro Allowance to M/s PGJV. However, the management has released payment of Hydro allowance based on a notional formula for the same and paid Rs.928437602, afterwards recovery of Rs.14,78,03,826/-at the advice of Vigilance Department /CVC was made. However, the actual recovery on the basis of wages paid to the labourer comes out to be Rs.720420580 which is yet to be recovered. To that extent the Capital Cost of Hydraulic Works is overstated and payable to contractors is overstated/recoverable from contractors is understated. Also, the depreciation provided from the date of capitalization is also overstated to that extent.”

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In this manner, learned Single Judge held the existence of cause of action in favour of the plaintiff.

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The above finding has been rendered by learned Single Judge, professedly, by taking into consideration the legal position that the Court while dealing with the application under Order VII Rule 11 of the Code, is required to consider whether real cause of action as set out in the plaint or something purely illusory has been stated. Reference has been made to the judgments passed by the Hon’ble Supreme Court in Sopan Sukhdeo Sable vs. Charity Commr., (2004) 3 SCC 137, and Madanuri Sri Rama Chandra Murthy vs. Syed Jala (2017) 13 SCC 174.

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As regards the objection as to suit being barred by limitation, learned Single Judge has held that since, according to plaintiff, the limitation started from the month of October, 2017 when the audit report for the year 2016-2017 had pointed out recovery, the suit was within limitation.

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We have heard learned counsel for the parties and have also gone through the records of the case carefully. After examining the entire available material on record we are not persuaded to agree with the view taken by learned Single Judge for the reasons detailed

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hereafter.

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For assessing the cause of action in a particular civil suit,

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while deciding application under Order VII Rule 11 of the Code, the Court is required to advert to the averments made in the plaint as a whole. In Dahiben vs. Arvindbhai Kalyanji Bhanusali (Gajra) dead through L.Rs and others (2020) 7 SCC 366 it has been held as under:

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23.11 The test for exercising the power under Order VII Rule 11 is that if the averments made in the plaint are taken in entirety, in conjunction with the documents relied upon, would the same result in a decree being passed. This test was laid down in Liverpool & London S.P. & I Assn. Ltd. Vs M.V. Sea Succcess (2004) 9 SCC 512, which reads as :

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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 their entirety, a decree would be passed.”

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Whether a plaint discloses a cause of action is essentially a question of fact.

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In the facts of the case in hand, the plaintiff has sought recovery of Rs.129.51 crores from the defendant by alleging that in

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the audit report for the year 2016-2017 of the plaintiff-company, the discrepancy was noticed and thereafter plaintiff was advised by its CVO and DCVO vide communications dated 10.05.2018 and 31.07.2019 respectively to recover the due amount. The demand for suit amount allegedly made by the plaintiff from the defendant vide communication dated 12.07.2018 and its denial by the defendant vide communication dated 16.10.2018 has also been made basis by the plaintiff for filing the instant suit.

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Noticeably, the defendant had sought the rejection of plaint on two grounds specified in Clauses (a) and (d) of Order VII Rule 11 (1) of the Code. The first ground is that the plaint is without cause of action and the second is that it is barred by law of limitation.

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In our considered view, both are inter-related insofar as the facts of this case are concerned. For establishing the cause of action, the averments in the plaint are required to reveal and divulge existence of a right in favour of plaintiff to seek the decree as prayed for and the denial of corresponding obligation by the defendant.

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The case of the plaintiff is that it had taken a decision on 19.03.2010 and in pursuance thereof had paid a sum of Rs.79.02 crores to defendant on account of “Hydro Allowance”. It is further

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alleged that as per audit report for the year 2016-2017 the entire amount was not paid by the defendant to labour and for such reason the plaintiff was under advice to seek the refund from defendant. There is no averment in the plaint that in case of amount of “Hydro Allowance” having remained unpaid to labour, the defendant was liable to refund the same to plaintiff. Thus, we have not been able to find as to under what right the suit amount has been sought to be claimed by the plaintiff from defendant. Neither there are pleadings claiming such right under any contract or under any statutory provision.

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On the other hand, it is the case of plaintiff that the amount of Rs.79.02 crore was released to defendant towards “Hydro Allowance” to be paid to the labour and such disbursal was subject to conditions firstly that no claim would be raised on that account in any forum in future against the plaintiff and secondly , the actual payment made on account of “Hydro Allowance” will not be less than the amount claimed by the defendant.

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It is evident from the contents of plaint that the plaintiff has placed reliance on aforesaid two conditions on the basis of the recommendations made by the committee constituted by the plaintiff

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for addressing issue of unrest amongst the labour class employed in the execution of RHEP.

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The plaintiff has also placed reliance on a communication dated 12.07.2018 issued to the defendant with respect to claim of suit amount and has filed a copy of said communication along with the plaint. In para 4.0 of said communication, the second condition as noticed above has been reproduced as under: “ The actual payment made on account of Hydro Allowance is not less than the amount paid by M/s PGJV .” ( emphasis is ours ).

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Noticeably, the plaintiff has also filed along with plaint copies of two separate communications dated 22.02.2010 addressed to the Chairman-cum-Managing Director, SJVN Ltd., one addressed by Vice President & Deputy Director (P) of defendant and the other by the Executive Director of defendant. The respective concluding paras of these communications read as under: (i) “ We would also like to draw your kind attention sir, inspite of assurances extended to us no concrete action could be initiated by SJVNL as yet towards the reimbursement of atleast hydro allowance (as a result of subsequent legislation) enabling us to insulate the negativity of cash flow at project site

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And

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(ii) “ We would also like to draw your attention that inspite of assurances extended to us no concrete action has been initiated for reimbursement of atleast hydro allowance (as a result of subsequent legislation) so that our cash flow position can improve to some extent” .

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We have found that the above second condition imposed by the plaintiff for paying the amount on account of “Hydro Allowance” to defendant has been presented in a different mode and manner in the plaint than the one quoted in communication/ notice dated 12.07.2018. The condition as reflected in the plaint with its plain meaning connotes that the defendant had undertaken that actual payment made by it on account of “Hydro Allowance” will not be less than the amount claimed by the defendant from the plaintiff. Whereas, the quoted text of the said condition in the communication/ notice dated 12.07.2018 clearly means that the actual payment made on account of “Hydro Allowance” by the plaintiff to defendant is not less than the amount paid by M/s PGJV i.e. the defendant. Even para 5.0 of communication/ notice dated 12.07.2018 has reproduced the said condition in identical words as in para 4.0 noticed above.

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Thus after perusal of the contents of the plaint as a whole

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and documents filed therewith we are reminded of the duties of the court as observed in T. Arivandandam vs. T.V.Satyapal and another (1977) 4 SCC 467 (judgment of Hon’ble Supreme Court authored by V.R. Krishna Iyer J.) as under:

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“5. ……. 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 Or. VII r. 11 C.P.C. 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 X C.P.C. An activist Judge is the answer to irresponsible law suits. The trial court should insist imperatively on examining the party at the first bearing so that bogus litigation can be shot down at the earliest stage. The Penal Code (Ch. XI) is also resourceful enough to meet such men, and must be triggered against them. In this case, the learned Judge to his cost realised what George Bernard Shaw remarked on the assassination of Mahatma Gandhi

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"It is dangerous to be too good." .

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In Dahiben, supra , the Hon’ble Supreme Court has once again observed as under:

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“23.4 In Azhar Hussain v. Rajiv Gandhi1 this Court held that the whole purpose of conferment of powers under this provision is to

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ensure that a litigation which is meaningless, and bound to prove abortive, should not be permitted to waste judicial time of the court, in the following words : (SCC p.324, para 12)

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“12. …The whole purpose of conferment of such power is to ensure that a litigation which is meaningless, and bound to prove abortive should not be permitted to occupy the time of the Court, and exercise the mind of the respondent. The sword of Damocles need not be kept hanging over his head unnecessarily without point or purpose. Even if an ordinary civil litigation, the Court readily exercises the power to reject a plaint, if it does not disclose any cause of action.”

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In I.T.C. Limited vs. Debts Recovery Appellate Tribunal

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and others (1998) 2 SCC 70 , the Hon’ble Supreme Court has held as under:

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“16. The question is whether a real cause of action has been set out in the plaint or something purely illusory has been stated with a view to get out of Order 7 Rule 11 CPC. Clever drafting creating illusions of cause of action are not permitted in law and a clear right to sue should be shown in the plaint.”

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Thus, the mandate of law is loud and clear that the plaintiff has to make purposeful pleadings and cannot use astute

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pleadings for the purpose of making out an illusory cause of action. As noticed above, the plaint nowhere discloses as to what obligated the defendant to refund unpaid amount of “Hydro Allowance”. That being so, we find that the plaint has been filed without disclosing any

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enforceable cause of action.

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Once, the plaint is held to be not disclosing any enforceable cause of action, obviously, the objection as to plaint being barred by limitation, has also to be upheld. The question of limitation in this case, as observed earlier also by us, is directly relatable to the cause of action. Once, the plaint fails to disclose the enforceable cause of action, the averments made in para 10 of the plaint, as reproduced in the impugned order, cannot correctly supply the initial date of commencement of limitation.

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Viewed from another angle, The plaintiff had entered into a contract with defendant to execute certain components of the project; the disbursal of “Hydro Allowance” had taken place in the year 2010 and the project stood commissioned on 13.05.2014, as per

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the averments made in the plaint. The plaintiff has not alleged or pleaded fraud having been employed by the defendant at any stage. That being so, the plaint instituted on 23.08.2019 cannot be said to be within limitation.

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In result, the appeal is allowed. Order dated 15.12.2023 passed by learned Single Judge in OMP No.189 of 2021 in Civil Suit No. 83 of 2019, is set-aside. The application of the defendant under

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Order VII Rule 11 of the Code is allowed and plaint is ordered to be

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rejected.

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The appeal stands disposed of in the aforesaid terms, so

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also the pending application(s) if any.

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(Tarlok Singh Chauhan) Acting Chief Justice

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23^rd December2024 (Satyen Vaidya) (GR) Judge

M/S Patel- Gammon Jv v. Sjvn Ltd.

Case brief

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M/S Patel- Gammon Jv v. Sjvn Ltd.

Case brief

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