Dismissed

Namburu Subash, v. M.v.Raman Rao

Telangana HC8 Dec 2014CRP/1139/2014

Case brief

AI extract

What is this about?

In a civil revision petition, the High Court examined a challenge to the trial court's order refusing to reject a plaint for lack of cause of action. The High Court upheld the trial court's decision, finding the plaint disclosed a prima facie cause of action.

What did the court decide?

The Civil Revision Petition was dismissed; pending miscellaneous petitions were also dismissed; no order as to costs.

Namburu Subash, Vs M.v.Raman Rao — Contract and Commercial Disputes | Telangana HC (2014)

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THE HON’BLE SRI JUSTICE M.SEETHARAMA MURTI

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Civil Revision Petition No.1139 of 2014

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ORDER:

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This civil revision petition under Article 227 of the Constitution of India by the defendant is directed against the orders dated 03.03.2014 of the learned III Additional Chief Judge, City Civil court, Hyderabad made in IA.No.3456 of 2011 in OS.No.253 of 2011 filed under Order VII Rule 11 of the Code of the Civil Procedure, 1908 (‘the Code’ for short) requesting to reject the plaint as the plaint does not disclose any cause of action and is barred by law.

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2. The parties in this revision shall be referred to as the defendant and the plaintiff for convenience and clarity.

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3. I have heard the submissions of the learned counsel for both the sides. I have perused the material record.

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4. Now the points for determination are–

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(i) Whether the defendant had made out valid and sufficient grounds for rejection of the plaint on the grounds that the plaint does not disclose any cause of action and as the same is barred by law?

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(ii) And, if so, whether the order impugned is liable to be set aside?

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5. POINTS:

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5. (a) The sole plaintiff brought the suit against the defendant for recovery of money. The defendant, who is resisting the suit, filed the petition for rejection of the plaint mainly on the ground that the plaint does not disclose any cause of action and that the same is barred by the provisions of law.

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5. (b) The case of the defendant in support of the said request in the interlocutory application is as follows: - ‘On a meaningful reading of the plaint averments as a whole it can be seen that on the face of the plaint, the plaint is merit less in as much as the plaint averments do not disclose a clear right to sue. The plaint averments which are alone material and relevant to decide the present interlocutory application do not disclose any cause of action. In view of the express admission of the default on the part of the plaintiff, the plaintiff seeks to cover up the said default by clever drafting and seeks to create an illusory cause of action for maintaining the suit. The plaintiff admits in the plaint the inability to pay the balance amount in view of the financial difficulties. Having admitted his failure to perform his part of the contract, the plaintiff has come up with the present suit for the refund of the amount paid by him by resorting to clever drafting of the plaint and creating an illusion of cause of action. The plaintiff had stated in the plaint to the effect that the plaintiff had started experiencing financial difficulties in view of the steep fall in share prices and that therefore, the plaintiff had informed the defendant in October 2008 that he will not be in a position to pay further amounts. Thus the plaintiff by making the above averments had admitted his inability to fulfil his part of the contract namely the payment of balance amount of Rs.50,35,00,000/- to the defendant. Having so admitted his inability to perform his part of the contract and having committed the breach of the contract, the plaintiff had filed the above suit on an illusory cause of action. Therefore, the suit need not go to trial. The plaintiff had also stated in the plaint to the effect that the plaintiff having felt the crunch and having seen no prospect of development in the near future had informed the defendant that he intends to cancel the agreement and had requested the defendant to refund the money paid by him. Therefore, the plaintiff is the party who had defaulted on the arrangement unilaterally in view of his admitted financial difficulties. Only the plaintiff had intended to cancel the arrangement, and not the defendant. It is not the case of the plaintiff that the defendant had committed any breach. The plaintiff had also pleaded in the plaint that he has

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to pay Rs.20 Crores to the defendant and that it is also discussed that the plaintiff need not pay the whole sum but shall have to pay about Rs.20 crores and that the rest of the money can be paid from out of the advance received from the developer and by advance sale of the proposed built up area. Thus, it is stated in the plaint averments that the plaintiff had paid Rs.14,65,00,000/to the defendant and therefore, as the plaintiff himself has not paid the sum of Rs.20 Crores to the defendant, the plaintiff has committed the breach of contract and the same is evident from the plaint averments. Therefore, the plaint itself does not disclose a cause of action to sue the defendant; and any cause of action would accrue to the plaintiff only when the plaintiff would complete the payment of Rs.20 Crores to the defendant. Since no cause of action had accrued to the plaintiff, the plaint is liable to be rejected and hence the plaintiff cannot maintain the suit for refund of the money paid as part of the contract. It is also averred in the plaint as follows: ‘The transaction started as a business venture in the beginning, but, later it is realised that the proposed development cannot go on, in view of changed scenario. Thus, at least from October 2008, the transaction ceased to be one as originally conceived, when the plaintiff informed the same to the defendant and that the amount paid would be treated as loan which has to be repaid with interest.’. It could be seen from the said plaint averments that such averments do not constitute a cause of action. The plaint averments are not precise but are vague and bereft of material facts. No material facts are stated in the plaint as to under what terms, how and when the plaintiff had allegedly agreed to pay Rs.65 Crores for acquiring 10% share of the defendant. No material facts are stated in the plaint as to under what terms, how and when the alleged understanding to pay about Rs.20 Crores took place. Therefore, in the absence of the material facts and as the cause of action alleged is vague as a vacuum, the plaint is liable to be rejected. The plaint averments do not state the material facts as to the terms how and when, and the date on which the sale transaction was agreed to between the plaintiff and the defendant and when it was agreed to be a loan transaction and not a sale transaction. If clever drafting has created an illusion of cause of action, it requires to be nipped in the bud under the provisions of law at the first hearing by examining

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the parties searchingly under Order X of the Code, more particularly in respect of inconsistencies and vagueness on the face of the plaint itself creating an illusion of cause of action, irresponsible law suits are liable to be dismissed at the threshold. The plaint averments do not show that the plaintiff had issued a notice of termination of the oral contract and therefore, in the absence of such averment no cause of action had accrued to the plaintiff to file the present suit. The express admission in the plaint that the plaintiff was not in a position to fulfil his part of the contract in view of the financial difficulties and the plaint averments being vague and not disclosing any cause of action and also the material facts, the suit is liable to be rejected. The suit is barred within the meaning of Order VII rule 11 of the Code.’

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5. (c) On the other hand, the plaintiff filed a counter denying each and every allegation in the affidavit of the defendant filed in support of the petition. It is asserted in the counter that in the plaint the cause of action is categorically averred and the modes of payments made by the plaintiff to the defendant are also stated and that the same constitute cause of action. It is also averred in the plaint that the question whether the defendant has to pay Rs.20 Crores to the plaintiff and the reason for paying only a sum of Rs.14,65,00,000/- requires an elaborate trial for the reason set out in the plaint and at the interlocutory stage, the merits of the suit cannot be decided and that there is sufficient documentary evidence to prove the liability of the defendant under the suit transaction. It is further stated in the counter that the circumstances and the bona fides of the parties and their intentions can be gathered only after an elaborate trial of the main suit and that the entire plaint consists of facts supported by clear documentary evidence and there is nothing vague about the claim of the plaintiff and that the averments in the affidavit of the defendant are not sufficient to order rejection of the plaint.

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5. (d) At the time of enquiry, no oral and documentary evidence was adduced. On merits, the learned Additional Chief Judge had dismissed the petition. Hence the defendant is before this Court.

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6. At the time of hearing, the learned counsel for the defendant while

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reiterating the pleaded case of the petitioner/defendant before this Court had contended in line with the grounds of revision as follows: - ‘The trial court did not appreciate the admissions of the plaintiff in the plaint and had failed to take note that there is no cause of action for the plaintiff to institute the suit without completing the payment of Rs.20 Crores as stated in the plaint averments. The plaintiff had admitted his financial difficulties and had committed breach of oral agreement, however, the trial court without taking note of the said fact had only mentioned the cause title and citations of the judgments of the Supreme Court relied on behalf of the defendant without adverting to the facts and ratios in the decisions and had committed a material irregularity in not granting the relief to the defendant by following the law declared by the Supreme Court. The observation that the plaintiff has rightly pointed out that the defendant had failed to commence the contract as per the pleadings is factually incorrect and there is no such pleading in the plaint. The trial court gave one of the reasons in its order to the effect that huge amounts are involved in the case and hence an opportunity may be given to the plaintiff to prove his case and had acted like a court of equity in stead of acting as a court of law. The trial court had taken into account irrelevant facts and had given a reasoning to the effect that the drafting is not the criteria and that the facts and the factual matrix are the only criterion to decide the case and had erroneously held that some advocates may cleverly draft the pleadings and that intelligence of the advocate is not the criteria to decide the case. The said reasoning based on the intelligentsia of the advocates practicing at various levels is unsustainable as it is not in consonance with the law laid down in Order VII Rule 11 of the Code. The trial court had erroneously held that the plaint discloses a cause of action. The plaintiff had, nowhere in the plaint, averred that the defendant had committed breach of the oral agreement. The trial court was carried away by the amount involved in the suit and not by the fact that the plaint does not disclose the cause of action. If the pleading at paragraph 3.8 of the plaint is seen, it does not say that it is realised by the defendant also that the proposed development cannot go on in view of the changed scenario and similarly the cause of action mentioned in the plaint also does not expressly

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state that the original understanding was given up by the defendant also and that the amount was treated as loan by the defendant also. Thus if the plaint is read as it is, the case facts attract the ratio laid down by the Hon’ble Supreme Court in the decision in Popat and Kotecha Property v. SBI Staff Association [

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(2005) 7 SCC 510] and therefore, the trial court had committed patent illegality in not following the ratio in the above decision.’

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7. On the other hand, the learned counsel for the plaintiff while reiterating the averments in the counter filed before the trial court and while reiterating some of the averments in the plaint had contended that a plain reading of the plaint discloses a cause of action and that while considering the aspect of rejection of the plaint, the court has to consider only the plaint averments and not the averments in the defence of the defendant and that on a plain consideration of the plaint averments it is evidently clear that the plaint discloses a cause of action and that the trial court having examined the pleadings in the plaint and having adverted to the decisions cited had come to a correct conclusion having regard to the correct legal position obtaining and applicable to the case facts and that therefore, the well reasoned order of the court below does not call for interference and that the defendant is intending to somehow drag on the matter and harass the plaintiff.

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8. A plain consideration of the contentions of the defendant would show that the defendant is only contesting that because of lack of cause of action the plaintiff’s suit is liable to be rejected under Order VII Rule 11 (a) & (d) of the Code. There is no dispute with the legal proposition that while considering a request for rejection of the plaint for lack of cause of action or on the ground that the suit is barred by law, the court has only to consider the plaint averments. Now it is to be examined by reading the plaint as to whether the plaint discloses a cause of action and whether the suit appears from the statement in the plaint to be barred by any law.

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9. I have gone through the plaint in its entirety. It is to be re-stated that the suit is filed for recovery of money. According to the plaint averments, the facts

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which lead to the filing of the suit are to the following effect: -

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‘Sometime in December 2007 one Sri B.Adinarayana Rao mentioned to the plaintiff that the defendant is owning substantial extent of land abutting Necklace Road, Hyderabad and is intending to develop the said land by building a Mall, Hotels etcetera and that the defendant is in need of finances to meet some urgent obligations, including getting release of title deeds by paying deficit stamp duty etcetera and if the plaintiff is interested, he can talk to the defendant. Since the plaintiff had some funds at his disposal, he had agreed for the proposal out of faith which the plaintiff had in the said Sri Adinarayana Rao. Afterwards, the plaintiff and the defendant met in the office of Sri Adinarayana Rao for the said purpose during the first and second weeks of January 2008. The defendant had informed that he along with his friend, who had 20% undivided interest, owns Ac.22.00 cents of land and that there are no encumbrances on the property. He intends to settle the claims of his friend and develop the said property by entering into development agreement with some reputed builders and that the sale deeds relating to the said land are pending registration and that on payment of deficit stamp duty the documents would be released and that the defendant is willing to sell the land or a part thereof and that he is willing to part with a share in the proposed development since he is in need of funds. The aforesaid facts were endorsed by Sri B. Adinarayana Rao, advocate. The plaintiff had agreed for the said proposal and it was suggested by the said Advocate that both the parties can discuss about the financial aspects of the issue. On discussions in his presence, it was agreed that the plaintiff should pay Rs.65 Crores for acquiring 10% share of the defendant’s interest in the proposed development. This is with the understanding that the process of negotiations with the developers, which are on, would be complete in the next six to seven months. It was also agreed that the necessary documentation by settling the terms would be reduced into writing, after development agreement is finalised. It was further agreed that the plaintiff need not pay the whole sum but shall have to pay about Rs.20 Crores and rest of the money can be paid from out of advance received from the developer and by advance sale of the proposed built-up area.’

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‘Based on the understanding, the plaintiff in all had paid Rs.14,65,00,000/- from 30.01.2008 to 16.09.2008 by way of

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cheques and cash in 13 instalments as mentioned in the table in the plaint. Due to world economic slow down and the steep fall in real estate prices and development activities, the proposed development did not materialize and the developers negotiating with the defendant had backed out and the plaintiff had also started experiencing financial difficulties in view of the steep fall in share prices and hence the defendant had informed the plaintiff in October 2008 that he will not be in a position to pay any further amounts. Having felt the crunch and with no prospect of development in the near future, the plaintiff had informed the defendant that he intends to cancel the arrangement and requested the defendant to refund the money paid by him. But the defendant who had agreed for the cancellation, expressed his inability to pay the amounts immediately and that he would pay the amount on receipt of his outstanding shortly. As the pressure started building upon the plaintiff, he had also started repeatedly requesting the defendant to refund the money. The plaintiff had sought the intervention of Sri B.Adinarayana Rao, advocate and that in December 2008 both the plaintiff and the defendant met in the office of the said Adinarayana Rao and the issue was discussed at length. The defendant agreed to refund the money after considerable debate with a promise to settle the issue shortly by raising funds.’

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It is pertinent to mention that in paragraph 3.8 of the plaint it is averred as follows: -

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‘It is submitted the transaction started as a business venture in the beginning, but later it is realised that the proposed development cannot go on, in view of changed scenario. Thus, at least from October 2008 the transaction ceased to be one as originally conceived, when the plaintiff informed the same to the defendant and that the amount paid would be treated as loan which has to be repaid with interest. Thus, from 01.11.2008, the transaction took the shape of a loan of funds by plaintiff by defendant.’

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The above averments in the plaint, including the averments, which are highlighted by supplying emphasis, make it manifest that at least from 2008 the transaction ceased to be one as originally conceived, when the plaintiff informed the same to the defendant, and that the amount that was paid by the

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plaintiff shall be treated as a loan which has to be repaid with interest and thus from 01.11.2008 the transaction took the shape of a loan taken by the defendant from the plaintiff. Though the plaintiff is required to prove his case as required under law after full-fledged trial, it cannot be said that there are neither material facts nor facts constituting the right to sue in the plaint averments. The plaint averments when read as a whole, in the wellconsidered view of this court, do disclose a cause of action, prima facie.

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10. The learned counsel for the defendant had placed reliance on the following decisions.

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i. Nihal Singh v. Rao Birendera Singh^[1]

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ii. Union of India v. Sita Ram Jaiswa l^[2]

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iii. Shri Udhav Singh v. Madhav Rao Scindia^[3]

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iv. T. Arivandandam v. T.V. Satyapa l^[4]

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v. S.P. Gupta v. Union of India and Batch^[5] vi. Roop Lal Sathi v. Nachhattar Singh Gil l^[6] vii. Bhagwati Prasad Dixit v. Rajeev Gandh i^[7]

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viii. Azhar Hussain v. Rajiv Gandh i^[8]

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ix. Samar Singh v. Kedar Nath^[9]

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x. Patasibai and others v. Ratanla l^[10]

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xi. ITC Limited v. DRAT & others^[11]

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xii. Saleem Bhai and others v. State of Maharashtra and others^[12]

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xiii. N.V. Srinivasa Murthy v. Mariyamma (dead) by LRs^[13] xiv. Popat and Kotecha property v. State Bank of India Staff Association^[14]

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xv. Church of North India v. Lavajibhai Ratanjibhai and others^[15]

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xvi. Anil Vasudev Salgaonkar v. Naresh Kushali Shigaonka r^[16] xvii. Vinod Seth v. Devinder Bajaj and anothe r^[17]

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xviii. The Church of Christ Charitable Trust & Educational Charitable Society v. Ponniamman Educational Trus t^[18]

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I have carefully gone through the cited decisions. While stating the legal position in regard to the law of pleadings and the distinction between material facts and material particulars and the requirement of rejection of plaint where the plaint does not disclose a cause of action, the issues involved in the cited decisions were decided on facts peculiar to the cases. In the decisions in I.T.C Limited (11 supra) and T. Arivandandam (4 supra) the aspect of clever drafting of pleadings and creation of illusions of cause of action by clever drafting of pleadings are also discussed and it is held that clever drafting creating illusions of cause of action is impermissible in law and that the plaint must disclose a clear right to sue. There is no dispute with the legal propositions in the decisions, which are cited. The instant case is not a case where it can be said that there is absence of material facts or material particulars in the plaint; neither it can be said that there is no cause of action for the plaintiff nor that the plaint pleadings are vague and unambiguous. It cannot also be said that the cause of action averred is illusory and there is no clear right to sue. It cannot also be said that the cause of action averred is illusory and there is no clear right to sue.

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11. In the decision in Popat and Kotecha property (14 supra) the facts peculiar to the cited case apart, the following principle of law was laid down: ‘Clause (d) of Order VII Rule 7 speaks of suit, as appears from the statement in the plaint to be barred by any law. Disputed questions cannot be decided at the time of considering an application filed under Order VII Rule 11 of the CPC. Clause (d) of Rule 11 of Order VII applies in those cases only where the statement made by the plaintiff in the plaint, without any doubt or dispute shows that the suit is barred by any law in force.’ A reading of the citation would show that the precedential guidance is more helpful to

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the plaintiff. In the decision in the case of Bhau Ram vs. Janak Singh and others^[19] it is held as under:

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“The law has been settled by this Court in various decisions that while considering an application under Order VII, Rule 11, C.P.C, the Court has to examine the averments in the plaint and the pleas taken by the defendants in its written statements would be irrelevant. [vide C. Natrajan v. Ashim Bai and another (2007) 14 SCC 183, Ram Prakash Gupta v. Rajiv Kumar Gupta and Others (2007) 10 SCC 59, Hardesh Ores (P) Ltd. v. Hede and Company (2007) 5 SCC 614, Mayar (H.K.) Ltd. and Others. v. Owners & Parties, Vessel M.V. Fortune Express and Ors. (2006) 3 SCC 100, Sopan Sukhdeo Sable and Others v. Assistant Charity Commissioner and Ors. (2004) 3 SCC 137, Saleem Bhai and Others v. State of Maharashtra and Others (2003) 1 SCC 557]. The above view has been once again reiterated in the recent decision of this Court in The Church of Christ Charitable Trust & Educational Charitable Society, represented by its Chairman v. M/s Ponniamman Educational Trust represented by its Chairperson/Managing Trustee, JT 2012 (6) SC 149.”

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12. In the decision in the case of United Insurance Co. v.

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[20] C.R. Ramanatha m , it was observed that under Order VII Rule 11 (d) a plaint could be rejected only if the averments therein explicitly disclose that the suit was barred by the provisions of any law, but not otherwise and that the Court had no power to throw out the suit by rejecting the plaint at the threshold stage by examining and interpreting the provisions of law on which the suit was found and that what was explicitly mentioned in the plaint, therefore, must alone be the basis for the exercise of power under Order VII Rule 11(d), but not the conclusions that may be interpretatively drawn on an examination of the statutory provisions alluded to in the plaint and that where there was no such explicit statement in the plaint the question whether there was any legal barricade to the suit must be tried as an issue at the appropriate stage and that by this procedure alone the interests of both the parties to the suit could be safeguarded.

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13. Having regard to the precedential guidance in the above cited two cases, when the plaint averments are harmoniously read, the averments in the plaint disclose, prima-facie, that there are sufficient averments in the plaint to come to a ex-facie conclusion that the instant suit as laid can be permitted to be prosecuted and that there are no grounds to reject the plaint at the threshold.

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14. Having gone through the order of the court below, this court is of the well considered view that there is no irregularity or illegality or impropriety in the said order calling for interference. Viewed thus, this Court finds that the order of the Court below does not warrant interference and that the revision petition is devoid of merit.

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15. Accordingly, the Civil Revision Petition is dismissed. As a sequel, miscellaneous petitions pending, if any, in this revision shall also stand dismissed. There shall be no order as to costs.

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________________________ M. SEETHARAMA MURTI, J

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08^th December 2014 Vjl

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