Canara Bank vs P Sellathal (Dead) Thr Lrs on 28 February, 2020


Supreme Court of India

Canara Bank vs P Sellathal (Dead) Thr Lrs on 28 February, 2020

Author: M.R. Shah

Bench: M.R. Shah

                                                          REPORTABLE
                                   IN THE SUPREME COURT OF INDIA

                                   CIVIL APPELLATE JURISDICTION

                                    CIVIL APPEAL NOS.1863­1864 OF 2020
                              (Arising out of SLP(C) Nos.24819­24820/2019)


          Canara Bank                                         …Appellant

                                          Versus


          P. Selathal and others etc. etc.                    …Respondents




                                              JUDGMENT

M.R. SHAH, J.

Leave granted.

2. Feeling aggrieved and dissatisfied with the impugned

common judgment and order dated 09.11.2017 passed by the
Signature Not Verified

Digitally signed by

High Court of Judicature at Madras in C.R.P.(PD) No. 2586/2013
ARJUN BISHT
Date: 2020.02.28
14:58:59 IST
Reason:

and C.R.P.(PD) No. 2587/2013, by which the High Court has

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dismissed the said revision applications preferred by the

appellant herein – Canara Bank and has confirmed the orders

passed by the learned trial Court dismissing the applications

preferred by the appellant herein to reject the respective plaints

in exercise of powers under Order 7 Rule 11 of the CPC, original

defendant no.5 – Canara Bank in O.S. No. 1269/2010, who is

original defendant no.6 in O.S. No.233/2011, has preferred the

present appeals.

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

under:

That the appellant – bank sanctioned and granted a term

loan of Rs.49,50,000/­ to M/s Coimbatore Hatcheries, a

partnership firm in which one Shri Ravichandran and G. Suresh

Babu were the partners, in the year 1995. That the said loan

was secured by mortgage of immovable property belonging to the

said firm and the land situated at Survey Nos. 472 and 488 of

Sanganur Village of one Shri M.C. Kallikutty – Guarantor. That

the land bearing Survey Nos. 472 and 488 of Sanganur Village of

one Shri M.C. Kallikutty – Guarantor is the subject matter of

dispute. At this stage, it is required to be noted that the said

Shri M.C. Kallikutty stood as a Guarantor. That the said Shri

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M.C. Kallikutty (hereinafter referred to as the ‘Guarantor’) signed

Guarantee Deed dated 28.09.1995 and created equitable

mortgage by deposit of Title Deeds of the disputed lands in

question.

3.1 That as the original borrower failed to repay the loan

amount due to the appellant­bank, the appellant­bank filed O.A.

No. 489 of 2001 before the Debt Recovery Tribunal, Chennai in

the month of October, 1997 against the principal borrower, its

partners as well as against the Guarantor. That on 31.10.2001,

DRT, Chennai passed an order in O.A. No. 489/2001 to proceed

ex­parte against the Guarantor. That O.A. No. 489/2001 was

transferred to DRT, Coimbatore and was re­numbered as T.A. No.

822/2002. That T.A. No. 822/2002 (previously O.A. No.

489/2001) filed by the appellant­bank came to be decreed by the

DRT for Rs.57,35,770/­ with 18% interest per annum in favour of

the appellant­bank and against the principal borrower as well as

Guarantor. That a Recovery Certificate dated 16.09.2003 was

issued in favour of the appellant­bank for a sum of

Rs.57,35,770/­ with 18% interest per annum.

3.2 That Recovery Officer, DRT, Coimbatore issued a Demand

Notice dated 11.11.2003 in R.P. No. 141/2003 to the principal

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borrower, its partners and the Guarantor directing them to pay

the sum of Rs.1,55,75,443/­ as decreed in T.A. No. 822/2002.

That the Guarantor filed a writ petition before the High Court of

Madras denying his guarantee and creation of EMT and sought

direction to the Crime Branch­CID to register an FIR and

investigate into the matter. That on directions of the High Court

of Madras, FIR No. 152/2010 came to be registered on

2.11.2005. The CB­CID, Coimbatore filed a final report under

Section 173(2) of Cr.P.C. for the offences under Sections 120B

read with 465, 466, 467, 468, 471, 420 and 419 of the IPC

against the partners of the principal borrower and also against

one K.V. Roshan Babu, Agricultural Extension Officer of the

appellant – bank. It appears that thereafter the criminal

proceedings against the officer of the bank – Roshan Babu came

to be quashed by the High Court vide judgment and order dated

28.06.2011.

3.3 That in the year 2007 and in pursuance of the Recovery

Certificate in favour of the appellant­bank, the bank auctioned

and sold the properties of the partnership firm and recovered

Rs.38 lacs. That thereafter after a period of five years from the

date of the order passed by the DRT dated 27.08.2003, the

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Guarantor filed I.A. No. 1821 of 2008 in the year 2008 for setting

aside the ex­parte decree dated 27.08.2003 before the DRT,

Coimbatore. That vide order dated 12.06.2009, DRT, Coimbatore

dismissed the said I.A filed by the Guarantor and refused to

condone the delay of 1337 days in challenging the ex­parte

decree dated 27.08.2003 and for condonation of delay of 2392

days in filing the petition to set aside the ex­parte order dated

31.10.2001.

3.4 That thereafter after a period of 15 years from the date of

mortgage and after seven years from the date of the decree dated

27.08.2003 passed by the DRT, the respondents herein filed O.S.

No. 1269/2010 and O.S. No. 233/2011 respectively in the Court

of learned Second Additional Subordinate Court, Coimbatore

against the Guarantor, principal borrower and its partners and

the appellant­bank for a declaration to declare the order dated

27.08.2003 passed by the DRT in T.A. No. 822/2002 as non­est,

ultra vires, null and void and not binding on the suit property

and also for a consequential permanent injunction restraining

the Recovery Officer from interfering with their peaceful

possession and enjoyment of the suit property by taking any

action as against the suit property by way of attachment, sale or

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otherwise. That in the aforesaid two suits, the appellant­bank

was joined as defendant no.5 in O.S. No. 1269/2010 and

defendant no.6 in O.S. No. 233/2011 and was served with the

summons/notices of the suits. That the appellant­bank filed I.A.

No.431/2011 in O.S. No. 1269/2010 and I.A. No. 122/2012 in

O.S. No. 233/2011 to reject the respective plaints in exercise of

powers under Order 7 Rule 11(d) of the CPC. It was the case on

behalf of the appellant­bank that in view of the specific bar of

jurisdiction under Sections 18 and 20(1) of the Recovery of Debts

due to Banks and Financial Institutions Act, 1993 (for short

‘RDDBFI Act’), the suits are not maintainable and the civil court

has no jurisdiction. It was the case on behalf of the appellant­

bank that as per Section 20(1) of the RDDBFI Act, the appeal is

provided to Debt Recovery Appellate Tribunal against the order of

DRT and therefore the civil court has no jurisdiction to entertain

the suits challenging the decree passed by the DRT.

3.5 That the said applications were opposed by the original

plaintiffs submitting inter alia that they have purchased the suit

property from the original owner and that they are in possession

and enjoyment of the suit property. It was the case on behalf of

the original plaintiffs that the vendor did not create any equitable

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mortgage in favour of the bank and the officials of the bank in

collusion with the promoters of the principal borrower created

and fabricated equitable mortgage, as though the original owner,

their vendor created a mortgage. It was submitted that on a

complaint given by the Guarantor – Shri M.C. Kallikutty, the

original owner of the suit property, an FIR was registered on

02.11.2005 and a charge sheet dated 18.08.,2007 has been filed

which is pending. It was alleged that the bank and promoters of

the principal borrower played fraud and obtained decree in the

DRT. It was submitted that the fraud played by the bank and

others can be proved only by the civil forum and the same cannot

be decided by the DRT. It was also submitted that the plaintiffs

are third parties and therefore they cannot approach the DRT

and the DRAT. Therefore, it was prayed to dismiss the said

applications.

3.6 That the learned trial Court dismissed the said applications

and refused to reject the respective plaints in exercise of powers

under Order 7 Rule 11(d) of the CPC.

3.7 Feeling aggrieved and dissatisfied with the orders passed by

the learned trial Court dismissing the aforesaid applications and

refusing to reject the respective plaints under Order 7 Rule 11(d)

7
of the CPC, the appellant­bank preferred two separate revision

applications before the High Court. By the impugned common

judgment and order, the High Court has dismissed the said

revision applications and has confirmed the orders passed by the

learned trial Court rejecting the applications to reject the

respective plaints in exercise of powers under Order 7 Rule 11

CPC by observing that the issue of either fraud or impersonation

or whether mortgage created by the Guarantor, vendor of the

original plaintiffs, in favour of the bank is legal or not is a matter

to be adjudicated in the civil suits and in criminal case.

3.8 Feeling aggrieved and dissatisfied with the impugned

common judgment and order passed by the High Court in

refusing to reject the respective plaints in exercise of powers

under Order 7 Rule 11 CPC, the appellant­bank – original

defendant no. 5 in O.S. No. 1269/2010 and original defendant

no.6 in O.S. No. 233/2011 has preferred the present appeals.

4. Shri Rajesh Kumar, learned Advocate appearing on behalf of

the appellant­bank has vehemently submitted that in the facts

and circumstances of the case, the High Court has materially

erred in rejecting the respective applications and confirming the

orders passed by the learned trial Court rejecting the applications

8
preferred by the appellant­bank and refusing to reject the

respective plaints in exercise of powers under Order 7 Rule 11(d)

of the CPC. It is vehemently submitted by the learned Advocate

that both, the High Court as well as the learned trial Court have

not properly appreciated and/or considered the relevant

provisions of RDDBFI Act, more particularly Sections 18, 19 and

20 of the said Act.

4.1 It is further submitted by the learned Advocate appearing on

behalf of the appellant­bank that in substance the original

plaintiffs are challenging the decree passed by the DRT,

Coimbatore dated 27.08.2003 passed in T.A. No. 822/2002. It is

submitted that under the RDDBFI Act against the decree passed

by the DRT, the remedy of appeal is available under Section 20 of

the said Act before the DRAT. It is submitted that therefore

RDDBFI Act being a Special Act, the procedure provided under

the said Act has to be followed. It is submitted that therefore the

civil suit challenging the decree passed by the DRT shall not be

maintainable and therefore the case squarely falls within Order 7

Rule 11(d) of the CPC and therefore the learned trial Court as

well as the High Court ought to have rejected the respective

plaints in exercise of powers under Order 7 Rule 11(d) of the

9
CPC. In support of the above submission, learned Advocate

appearing on behalf of the appellant – bank has heavily relied

upon the decision of this Court in the case of Punjab National

Bank v. O.C. Krishnan and others, (2001) 6 SCC 569. It is

submitted that even in the said decision, as held by this Court,

even the petitions under Articles 226 and 227 of the Constitution

of India are held to be not maintainable.

4.2 Learned Advocate appearing on behalf of the appellant­bank

has also heavily relied upon the decision of the Division Bench of

the Madras High Court in the case of M/s Cambridge Solutions

Limited, Bangalore v. Global Software Limited, Chennai, 2016­5­

L.W. 45. It is submitted that in the said case also the plaintiff

filed a suit alleging fraud while challenging the order passed by

the Recovery Officer and despite the allegation of fraud the suit

challenging the order passed by the Recovery Officer is held to be

not maintainable. It is submitted that in the aforesaid decision,

the Division Bench of the High Court has found the allegation of

fraud to be illusory. It is submitted that special leave petition

against the said decision has been dismissed by this Court.

4.3 It is further submitted by the learned Advocate appearing on

behalf of the appellant­bank that in the present case also the
10
allegation of fraud is not with respect to the Guarantee Deed

executed by the Guarantor – Shri M.C. Kallikutty, but with

respect to Partnership Deed. It is submitted that therefore the

suits filed by the original plaintiffs are frivolous and abuse of a

process of law and therefore the plaints are liable to be rejected

on that ground also and in exercise of powers under Order 7 Rule

11(d) of the CPC. In support of his above submission, learned

Advocate appearing on behalf of the appellant – bank has heavily

relied upon the decisions of this Court in the cases of T.

Arivandandam v. T.V. Satyapal (1977) 4 SCC 467; A.B.C.

Laminart Pvt. Ltd. v. A.P. Agencies (1989) 2 SCC 163; Sopan

Sukhdeo Sable v. Assistant Charity Commissioner (2004) 3 SCC

137 and Madanuri Sri Rama Chandra Murthy v. Syed Jalal (2017)

13 SCC 174.

4.4 Making the above submissions and relying upon the above

decisions, it is prayed to allow the present appeals.

5. The present appeals are vehemently opposed by Shri Robin

R. David, learned Advocate appearing on behalf of the original

plaintiffs. It is vehemently submitted that in the facts and

circumstances of the case, more particularly when there are

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specific allegations of fraud in the respective suits which can be

decided only by the civil court, both, the learned trial Court as

well as the High Court have rightly refused to reject the plaints in

exercise of powers under Order 7 Rule 11(d) of the CPC.

5.1 It is further submitted by the learned Advocate appearing on

behalf of the original plaintiffs that as such they are the bona fide

purchasers of the suit properties which were alleged to have been

mortgaged by their vendor – Shri M.C. Kallikutty. It is submitted

that in the criminal proceedings initiated by the said Shri

Kallikutty, there are specific allegations of fraud and in fact

charge­sheets have been filed in the criminal proceedings

initiated by the said Shri M.C. Kallikutty. It is submitted that in

fact thereafter in the criminal proceedings the trial Court has

convicted the partners of the partnership firm – G Suresh Babu

and Ravi Chandran for the offences under Sections 120B read

with 465, 466, 468, 471, 419 and 420 of the IPC. It is submitted

that the learned Magistrate has specifically observed and held

that accused entered into a criminal conspiracy and created a

forged Partition Deed of Shri M.C. Kallikutty by forging the

signatures and thumb impressions of witnesses and obtained the

loan from the bank. It is submitted that the learned trial Court

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as well as the High Court have rightly refused to reject the

respective plaints under Order 7 Rule 11 (d) of the CPC.

5.2 Making the above submissions, it is prayed to dismiss the

present appeals.

6. In reply, learned Advocate appearing on behalf of the

appellant­bank has submitted that so far as the criminal

proceedings are concerned, the bank is not a party to the said

criminal proceedings and therefore any observations/finding of

the Magistrate shall not bind the bank.

6.1 It is further submitted by the learned Advocate appearing on

behalf of the appellant – bank that even the criminal proceedings

were with respect to the partnership deed and not with respect to

the guarantee deed executed by Shri M.C. Kallikutty – Guarantor.

It is submitted that even the guarantee deed executed by Shri

M.C. Kallikutty – Guarantor was not even before the learned

Magistrate. It is submitted that therefore the plaintiffs cannot

rely upon the said criminal proceedings and/or cannot take the

shelter under the word “fraud” used in the plaints. It is

submitted that therefore the allegations of fraud in the plaints

are illusory and the suits are vexatious and have been filed with

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mala fide intention and therefore this is a fit case to exercise

powers under Order 7 Rule 11(d) of the CPC.

7. We have heard the learned Advocates appearing on behalf of

the respective parties at length.

7.1 At the outset, it is required to be noted that there is already

an order passed by the DRT against the principal borrower and

the Guarantor and the recovery certificate issued by the Recovery

Officer. That the appellant­bank sanctioned the term loan in

favour of the principal borrower – partnership firm and its

partners. The partners of the partnership firm – principal

borrower executed a Memorandum of Agreement for Agricultural

Loans, thereby agreeing to abide by the terms and conditions

depicted therein. The Guarantor – Shri M.C. Kallikutty, who was

defendant no.4 in the application before the DRT, also signed the

said agreement as co­obligant, making himself jointly and

severally liable to pay the loan amount due to the bank in respect

of the said term loan. The term loan was further secured by the

partners of the partnership firm – principal borrower by

mortgaging the lands of the firm and also by the Guarantor – Shri

M.C. Kallikutty by mortgaging the lands owned by him. That the

judgment and decree came to be passed by the DRT as far back

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as on 27.08.2003 and even the recovery certificate was issued in

favour of the bank on 16.09.2003. That after a period of 5 years

the said Shri Kallikutty filed an interlocutory application before

the DRT to set aside the ex­parte decree dated 27.08.2003, which

came to be dismissed by the DRT on 12.06.2009. However, in

the meantime, the said Kallikutty initiated the criminal

proceedings against the partners of the partnership firm –

principal borrower alleging forgery with respect to the

partnership deed. That thereafter after a period of 15 years from

the date of mortgage and after seven years from the date of

decree passed by the DRT, the original plaintiffs filed the present

suits basically challenging the decree passed by the DRT dated

27.08.2003 alleging fraud. That in the said suits, it is the case

on behalf of the original plaintiffs that they have purchased the

suit property, which have been mortgaged while taking the term

loan, from their vendor vide sale deeds dated 30.01.1996 and

10.03.1997 respectively and as the suit lands purchased by them

vide sale deeds dated 30.01.1996 and 10.03.1997 respectively

were put to mortgage by fraud by the principal borrower –

partners of the partnership firm and therefore the decree passed

15
by the DRT shall not bind them. In the suits, the original

plaintiffs have prayed inter alia for the following reliefs:

“a) declaring that the alleged order dated 27.8.03 passed by
the Debt Recovery Tribunal, Coimbatore in T.A. No. 822/2002 is
non­est, ultra vires, null and void, and not binding on the suit
property and for a consequential permanent injunction restraining
the 6th defendant from interfering with the plaintiff peaceful
possession and enjoyment of the suit property by taking any action
as against the suit property by way of attachment or sale or
otherwise;

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

Thus, basically the plaintiffs are challenging the decree

passed by the DRT being purchasers. At this stage, it is required

to be noted that in fact the suit property was mortgaged in the

month of September, 1995 and the original plaintiffs have

claimed that they have purchased the suit property on

30.01.1996 and 10.03.1997 respectively. It is also required to be

noted at this stage that at no point of time and even when the

Guarantor – Shri Kallikutty filed an interlocutory application

before the learned DRT in the year 2008 for quashing and setting

aside the ex­parte decree passed by the DRT, he did not disclose

that he had already sold the suit properties to the plaintiffs. It is

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also required to be noted at this stage that even the sale deeds

dated 30.01.1996 and 10.03.1997 respectively, as per the

averments in the sale deeds, were executed by Shri Kallikutty as

power of attorney holder of the original owners and even the sale

consideration was paid in cash. As observed hereinabove and as

mentioned in the judgment and decree passed by the learned

DRT dated 27.08.2003, not only Kallikutty – Guarantor signed

the Memorandum of Agreement of Agricultural Loans dated

28.09.1995 by which the partners of the firm agreed to make

themselves jointly and severally liable to pay the loan and became

co­obligant, even the said Kallikutty also mortgaged the lands

owned by him. On considering the averments in the plaints there

are allegations of fraud with respect to partnership deed and that

too by the partners of the partnership firm – principal borrower.

However, there is no reference at all in the plaints with respect to

properties mortgaged by Shri Kallikutty even after the period of

15 years from the date of the mortgage and after 7 years from the

date of decree passed by the DRT, basically challenging the

decree passed by the DRT. As the suits were filed challenging the

decree passed by the DRT, the appellant­bank – one of the

defendants filed applications to reject the plaints in exercise of

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powers under Order 7 Rule 11(d) of the CPC on the ground that

considering the provisions of RDDBFI Act, more particularly

Sections 18, 19 and 20 of the Act, the suits are not maintainable.

Both the applications are dismissed by the learned trial Court

and which are further confirmed by the High Court. Therefore,

the short question which is posed for consideration of this Court

is, whether the suits filed by the plaintiffs were liable to be

rejected in exercise of powers under Order 7 Rule 11(d) of the

CPC or not?

7.2 While considering the aforesaid issue/question, few

decisions of this Court on exercise of powers under Order 7 Rule

11(d) of the CPC are required to be referred to and considered.

7.3 In the case of T. Arivandandam (supra), while considering

the very same provision i.e. Order 7 Rule 11 of the CPC and the

decree of the trial Court in considering such application, this

Court in para 5 has observed and held as under:

“5. We have not the slightest hesitation in condemning the
petitioner for the gross abuse of the process of the court repeatedly
and unrepentantly 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

18
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….”

7.4 In the case of Church of Christ Charitable Trust and

Educational Charitable Society v. Ponniamman Educational

Trust (2012) 8 SCC 706, this Court in paras 13 has observed

and held as under:

“13. While scrutinizing the plaint averments, it is the bounden duty of the
trial Court to ascertain the materials for cause of action. The cause of action is a
bundle of facts which taken with the law applicable to them gives the plaintiff
the right to relief against the defendant. Every fact which is necessary for the
plaintiff to prove to enable him to get a decree should be set out in clear terms.

It is worthwhile to find out the meaning of the words “cause of action”. A cause
of action must include some act done by the Defendant since in the absence of
such an act no cause of action can possible accrue.”

7.5 In A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies,

Salem

(supra), this Court explained the meaning of “cause of action” as

follows:

“12.A cause of action means every fact, which if traversed, it would
be necessary for the plaintiff to prove in order to support his right
to a judgment of the court. In other words, it is a bundle of facts
which taken with the law applicable to them gives the plaintiff a
right to relief against the defendant. It must include some act done
by the defendant since in the absence of such an act no cause of
action can possibly accrue. It is not limited to the actual
infringement of the right sued on but includes all the material facts
on which it is founded. It does not comprise evidence necessary to
prove such facts, but every fact necessary for the plaintiff to prove
to enable him to obtain a decree. Everything which is not proved
would give the defendant a right to immediate judgment must be
part of the cause of action. But it has no relation whatever to the

19
defence which may be set up by the defendant nor does it depend
upon the character of the relief prayed for by the plaintiff.”

7.6 In the case of Sopan Sukhdeo Sable (supra) in paras 11 and

12, this Court has observed as under:

“11. In I.T.C. Ltd. v. Debts Recovery Appellate Tribunal [(1998) 2
SCC 70] it was held that the basic question to be decided while
dealing with an application filed under Order 7 Rule 11 of the Code
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 of the Code.

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

7.7 In the case of Madanuri Sri Rama Chandra Murthy (supra),

this Court has observed and held as under:

“7. The plaint can be rejected under Order 7 Rule 11 if
conditions enumerated in the said provision are fulfilled. It is
needless to observe that the power under Order 7 Rule 11 CPC
can be exercised by the Court at any stage of the suit. The
relevant facts which need to be looked into for deciding the
application are the averments of the plaint only. If on an entire
and meaningful reading of the plaint, it is found that the suit is
manifestly vexatious and meritless in the sense of not disclosing
any right to sue, the court should exercise power under Order 7
Rule 11 CPC. Since the power conferred on the court to terminate
civil action at the threshold is drastic, the conditions enumerated
under Order 7 Rule 11 CPC to the exercise of power of rejection of
plaint have to be strictly adhered to. The averments of the plaint
have to be read as a whole to find out whether the suit is barred
by any law. It is needless to observe that the question as to

20
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 barred by any law, or do not disclose
cause of action, the application for rejection of plaint can be
entertained and the power under Order 7 Rule 11 CPC can be
exercised. If clever drafting of the plaint has created the illusion
of a cause of action, the court will nip it in the bud at the earliest
so that bogus litigation will end at the earlier stage.”

7.8 In the case of Ram Singh v. Gram Panchayat Mehal Kalan

(1986) 4 SCC 364, this Court has observed and held that when

the suit is barred by any law, the plaintiff cannot be allowed to

circumvent that provision by means of clever drafting so as to

avoid mention of those circumstances, by which the suit is barred

by law of limitation.

8. Applying the law laid down by this Court in the aforesaid

decisions on exercise of powers under Order 7 Rule 11 of the CPC

to the facts of the case on hand and the averments in the plaints,

we are of the opinion that both the courts below have materially

erred in not rejecting the plaints in exercise of powers under

Order 7 Rule 11 of the CPC. As observed hereinabove, the main

prayer in the suits is challenging the decree passed by the DRT.

The decree passed by the learned DRT and even the order passed

by the Recovery Officer are appealable under Section 20 of the
21
RDDBFI Act. In the case of O.C. Krishnan and others (supra),

this Court has observed and held that in view of the alternate

remedy of preferring the appeal before the DRAT, the petition

under Article 227 challenging the order passed by the DRT shall

not be maintainable, without exhaustion of such remedy. In the

case of O.C. Krishnan and others (supra), decree passed by the

DRT was challenged in a petition under Article 227 of the

Constitution of India. The High Court allowed the petition. While

allowing the appeal of the bank – Punjab National Bank, this

Court has observed that without exhaustion of the remedies

under the RDDBFI Act, the High Court ought not to have

exercised its jurisdiction under Article 227. While holding so, in

paragraph 6, this Court has observed and held as under:

“6. The Act has been enacted with a view to provide a special
procedure for recovery of debts due to the banks and the financial
institutions. There is a hierarchy of appeal provided in the Act,
namely, filing of an appeal under Section 20 and this fast­track
procedure cannot be allowed to be derailed either by taking
recourse to proceedings under Articles 226 and 227 of the
Constitution or by filing a civil suit, which is expressly barred.
Even though a provision under an Act cannot expressly oust the
jurisdiction of the court under Articles 226 and 227 of the
Constitution, nevertheless, when there is an alternative remedy
available, judicial prudence demands that the Court refrains from
exercising its jurisdiction under the said constitutional provisions.
This was a case where the High Court should not have entertained
the petition under Article 227 of the Constitution and should have
directed the respondent to take recourse to the appeal mechanism
provided by the Act.”

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9. Relying upon and following the decision of this Court in the

case of O.C. Krishnan and others (supra), thereafter the

Division Bench of the Madras High Court in the case of M/s

Cambridge Solutions Limited (supra), has rejected the plaint

in which the order passed by the DRT was challenged, in

exercise of powers under Order 7 Rule 11 (d) of the CPC. It is

required to be noted that in the said case also there were

allegations of fraud in the plaint and considering the averments

in the plaint, it was found that the allegations of fraud are

illusory. It is observed by the Division Bench in the said

decision that specific instances and acts of fraud with evidence

have to be pleaded in the plaint. It is further observed that mere

statements are not enough. It is further observed that it is not

sufficient if just fraud is pleaded and there must be material to

show that the fraud is committed.

10. Having considered the pleadings and the averments in the

suits, more particularly the allegations of fraud, we find that the

allegations of fraud are with respect to the partnership deed and

there are no allegations at all with respect to mortgage created

by the Guarantor – Shri Kallikutty and that too with respect to

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the deed of guarantee executed by the Guarantor. Much

reliance is placed upon the judgment and order passed by the

learned Magistrate holding the partners of the firm guilty.

However, it is required to be noted that even in the said

judgment passed by the learned Magistrate there is no reference

to the deed of guarantee and/or the mortgage created by the

Guarantor. Even the bank is not a party to the said

proceedings. It is reported that against the judgment and order

passed by the learned Magistrate, further appeal is pending. Be

that as it may, considering the pleadings/averments in the suits

and the allegations of fraud, we are of the opinion that the

allegations of fraud are illusory and only with a view to get out of

the judgment and decree passed by the DRT. We are of the

opinion that therefore the suits are vexatious and are filed with a

mala fide intention to get out of the judgment and decree passed

by the DRT. As observed hereinabove, the plaintiffs are claiming

right, title on the basis of the sale deeds dated 30.01.1996 and

10.03.1997 respectively executed by Shri Kallikutty as power of

attorney holder of the original owner. However, according to the

averments in the plaints, they have purchased the suit property

from their vendor which is factually incorrect. On a bare reading

24
of the sale deeds, it appears that the sale deeds are executed by

Shri Kallikutty as power of attorney holder of the original vendor.

As observed hereinabove, even in the year 2008, when the said

Kallikutty filed interlocutory application before the DRT to quash

and set aside the ex­parte judgment and decree passed by the

DRT, he did not disclose that he has already sold the property in

favour of the original plaintiffs. As observed hereinabove, even

the sale consideration is alleged to have been paid in cash.

Before the execution of the sale deeds dated 30.01.1996 and

10.03.1997, the lands were already put as a security by way of

mortgage with the appellant­bank by Shri Kallikutty. Thus,

considering the overall facts and circumstances of the case, the

suits filed by the original plaintiffs are vexatious, frivolous and

nothing but an abuse of process of law and court. Therefore,

considering the law laid down by this Court in the aforesaid

decisions, more particularly in the case of T. Arivandandam

(supra), the suits being vexatious and frivolous, the plaints are

required to be rejected in exercise of powers under Order 7 Rule

11 of the CPC. As pointed out by Krishna Iyer, J. in T.

Arivandandam (supra), the ritual of repeating a word or

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creation of an illusion in the plaint can certainly be unravelled

and exposed by the court while dealing with an application

under Order 7 Rule 11(a). As observed by this Court, such

proceedings are required to be nipped in the bud. Even

otherwise as observed hereinabove, without exhausting the

remedy of appeal provided under the RDDBFI Act, the suits with

the basic relief of challenging the decree passed by the DRT were

liable to be dismissed, as observed and held by this Court in the

case of O.C. Krishnan and others (supra).

11. At this stage, it is also required to be noted that the suits

have been filed after a period of 15 years from the date of

mortgage and after a period of 7 years from the date of passing

of the decree by the DRT. In the plaints, it is averred that the

plaintiffs came to know about the mortgage and the judgment

and decree passed by the DRT only six months back. However,

the said averments can be said to be too vague. Nothing has

been averred when and how the plaintiffs came to know about

the judgment and decree passed by the DRT and the mortgage of

the property. Only with a view to get out of the law of limitation

and only with a view to bring the suits within the period of

limitation, such vague averments are made. On such vague
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averments, plaintiffs cannot get out of the law of limitation.

There must be specific pleadings and averments in the plaints

on limitation. Thus, on this ground also, the plaints were liable

to be rejected. As observed hereinabove, the plaints are

vexatious, frivolous, meritless and nothing but an abuse of

process of law and court. Therefore, this is a fit case to exercise

the powers under Order 7 Rule 11 (d) of the CPC. Both the

courts below have materially erred in not rejecting the plaints in

exercise of powers under Order 7 Rule 11(d) of the CPC. Both

the courts below have materially erred in not exercising the

jurisdiction vested in them.

12. In view of the above and for the reasons stated above, both

these appeals succeed. The impugned common judgment and

order passed by the High Court in dismissing the revision

applications and the orders passed by the learned trial Court

rejecting the applications preferred by the appellant­bank to

reject the respective plaints in exercise of powers under Order 7

Rule 11(d) of the CPC are hereby quashed and set aside.

Consequently, the plaints filed by the original plaintiffs being

O.S. No. 1269/2010 and O.S. No. 233/2011 pending in the

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Court of Additional Subordinate Court, Coimbatore are rejected.

The instant appeals are allowed accordingly. No costs.

………………………………..J.

[UDAY UMESH LALIT]

……………………………….J.

                                    [INDIRA BANERJEE]


NEW DELHI;                          ………………………………..J.
FEBRUARY 28, 2020.                  [M.R. SHAH]




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