# CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC

- **Citation:** [2020] 2 S.C.R. 944
- **Court:** Supreme Court of India
- **Decided:** 2020-02-28
- **Case number:** Civil Appeal Nos. 1863-1864 of 2020
- **Bench:** Uday Umesh Lalit, Indira Banerjee, M. R. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/canara-bank-v-p-selathal-and-ors-etc-etc-34258
- **Pages:** 20

## Headnote

Code of Civil Procedure, 1908 - Or.7, r.11 - Rejection of
Plaint - The appellant-bank sanctioned and granted a term loan to
a partnership firm - The said loan was secured by mortgage of
immovable property belonging to the said firm and land of a
Guarantor - The land of the guarantor are subject matter of dispute
- A Guarantor had signed Guarantee Deed and created a equitable
mortgage by deposit of title deeds - The original borrower failed to
repay the loan amount - The DRT proceeded ex- parte against the
Guarnator and directed the principal borrower, its partners and
the Guarantor pay the sum of the term loan with interest - The
Guarantor filed an I.A. in 2008 against the order of the DRT, for
setting aside the ex-parte decree dated 27.8.2003, however, the same
was dismissed - After seven years from the date of the decree dated
27.8.2003 passed by the DRT, the respondents-plaintiffs filed two
suits to declare the order dated 27.8.2003 as non- est, ultra-vires,
null and void and not binding on the suit property - In the said
suits, the bank filed application u/Or. 7, r.11 to reject the respective
plaints - The bank contended that as per s.20(1) of Recovery of
Debts due to Banks and Financial Institutions Act, 1993 the appeal
is provided to DRAT against the order of DRT and therefore, the
Civil Court had no jurisdiction to entertain the suits - The
respondents-plaintiffs opposed the applications stating that they
have purchased the suit property from the original owner and that
they are in possession and enjoyment of the suit property - The
applications u/Or.7,r.11(d) were dismissed by the Trial Court - The
High Court confirmed the orders passed by the Trial Court - On
appeal, held: The decree passed by the DRT and even the order
passed by the Recovery Officer are appealable u/s. 20 of the
RDDBFI Act - The averments in suits, allege fraud with respect to
the partnership deed and there are no allegations at all with respect
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to mortgage created by the guarantor - The suits are vexatious and
are filed with malafide intention to get out of the judgment and
decree passed by the DRT - The plaintiffs are claiming right, title
on the basis of the sale deeds executed by the guarantor as power
of attorney holder of the original vendor/original owner - According
to the averments in the plaints that they have purchased the suit
property from their vendor/original owner is factually incorrect -
Before, the execution of sale deeds, the lands were already put as a
security by way of mortgage - Further, the guarantor had filed I.A.
in 2008 against the judgment and decree by the DRT, he did not
disclose that he had already sold the property in favour of plaintiffs
- Thus, considering the overall facts and circumstances of the case
the suits filed by the plaintiffs are vexatious, frivolous and an abuse
of process of law and Court - Therefore, considering the law laid
down by the Supreme Court, the plaints are rejected u/Or. 7, r. 11 -
Both the Courts below, materially erred in not rejecting the plaints
in exercise of powers u/or. 7, r. 11(d) of the CPC.
Allowing the appeals, the Court
HELD:1. 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? [Para 7.1][957 D-E]
2. Applying the law laid down by this Court 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, this Court is 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, the main prayer in the suits is
challenging the decree passed by the DRT. The decree passed
by the DRT and even the order passed by the Recovery Officer
are appealable under Section 20 of the Recovery of Debts due to
Banks and Financial Institutions Act, 1

## Text

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SUPREME COURT REPORTS
[2020] 2 S.C.R.
CANARA BANK
v.
P. SELATHAL AND ORS. ETC.ETC.
(Civil Appeal Nos. 1863-1864 of 2020)
FEBRUARY 28, 2020
[UDAY UMESH LALIT, INDIRA BANERJEE AND
M. R. SHAH, JJ.]
Code of Civil Procedure, 1908 - Or.7, r.11 - Rejection of
Plaint - The appellant-bank sanctioned and granted a term loan to
a partnership firm - The said loan was secured by mortgage of
immovable property belonging to the said firm and land of a
Guarantor - The land of the guarantor are subject matter of dispute
- A Guarantor had signed Guarantee Deed and created a equitable
mortgage by deposit of title deeds - The original borrower failed to
repay the loan amount - The DRT proceeded ex- parte against the
Guarnator and directed the principal borrower, its partners and
the Guarantor pay the sum of the term loan with interest - The
Guarantor filed an I.A. in 2008 against the order of the DRT, for
setting aside the ex-parte decree dated 27.8.2003, however, the same
was dismissed - After seven years from the date of the decree dated
27.8.2003 passed by the DRT, the respondents-plaintiffs filed two
suits to declare the order dated 27.8.2003 as non- est, ultra-vires,
null and void and not binding on the suit property - In the said
suits, the bank filed application u/Or. 7, r.11 to reject the respective
plaints - The bank contended that as per s.20(1) of Recovery of
Debts due to Banks and Financial Institutions Act, 1993 the appeal
is provided to DRAT against the order of DRT and therefore, the
Civil Court had no jurisdiction to entertain the suits - The
respondents-plaintiffs opposed the applications stating that they
have purchased the suit property from the original owner and that
they are in possession and enjoyment of the suit property - The
applications u/Or.7,r.11(d) were dismissed by the Trial Court - The
High Court confirmed the orders passed by the Trial Court - On
appeal, held: The decree passed by the DRT and even the order
passed by the Recovery Officer are appealable u/s. 20 of the
RDDBFI Act - The averments in suits, allege fraud with respect to
the partnership deed and there are no allegations at all with respect
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to mortgage created by the guarantor - The suits are vexatious and
are filed with malafide intention to get out of the judgment and
decree passed by the DRT - The plaintiffs are claiming right, title
on the basis of the sale deeds executed by the guarantor as power
of attorney holder of the original vendor/original owner - According
to the averments in the plaints that they have purchased the suit
property from their vendor/original owner is factually incorrect -
Before, the execution of sale deeds, the lands were already put as a
security by way of mortgage - Further, the guarantor had filed I.A.
in 2008 against the judgment and decree by the DRT, he did not
disclose that he had already sold the property in favour of plaintiffs
- Thus, considering the overall facts and circumstances of the case
the suits filed by the plaintiffs are vexatious, frivolous and an abuse
of process of law and Court - Therefore, considering the law laid
down by the Supreme Court, the plaints are rejected u/Or. 7, r. 11 -
Both the Courts below, materially erred in not rejecting the plaints
in exercise of powers u/or. 7, r. 11(d) of the CPC.
Allowing the appeals, the Court
HELD:1. 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? [Para 7.1][957 D-E]
2. Applying the law laid down by this Court 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, this Court is 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, the main prayer in the suits is
challenging the decree passed by the DRT. The decree passed
by the DRT and even the order passed by the Recovery Officer
are appealable under Section 20 of the Recovery of Debts due to
Banks and Financial Institutions Act, 1993. In the case of O.C.
Krishnan and others, 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, decree passed
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
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SUPREME COURT REPORTS
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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. [Para 8][960 D-G]
3. Having considered the pleadings and the averments in
the suits, more particularly the allegations of fraud, this Court
finds 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 and that too with respect
to the deed of guarantee executed by the Guarantor. Much
reliance is placed upon the judgment and order passed by the
Magistrate holding the partners of the firm guilty. However, it is
required to be noted that even in the said judgment passed by
the 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, this Court is
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. This Court is 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 the guarantor 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 of the sale deeds,
it appears that the sale deeds are executed by the guarantor as
power of attorney holder of the original vendor. As observed
hereinabove, even in the year 2008, when the guarantor filed
interlocutory application before the DRT to quash and set aside
the ex-parte judgment and decree passed by the DRT, he did not
disclose that he has already sold the property in favour of the
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original plaintiffs. As observed, 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 the guarantor. 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, 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, the ritual of repeating a word or 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. [Para 10][961 F-H; 962 A-G]
4. 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 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
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
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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. [Para 11][962 GH; 963 A-D]
Sopan Sukhdeo Sable v. Assistant Charity Commissioner
(2004) 3 SCC 137 : [2004] 1 SCR 1004; T.
Arivandandam v. T.V. Satyapal (1977) 4 SCC 467 :
[1978] 1 SCR 742; Church of Christ Charitable Trust
and Educational Charitable Society v. Ponniamman
Educational Trust (2012) 8 SCC 706 : [2012] 6 SCR
404; Punjab National Bank v. O.C. Krishnan and Ors.
(2001) 6 SCC 569 : [2001] 1 Suppl. SCR 466 - relied
on.
M/s. Cambridge Solutions Limited, Bangalore v. Global
software Limited, Chennai 2016-5-L.W. 45; A.B.C.
Laminart Pvt. Ltd. v. A.P. Agencies (1989) 2 SCC 163;
Madanuri Sri Rama Chandra Murthy v. Syed Jalal
(2017) 13 SCC 174 : [2017] 5 SCR 294; Ram Singh v.
Gram Panchayat Mehal Kalan (1986) 4 SCC 364 -
referred to.
Case Law Reference
[2001] 1 Suppl. SCR 466
relied on
Para 4.1
(1989) 2 SCC 163
referred to
Para 4.3
[2017] 5 SCR 294
referred to
Para 4.3
[1978] 1 SCR 742
relied on
Para 7.3
[2012] 6 SCR 404
relied on
Para 7.4
[2004] 1 SCR 1004
relied on
Para 7.6
(1986) 4 SCC 364
referred to
Para 7.8
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 18631864 of 2020.
From the Judgment and Order dated 09.11.2017 of the High Court
of Madras in CRP (PD) Nos. 2586 and 2587 of 2013.
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Rajesh Kumar-I, Anant Gautam, Ms. Sakshi Gaur, Sorabh Dahiya,
Vibhu Sharma, Nipun Sharma, Ms. Garvita, Anmol Mehta, Advs. for the
Appellant.
Robin R. David, Febin V. Mathew, Dhiraj A. Philip, Samuel David,
M/s. Dua Associates, Advs. for the Respondents.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Leave granted.
2. Feeling aggrieved and dissatisfied with the impugned common
judgment and order dated 09.11.2017 passed by the High Court of
Judicature at Madras in C.R.P.(PD) No. 2586/2013 and C.R.P.(PD)
No. 2587/2013, by which the High Court has 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 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 appellant-bank, the appellant-bank 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
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
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Guarantor. That on 31.10.2001, DRT, Chennai passed an order in O.A.
No. 489/2001 to proceed ex-parte against the Guarantor. That O.A. No.
489/2001 was transferred to DRT, Coimbatore and was re-numbered as
T.A. No. 822/2002. That T.A. No. 822/2002 (previously O.A. No. 489/
2001) filed by the appellant-bank 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
appellant-bank 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 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 Branch-CID 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 CB-CID, 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 appellant-bank, 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 Guarantor filed I.A. No. 1821 of 2008
in the year 2008 for setting aside the ex-parte 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 ex-parte decree dated
27.08.2003 and for condonation of delay of 2392 days in filing the petition
to set aside the ex-parte 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
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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 appellant-bank for a declaration
to declare the order dated 27.08.2003 passed by the DRT in T.A. No.
822/2002 as non-est, 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 otherwise. That in the aforesaid
two suits, the appellant-bank 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 appellant-bank 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 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
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
[M. R. SHAH, J.]
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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) of the CPC, the
appellant-bank 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
appellant-bank - 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 appellant-bank 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 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 appellant-bank that in substance the original plaintiffs are
challenging the decree passed by the DRT, Coimbatore dated 27.08.2003
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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 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 appellant-bank
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, 2016-5-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 appellant-bank that in the present case also the 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.
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
[M. R. SHAH, J.]
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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 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 charge-sheets 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 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.
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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 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
appellant-bank 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 co-obligant, 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 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 ex-parte 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
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
[M. R. SHAH, J.]
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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 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 5th 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 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
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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 co-obligant, 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 appellant-bank - one of the defendants filed applications
to reject the plaints in exercise of 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
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
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meritless, in the sense of not disclosing a clear right to sue, he
should exercise his power under Order 7, Rule 11 CPC taking
care to see that the ground mentioned therein is fulfilled. And, if
clever drafting has created the illusion of a cause of action, nip it
in the bud at the first hearing by examining the party searchingly
under Order 10, CPC. An activist Judge is the answer to
irresponsible law suits...."
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 defence which may be set up by the defendant
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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)2SCC70] 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 whether the suit is
barred by any law, would always depend upon the facts and
circumstances of each case. The averments in the written
CANARA BANK v. P. SELATHAL AND ORS. ETC.ETC.
[M. R. SHAH, J.]
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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.