# M/S FROST INTERNATIONAL LIMITED v. M/S MILAN DEVELOPERS AND BUILDERS (P) LIMITED & ANR

- **Citation:** [2022] 14 S.C.R. 1100
- **Court:** Supreme Court of India
- **Decided:** 2022-04-01
- **Case number:** Civil Appeal No. 1689 of 2022
- **Bench:** M. R. Shah, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-frost-international-limited-v-m-s-milan-developers-and-builders-p-limited-35726
- **Pages:** 38

## Headnote

Code of Civil Procedure, 1908 : ss. 96, 115 and Or.VII r.11 -
Negotiable Instruments Act - ss. 118, 138 - Specific Relief Act - ss.
34, 41 - Suit for declaration - Rejection of plaint - Respondent
no.1 engaged in business of exporting iron ore from Paradeep Port,
had a plot on licence from Paradeep Port Trust Authority for carrying
its business - Respondent no.1 and appellant entered into a
Cooperation Agreement, however, as per respondent no.1, it was
not given effect - Thereafter, appellant filed a complaint against
respondent no.1 with Paradeep Port Trust Authority for violating
terms and conditions of his license - Parties then entered into a
Memorandum of understanding agreeing the appellant would take
steps to protect the license of the plot given to the respondent no.1
from cancellation and that the respondent no.1 would issue a cheque
for Rs.56 lakhs in favour of appellant and the same would remain
in the custody of the respondent no.2 as security, which is equivalent
to the cost of 3876 MT of iron ore, and if the appellant succeeded
in protecting the licence from being cancelled then respondent no.
1 would supply iron ore fines to appellant - Accordingly cheque
was given to the respondent no.2 as security, however, the appellant
took no step to save the license of the plot and the license was
cancelled, and the cheque of Rs.56 lakhs was handed over to
appellant, who presented the same for encashment and it got
dishonoured - Appellant issued notice u/s. 138 of N.I. Act to the
respondent no. 1 - Respondent no.1 then filed suit for declaration
against the appellant and the respondent no. 2 that the cheque which
was dishonoured was handed over by him to respondent no.2 as a
security and that appellant had not acquired any right over the
said cheque as the respondent no.1 had no liability to discharge in
favour of appellant - Appellant then filed an application u/Or. VII
Rule 11seeking rejection of the plaint - Dismissed by trial court,
[2022] 14 S.C.R. 1100
1100
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however, the revisional court set aside the order of the trial court
and rejected the plaint - In writ petition, the High Court set aside
the order of the revisional court and remanded the matter holding
that the revisional court had exceeded its jurisdiction in rejecting
the plaint - On appeal, held : High Court was not right in holding
that the revisional court had exceeded its jurisdiction and it could
not have allowed the application filed under Order VII Rule 11 and
thereby reversed the order of the trial court and finally disposed of
the suit - High Court failed to appreciate the second proviso to s.
115 of CPC (Orissa amendment) in its true perspective - Revisional
court, being the High Court or the District Court, as the case may
be, can reverse an order which would finally dispose of the suit or
other proceeding - Revisional court being the District Court, did
the same.
s.115 and Order VII Rule 11 - Specific Relief Act,1963 -
ss.34,41 - Negotiable Instruments Act - ss. 118, 138 - Revisional
court-District Court allowing the application filed u/ord. VII r 11
by the appellant and thereby rejecting the plaint filed by the
respondent no.1 - Justification of - Appellant's case that respondent
no.2 has sought only declaratory that the cheque issued in the name
of the appellant was a security and the appellant had no right to
encash it and has not sought further or consequential reliefs, thus,
suit is barred under Specific Relief Act; and that the suit filed by the
respondent no.1 is an attempt to frustrate the possibility of the
appellant initiating action under the provisions of the N.I. Act for
the dishonour of cheque - Held : Omission on the part of the
respondent no. 1 in praying for further consequential relief, would
become relevant only at the time of final adjudication of the suit -
Right of appellant to prosecute the respondent no. 1 owing to the
dishonour of the cheque issued by the respondent no. 1 cannot be
frustrated by seekin

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SUPREME COURT REPORTS
[2022] 14 S.C.R.
M/S FROST INTERNATIONAL LIMITED
v.
 M/S MILAN DEVELOPERS AND BUILDERS (P) LIMITED &
ANR.
(Civil Appeal No. 1689 of 2022)
APRIL 01, 2022
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Code of Civil Procedure, 1908 : ss. 96, 115 and Or.VII r.11 -
Negotiable Instruments Act - ss. 118, 138 - Specific Relief Act - ss.
34, 41 - Suit for declaration - Rejection of plaint - Respondent
no.1 engaged in business of exporting iron ore from Paradeep Port,
had a plot on licence from Paradeep Port Trust Authority for carrying
its business - Respondent no.1 and appellant entered into a
Cooperation Agreement, however, as per respondent no.1, it was
not given effect - Thereafter, appellant filed a complaint against
respondent no.1 with Paradeep Port Trust Authority for violating
terms and conditions of his license - Parties then entered into a
Memorandum of understanding agreeing the appellant would take
steps to protect the license of the plot given to the respondent no.1
from cancellation and that the respondent no.1 would issue a cheque
for Rs.56 lakhs in favour of appellant and the same would remain
in the custody of the respondent no.2 as security, which is equivalent
to the cost of 3876 MT of iron ore, and if the appellant succeeded
in protecting the licence from being cancelled then respondent no.
1 would supply iron ore fines to appellant - Accordingly cheque
was given to the respondent no.2 as security, however, the appellant
took no step to save the license of the plot and the license was
cancelled, and the cheque of Rs.56 lakhs was handed over to
appellant, who presented the same for encashment and it got
dishonoured - Appellant issued notice u/s. 138 of N.I. Act to the
respondent no. 1 - Respondent no.1 then filed suit for declaration
against the appellant and the respondent no. 2 that the cheque which
was dishonoured was handed over by him to respondent no.2 as a
security and that appellant had not acquired any right over the
said cheque as the respondent no.1 had no liability to discharge in
favour of appellant - Appellant then filed an application u/Or. VII
Rule 11seeking rejection of the plaint - Dismissed by trial court,
[2022] 14 S.C.R. 1100
1100
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however, the revisional court set aside the order of the trial court
and rejected the plaint - In writ petition, the High Court set aside
the order of the revisional court and remanded the matter holding
that the revisional court had exceeded its jurisdiction in rejecting
the plaint - On appeal, held : High Court was not right in holding
that the revisional court had exceeded its jurisdiction and it could
not have allowed the application filed under Order VII Rule 11 and
thereby reversed the order of the trial court and finally disposed of
the suit - High Court failed to appreciate the second proviso to s.
115 of CPC (Orissa amendment) in its true perspective - Revisional
court, being the High Court or the District Court, as the case may
be, can reverse an order which would finally dispose of the suit or
other proceeding - Revisional court being the District Court, did
the same.
s.115 and Order VII Rule 11 - Specific Relief Act,1963 -
ss.34,41 - Negotiable Instruments Act - ss. 118, 138 - Revisional
court-District Court allowing the application filed u/ord. VII r 11
by the appellant and thereby rejecting the plaint filed by the
respondent no.1 - Justification of - Appellant's case that respondent
no.2 has sought only declaratory that the cheque issued in the name
of the appellant was a security and the appellant had no right to
encash it and has not sought further or consequential reliefs, thus,
suit is barred under Specific Relief Act; and that the suit filed by the
respondent no.1 is an attempt to frustrate the possibility of the
appellant initiating action under the provisions of the N.I. Act for
the dishonour of cheque - Held : Omission on the part of the
respondent no. 1 in praying for further consequential relief, would
become relevant only at the time of final adjudication of the suit -
Right of appellant to prosecute the respondent no. 1 owing to the
dishonour of the cheque issued by the respondent no. 1 cannot be
frustrated by seeking a declaration that the said cheque was handed
over as a security - Such a declaration cannot be ex facie granted
as it would be contrary to the provisions of the N.I. Act and
particularly s.118(a) thereof - In these circumstances, while the
respondent no. 1 has certain grievances arising from the MoU,
against the appellants which may give rise to seek appropriate
remedies in law, the declaratory reliefs sought in the plaint are barred
by law - Hence, the plaint is liable to be rejected in exercise of
jurisdiction u/Or. VII r. 11 CPC.
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
DEVELOPERS AND BUILDERS (P) LTD.
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Order VII Rule 11 - Rejection of Plaint - Purpose/Object -
Discussed.
Allowing the appeal, the Court
Held : 1.1 It is noted that the Orissa amendment differs
from the main Section 115 of CPC. The first proviso to main Section
115 of CPC restricts the revisional power of the High Court
inasmuch as a revision is maintainable only if it is filed by a party
who is aggrieved by an order passed by the court subordinate to
the High Court on an order deciding an issue which, had it been
made in favour of the party applying for revision, would have finally
disposed of the suit or other proceeding. But as per the second
proviso to Section 115 of CPC (Orissa amendment), the High
Court or the District Court, as the case may be, under the said
Section can vary or reverse any order including an order deciding
an issue, made in the course of a suit or other proceeding only if
the order if so varied or reversed would finally dispose of the
suit or other proceeding or the order if allowed to stand would
occasion a failure of justice or cause irreparable injury to the
party against whom it was made. In other words, under Orissa
amendment to Section 115 of CPC, an express power is conferred
on the High Court or the District Court, as the case may be,
being the revisional courts, to vary or reverse an order of the
court subordinate thereto only when it would finally dispose of
the suit or other proceedings or if the impugned order is allowed
to stand would occasion a failure of justice or cause irreparable
injury to the party against whom it was made. [Para 18][1117-BC; 1118-A-D]
1.2 It would also be pertinent to mention that the instant
suit was filed in the year 2009 and therefore the Orissa
amendment to Section 115 CPC vide Orissa Act 26 of
1991, Section 2, would be applicable. However, by Orissa Act 14
of 2010, Sub-Section 2, Section 115 was amended by the Orissa
Legislature and second proviso to Section 115 has been amended
and Sub- Section 2 of Section 115 has been added which states
that the High Court or District Court, as the case may be, shall
not under this Section, vary or reverse any order including an
order deciding an issue, made in the course of a suit or other
proceeding, except where the order, if it has been made in favour
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of the party applying for revision, would finally dispose the suit
or other proceeding. Further, clause 1 of the second proviso
of Section 115 has been omitted by the amendment made in the
year 2010 and Sub-Section 3 has been added. This provision states
that a revision shall not operate as a stay of suit or other
proceeding before the Court except where such suit or other
proceeding is stayed by the High Court or District Court, as the
case may be. Sub-Section 1 of Section 115 is in pari materia with
the Orissa Amendment of 1991 except its reference to the Orissa
Amendment Act of 2010. [Paras 19, 20][1118-E-H; 1119-A]
1.3 The High Court was not right in observing that the
revisional court had exceeded its jurisdiction and it could not
have allowed the application filed under Order VII Rule 11 of
CPC and thereby reversed the order of the trial court and finally
disposed of the suit. In fact, the High Court has failed to appreciate
the second proviso to Section 115 of CPC (Orissa amendment)
in its true perspective. The revisional court, being the High Court
or the District Court, as the case may be, can reverse an order
which would finally dispose of the suit or other proceeding. That
is exactly what has been done by the revisional court being the
District Court in the petition being C.R.P. No.5 of 2012. Hence,
the High Court was not justified in setting aside the said order
and remanding the matter to the revisional court (District Court)
to consider afresh, the application filed by defendant no.1/appellant
herein under Order VII Rule 11 of CPC seeking rejection of the
plaint. In fact, the exercise of jurisdiction by the revisional court
in the instant case is in accordance with second proviso to Section
115 of CPC (Orissa amendment). Therefore, the High Court was
not right in holding that the revisional court had no jurisdiction
to reject the plaint filed under Order VII Rule 11 of CPC. The
reasoning of the High Court is contrary to the express proviso of
Section 115 (Orissa Amendment). [Paras 21, 22][1120-B-E; 1122D-E]
1.4 No doubt rejection of a plaint is a decree within the
meaning of Section 2(2) of CPC and an appeal lies from every
decree passed by any court exercising original jurisdiction to the
Court authorised to hear appeals from a decision of such court.
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
DEVELOPERS AND BUILDERS (P) LTD.
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However, it must be borne in mind that when a revisional court
rejects a plaint, in substance, an application filed under Order
VII Rule 11 is being allowed. Under such circumstances, the
remedy by way of a writ petition under Article 227 of the
Constitution could be availed and respondent no.1/plaintiff has
resorted to the said remedy in the instant case; although if the
plaint had been rejected by the trial court i.e. court of original
jurisdiction, it would have resulted in a right of appeal under
Section 96 of CPC. Having regard to the second proviso to Section
115 of CPC (Orissa amendment), a revisional court while allowing
the application filed under Order VII Rule 11 of CPC would in
substance reject the plaint but since the said decree is not passed
by the court of original jurisdiction, namely the trial court, the
remedy by way of writ petition under Article 227 of the Constitution
would be available to the aggrieved party and respondent no.1
has availed the said remedy. [Paras 23, 24][1122-E-H; 1123-A]
1.5 On a reading of the plaint, in the instant case it is noted
that it discloses a cause of action inasmuch as the MoU dated
17th January, 2009, entered into between the plaintiff and
defendant no.1 in the presence of defendant no.2 and the acts
done pursuant to the said MoU is the basis for the grievance of
the plaintiff. [Para 28][1128-C-D]
1.6 At the outset, on perusal of the plaint averments, the
plaintiff has indeed made out a cause of action for filing the suit.
In fact, in para 2 of the application filed under Order VII Rule 11
CPC, defendant no.1 has also encapsulated the averments made
in the plaint. Therefore, on that score the plaint cannot be rejected.
[Para 29][1129-D-E]
1.7 The main thrust of the application seeking rejection of
the plaint is that apart from the fact that the plaint does not disclose
a cause of action which has been negated by the revisional court
and rightly so, plaintiff has sought only declaratory reliefs and
has not sought further or consequential reliefs. In the
circumstances, the suit is barred under the provisions of the SR
Act.The proviso to Section 34 states that no court can make any
declaration where the plaintiff, being able to seek further relief
than mere declaration of title, omits to do so. The said question
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will have to be considered at the time of final adjudication of the
suit as the question of granting further relief or consequential
relief would arise only if the court grants a declaration. If the
plaintiff is unsuccessful in seeking the main relief of declaration,
then, the question of granting any further relief would not arise
at all. Therefore, omission on the part of the plaintiff in praying
for further consequential relief, would become relevant only at
the time of final adjudication of the suit. Hence the plaint cannot
be rejected at this stage by holding that the plaintiff has only
sought declaratory reliefs and no further consequential reliefs.
[Para 31][1129-H; 1130-A-B, E-G]
1.8 On a reading of ss. 118(a) and 138 of the NI Act, it is
clear that there is a rebuttable presumption that every negotiable
instrument including a cheque was made or drawn for a
consideration and every such instrument when it has been
accepted is for a consideration. [Para 33][1132-D-E]
1.9 On a reading of the plaint, it is evident that cheque
issued had been dishonoured and defendant no.1 had issued
notice under Section 138 of N.I. Act on 10th June, 2009, to the
plaintiff and its Managing Director replied to the same through
their advocate on 23rd June, 2009. Therefore, it is evident that
the plaintiff by seeking the said reliefs is in substance frustrating
the right of defendant no.1 to take steps under the provisions of
N.I. Act for releasing the amount of cheque issued by the plaintiff
to defendant no.1 for a sum of Rs. 56 lakhs by filing a civil suit
and/or by initiating a criminal prosecution. In other words, by
seeking such a declaration that the cheque was issued as a
security and that the same was illegally handed over by defendant
no.2 to defendant no.1 in violation of the terms and conditions of
the MoU, the plaintiff in substance is making an attempt to
frustrate proceedings being initiated under Section 138 of the
N.I. Act or for recovery of the amount by filing a civil suit. [Para
34][1132-E-H]
1.10 On a holistic reading of the plaint and on consideration
of the reliefs sought by the plaintiff, the said reliefs are barred by
law inasmuch as no plaintiff can be permitted to seek relief in a
suit which would frustrate the defendants from initiating a
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
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prosecution against plaintiff or seeking any other remedy
available in law. In fact, the attempt made by the plaintiff to seek
such a declaratory relief is, in substance, to seek a relief of
injunction against the defendants, particularly defendant no.1, but
framed it in the nature of a declaratory relief. In other words, the
plaintiff has sought an injunction against defendant no.1 from
seeking remedies in law on account of the cheque issued by the
plaintiff for a sum of Rs. 56 lakhs being dishonoured. Further,
the nature of the declaratory reliefs sought already arises out of
the MoU dated 17th January, 2009, between the plaintiff and
defendant no.1 in respect of which the plaintiff could seek
appropriate remedies, if there is a breach of the said MoU by
defendant no.1, but the plaintiff cannot seek declaratory reliefs
to the effect that the plaintiff was not liable to carry out his
obligation under the terms of the MoU. If the plaintiff has failed
to do so then the defendant no.1 would have a cause of action
against the plaintiff, but there cannot be a frustration of the right
to seek a remedy in law by means of seeking declaration under a
contract or MoU as in the instant case. [Paras 35, 36][1133-A-C;
1135-F-H]
1.11 Moreover, the right of defendant no.1 to prosecute
the plaintiff owing to the dishonour of the cheque issued by the
plaintiff for a sum of Rs. 56 lakhs cannot be frustrated by seeking
a declaration that the said cheque was handed over as a security.
Such a declaration cannot be ex facie granted as it would be
contrary to the provisions of the N.I. Act and particularly Section
118(a) thereof. If the plaintiff is aggrieved on account of breach
of the terms and conditions of the MoU committed by defendant
no.1 then it could seek appropriate reliefs in accordance with
law. Whether the plaintiff was not liable to issue the cheque for
Rs. 56 lakhs to defendant no.1 under the terms of the MoU is a
matter which has to be considered in an appropriate proceeding
to be initiated by defendants on account of dishonour of the said
cheque under Section 138 of the N.I. Act. The plaintiff can always
prove that it had no legal liability or debt to be discharged vis-a-vis
defendant no.1 under the terms of the MoU, if any proceeding is
to be initiated by defendant no.1 on account of the dishonour of
the said cheque. Further, if defendant no.1 is to seek any relief
for the non-supply of 3876 MT of iron ore fines by the plaintiff
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under the very same MoU then the plaintiff is entitled to take
appropriate defences as are available in law. If the plaintiff has a
grievance against the defendants and particularly defendant no.1,
arising from the MoU, such prayers have not been sought by the
plaintiff. Such reliefs could have been sought by the plaintiff
inasmuch as there is no prayer seeking recovery of Rs. 21.50
lakhs from defendant no.1 which according to the plaintiff is due
to it. [Para 37][1136-A-E]
1.12 In the circumstances, while the plaintiff has certain
grievances arising from the MoU, against the defendants which
may give rise to seek appropriate remedies in law, the aforesaid
three declaratory reliefs sought in the plaint are barred by law.
Hence, the plaint is liable to be rejected in exercise of jurisdiction
under Order VII Rule 11 CPC. The revisional court was justified
in rejecting the plaint but the High Court has erroneously set
aside the order of the revisional court without appreciating the
facts and circumstances of the case and has simply remanded the
matter to the revisional court to reconsider the revision afresh
on the premise that the revisional court did not have the
jurisdiction to reject the plaint u/s. 115. The Order of the High
Court is set aside and the Order of the revisional court is restored.
The plaint is rejected. [Paras 38, 39][1136-E-H; 1137-A]
Pandurang Dhondi Chougule and Others v. Maruti Hari
Jadhav and Others AIR 1966 SC 153 : [1966] 1 SCR
102; Tek Singh v. Shashi Verma and Another (2019) 16
SCC 678 : [2019] 3 SCR 697; T. Arivandandam v. T. V.
Satyapal & Anr. (1977) 4 SCC 467 : [1978] 1 SCR
742; Azhar Hussain v. Rajiv Gandhi (1986) Supp SCC
315 : [1986] 2 SCR 782; Sopan Sukhdeo Sable and
Ors. v. Assistant Charity Commissioner and Others
(2004) 3 SCC 137 : [2004] 1 SCR 1004; I.T.C Ltd. v.
Debts Recovery Appellate Tribunal and Ors. (1998) 2
SCC 70 : [1997] 6 Suppl. SCR 683; Liverpool &
London S.P. & I Assn. Ltd. v. M.V. Sea Success I & Anr.
(2004) 9 SCC 512 : [2003] 5 Suppl. SCR 851;
Madanuri Sri Rama Chandra Murthy v. Syed Jalal
(2017) 13 SCC 174 : [2017] 5 SCR 294; Dahiben v.
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
DEVELOPERS AND BUILDERS (P) LTD.
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Arvindbhai Kalyanji Bhanusali (Gajra) Dead through
Legal Representatives and Others (2020) 7 SCC 366;
Rajendra Bajoria and Others v. Hemant Kumar Jalan
and Others 2021 SCC Online SC 764; Hardesh Ores
(P.) Ltd. v. Hede & Co. (2007) 5 SCC 614 : [2007]
6 SCR 608; D. Ramachandran v. R. V. Janakiraman
(1999) 3 SCC 367; Saleem Bhai v. State of Maharashtra
(2003) 1 SCC 557 : [2002] 5 Suppl. SCR 491; Cotton
Corporation of India Limited v. United Industrial Bank
Limited and Ors. (1983) 4 SCC 625 : [1983] 3 SCR
962; Ratna Commercial Enterprises Ltd. v. Vasutech Ltd.
AIR 2008 Del 99 - referred to.
Case Law Reference
[1966] 1 SCR 102
referred to
Para 22A
[2019] 3 SCR 697
referred to
Para 22A
[1978] 1 SCR 742
referred to
Para 25(a)
[1986] 2 SCR 782
referred to
Para 25(b)
[2004] 1 SCR 1004
referred to
Para 25(c)
[1997] 6 Suppl. SCR 683
referred to
Para 25(c)
[2003] 5 Suppl. SCR 851
referred to
Para 25(d)
[2017] 5 SCR 294
referred to
Para 25(e)
(2020) 7 SCC 366
referred to
Para 25(f)
[2007] 6 SCR 608
referred to
Para 26
(1999) 3 SCC 367
referred to
Para 26
[2002] 5 Suppl. SCR 491
referred to
Para 26
[1983] 3 SCR 962
referred to
Para 36(a)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1689
of 2022.
From the Judgment and Order dated 19.01.2016 of the High Court
of Orissa at Cuttack in WP (C) No. 7059 of 2013.
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Mrs. Rajdipa Behura, A. Venayagam Balan, Philomin Kani, Ashray
Behura, Ms. Neha Lingwal, Ms. Hansika Sahu, Swayamtosh Rath, Advs.
for the Appellant.
Anirudh Sanganeria, Adv. for the Respondents.
The Judgment of the Court was delivered by
NAGARATHNA, J.
1. This appeal is preferred by defendant no.1 in C.S. No.1065 of
2009 filed before the Court of Civil Judge (Senior Division) Bhubaneswar,
by assailing order dated 19th January, 2016 passed by the High Court of
Orissa at Cuttack in WP(C) No.7059 of 2013. By the said order, the
application filed by the appellant herein/defendant no.1 under Order VII
Rule 11 of the Code of Civil Procedure 1908 (for short, the 'CPC') has
been ordered to be reconsidered by the District Court at Khurda,
Bhubaneswar (revisional court) by restoring C.R.P. No.5 of 2012 filed
by the defendant no.1 herein. The said revision was filed by defendant
no.1 being aggrieved by the dismissal of the said application being C.S.
No.1065 of 2009 by the trial court, namely, the Court of Civil Judge
(Senior Division), Bhubaneswar, praying for rejection of the plaint under
Order VII Rule 11 of the CPC.
2. For the sake of convenience, the parties herein shall be referred
to in terms of their rank and status before the trial court.
3. Briefly stated, the facts of the case are that, respondent no.1
herein/plaintiff had filed a suit against the appellant herein/defendant
no.1 and respondent no.2 herein/defendant no.2 seeking the following
reliefs:
"(i)
Let it be declared that the plaintiff had handed over the
cheque to Sri Dilip Das, Advocate as a security;
(ii)
Let it be declared that the said cheque has been illegally
handed over by the defendant no.2 to the defendant no.1
by violating term and condition of the memorandum of
understanding dated 17.01.2009;
(iii)
Let it be declared that the plaintiff is not liable to give delivery
of 3876 MT of iron ore fines to the defendant no.1 nor the
cheque amount since the defendant no.1 has failed to save
the plaintiff's plot from cancellation;
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
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(iv)
Let the cost of the suit be decreed in favour of the plaintiff
and against the defendants;
(v)
Let any other decree/decrees be passed in favour of the
plaintiff to which the plaintiff is entitled to under law and
equity."
4. According to the plaintiff, which is a Private Limited Company,
incorporated under the provisions of the Companies Act, 1956, it is
engaged in the business of export of iron ore from Paradeep Port while
defendant no.1 is also a Company incorporated under the provisions of
the Companies Act, 1956, having its registered office at Kanpur, Uttar
Pradesh, and also having its Branch at Kolkata in West Bengal. Defendant
no.1 carries on business at Paradeep Port, Orissa in supplying and
exporting iron ore from the said Port to various destinations overseas.
That plaintiff had a plot namely Plot No.RS-4 on licence from Paradeep
Port Trust Authority for the purpose of its export business in iron ore.
That defendant no.1 and the plaintiff had entered into a Cooperation
Agreement on 24th December, 2007 but according to the plaintiff, the
same was not given effect to. That defendant no.1, through its Managing
Director Sunil Banna, tried to blackmail the plaintiff in various ways and
threatened him that he would intimate Paradeep Port Trust Authority
that the plaintiff had sub-let his licence in respect of Plot No.RS-4 to
defendant no.1 by violating the terms and conditions of licence.
According to the plaintiff, defendant no.1 in January 2009 stated
that plaintiff had illegally exported stock of 4000 MT of iron ore and
when the plaintiff through its Managing Director refuted the claim of
defendant no.1, a complaint was lodged at Paradeep Police Station on
8th January, 2009 and thereafter, on 10th January, 2009 alleging theft of
4000 MT iron ore fines belonging to defendant no.1.
According to the plaintiff, defendant no.1 lodged another false
complaint with the Paradeep Port Trust Authority to the effect that the
plaintiff was violating the terms and conditions of his licence in respect
of Plot No.RS-4 which had been sub-let to defendant no.1 and a copy of
the Cooperation Agreement dated 24th December, 2007 which was in
fact not acted upon was also filed along with complaint. Acting on the
said complaint, Paradeep Port Trust Authority had issued show cause
notice to the plaintiff on 20th January, 2009 and thereafter, cancelled the
licence of the plaintiff vis-à-vis Plot No.RS-4 by letter dated 18th February,
2009.
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5. Being apprehensive of the cancellation of the licence to Plot
No.RS-4, the Managing Director of the plaintiff Company agreed to the
proposal of the representative of defendant no.1 viz., Rabindra Banthia,
that in case plaintiff agreed to supply 3876 MT of iron ore fines to
defendant no.1, they would manage to withdraw their complaint and
would save the licence of the plot from cancellation.
6. That in January, 2009, plaintiff had outstanding dues of Rs.21.50
lakhs against defendant no.1 and at the behest of defendant no.2, a
Memorandum of Understanding (for short, 'MoU') was arrived at on
17th January, 2009 on certain terms and conditions that defendant no.1
would take steps to protect the licence of the plot given to the plaintiff
from cancellation in seven days' time and it was further agreed that
defendant no.1 would give a cheque of Rs.21.50 lakhs to the plaintiff
towards the outstanding dues to the plaintiff. Similarly, the plaintiff would
issue a cheque for Rs.56 lakhs in favour of defendant no.1 and the same
would remain in the custody of Sri Dilip Das, Advocate - defendant no.2
as security, which is equivalent to the cost of 3876 MT of iron ore. The
plaintiff would supply 3786 MT of iron ore fines to defendant no.1 if
defendant no.1 succeeded in protecting the licence of the said plot of the
plaintiff from being cancelled. Accordingly, plaintiff furnished a cheque
for Rs.56 lakhs in favour of defendant no.1 and handed over the same to
Sri Dilip Das, Advocate - defendant no.2 in the suit, as security. Defendant
no.2 wrote a letter to the Managing Director of the plaintiff on 20th
January, 2009 intimating therein that both cheques would be in his custody
and the cheque drawn by the plaintiff amounting to Rs.56 lakhs would
not be handed over to defendant no.1 unless defendant no.1 fulfilled its
undertaking as per the MoU dated 17th January, 2009. Further, the cheque
would be handed over to defendant no.1 only when the plot licence of
the plaintiff was saved from cancellation by defendant no.1 and if the
plaintiff failed to supply the iron ore to defendant no.1.
7. According to the plaintiff, defendant no.1 did not take any step
to save the licence of the plot of the plaintiff from cancellation and the
licence was cancelled on the complaint of defendant no.1 by letter dated
18th February, 2009 by the Paradeep Port Trust Authority. According to
the plaintiff, the question of handing over the cheque to defendant no.1
by defendant no.2 did not arise at all. Plaintiff had approached the High
Court in a writ petition vis-à-vis the cancellation of the licence in respect
of the plot and an order of stay on the cancellation was granted.
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
DEVELOPERS AND BUILDERS (P) LTD. [B. V. NAGARATHNA, J.]
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It is the further case of the plaintiff that when the matter stood
thus, defendants no.1 and 2 colluded with each other and defendant no.2
committed breach of trust and betrayed the plaintiff as the cheque for
Rs.56 lakhs was handed over by defendant no.2 to defendant no.1. On
receipt of the cheque, defendant no.1 pressurized the plaintiff to either
supply 3876 MT iron ore fines or they would present the cheque for
encashment. Since the plaintiff did not agree to supply iron ore, defendant
no.1 presented the cheque for encashment but the same was dishonoured
as the plaintiff had issued stop payment instructions to the Bank on coming
to know about the collusion between defendant no.1 and defendant no.2.
Thereafter, defendant no.1 issued notice under Section 138 of the
Negotiable Instruments Act, 1881 (for short, the 'N.I. Act') through
their advocate on 10th June, 2009 to the plaintiff through its Managing
Director, to which a reply was sent on 23rd June, 2009. It was, inter
alia, stated in the reply that the defendants were trying to harass the
plaintiff and having no other alternative, the plaintiff filed the suit seeking
a declaration that the cheque which was dishonoured was handed over
by the plaintiff to defendant no.2 as a security and that defendant no.1
had not acquired any right over the said cheque as the plaintiff had no
liability to discharge vis-à-vis defendant no.1. It was averred in the plaint
that defendant no.1 was liable to pay a sum of Rs.21.50 lakhs to the
plaintiff towards its outstanding dues for which a cheque was issued on
17th January, 2009 which was also kept with defendant no.2 and in respect
of which the plaintiff reserved its right to initiate appropriate proceeding
for recovery of the said amount from defendant no.1. There were further
correspondences between the parties and ultimately the aforementioned
suit was filed by the plaintiff against the defendants.
8. On receipt of the summons sent by the trial court, defendant
no.1 appeared and filed an application under Order VII Rule 11 of CPC
seeking rejection of the plaint on the ground that the suit was not
maintainable being barred under the provisions of the Specific Relief
Act, 1963 (for short, the 'SR Act') and secondly, the suit was frivolous
and instituted as a subterfuge to defeat the legitimate claim of defendant
no.1 without having any right to sue. Objection was filed to the said
application by the plaintiff. The said application was considered by the
trial court and dismissed by refusing to reject the plaint.
9. Being aggrieved, defendant no.1 preferred C.R.P. No.5 of 2012
before the Court of District Judge, Khurda at Bhubaneswar under Section
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115 of the CPC. By order dated 20th March, 2013, the revisional court
allowed the said revision petition, set aside the order of the trial court
refusing to reject the plaint, and rejected the plaint. Being aggrieved, the
plaintiff filed W.P.(C) No.7059 of 2013 before the High Court of Orissa
at Cuttack which set aside the order of the revisional court and remanded
the matter to the said court for fresh consideration by holding that the
revisional court had exceeded its jurisdiction in rejecting the plaint. Being
dissatisfied with the order of the High Court defendant no.1 has preferred
this appeal.
10. We have heard Mrs. Rajdipa Behura, learned counsel for the
appellant and Sri Anirudh Sanganeria, learned counsel for the respondents
and perused the material on record.
11. Learned counsel for the appellant submitted that the High
Court was not right in setting aside the order passed by the revisional
court and remanding the matter to the said court for reconsideration of
the application filed by the appellant under Order VII Rule 11 of CPC on
the premise that revisional court had exceeded its jurisdiction. It was
contended that the application under Order VII Rule 11 of the CPC was
filed by the appellant/defendant no.1 in the suit filed by respondent no.1/
plaintiff seeking rejection of the plaint on the ground that the prayers
sought in the suit could not have been granted and the suit as such was
not maintainable and was barred under the provision of Section 41 of the
SR Act. Further there was no cause of action for the plaintiff to file the
suit against the defendants. The trial court did not appreciate the reasons
as to why an application was filed by defendant no.1 seeking rejection
of the plaint and dismissed the same. Being aggrieved the appellant/
defendant no.1 filed revision petition in C.R.P. No.5 of 2012 before the
District Court having regard to Section 115 of the CPC and particularly
proviso thereto as, if the application filed by defendant no.1 under Order
VII Rule 11 of CPC was to be allowed by the revisional court, then, the
proceedings before the trial court would conclude. The revisional court
rightly appreciated the case of appellant herein and rejected the plaint.
However, the High Court on a writ petition filed by the plaintiff held that
the revisional court while exercising its power of revision had exceeded
its jurisdiction by rejecting the plaint instead of remanding the matter to
the trial court to do so. While adverting to Section 115 of the CPC [vide
Orissa Act 26 of 1991, Section 2 (w.e.f. 7th November, 1991)], learned
counsel for the appellant contended that when the trial court failed to
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
DEVELOPERS AND BUILDERS (P) LTD. [B. V. NAGARATHNA, J.]
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exercise jurisdiction vested in it and refused to reject the plaint by allowing
the application filed under Order VII Rule 11 of the CPC by the appellant
herein, the revisional court rightly allowed the said revision and rejected
the plaint which finally disposed of the suit in terms of the second proviso
to the said Section. It was contended that the High Court has not taken
into consideration the Orissa amendment and has further misconstrued
the object and import of Section 115 of the CPC vis-à-vis the provisions
of the revisional court and has erroneously set aside the order of the
revisional court rejecting the plaint and remanding the matter to the
revisional court for fresh consideration.
12. Drawing our attention to the order of the High Court, it was
contended that the said order is contrary to Section 115 of CPC (Orissa
amendment) and hence the impugned order may be set aside and the
order of the revisional authority may be restored. It was contended by
learned counsel for the appellant that as against the order of the revisional
authority rejecting the plaint, respondent no.1 herein/plaintiff could not
have filed a writ petition.
13. Per contra, learned counsel for respondent no.1/plaintiff
supported the impugned order passed by the High Court and contended
that when a plaint is rejected by allowing an application filed under Order
VII Rule 11 of CPC, it results in a decree being passed within the meaning
of Section 2(2) of the CPC and hence the High Court directed the
revisional court to consider the matter afresh and if necessary, to remand
the matter to the trial court for considering the aspect regarding rejection
of plaint. Learned counsel for respondent no.1/plaintiff contended that
there is no merit in this appeal and the same may be dismissed.
14. Having heard learned counsel for the respective parties the
following points would arise for our consideration:
(a) Whether the High Court was justified in setting aside the order
passed by the revisional court in C.R.P. No.5 of 2012 and
thereby remanding the matter to the said court for
reconsideration on the premise that the revisional court had
exceeded its jurisdiction in rejecting the plaint?
(b) What order?
The reliefs sought by the plaintiff in the suit have been extracted
above.
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15. Having regard to the averments in the plaint summarised above
and the reliefs sought in the plaint, defendant no.1/appellant herein filed
an application under Order VII and Rule 11 of CPC seeking rejection of
the plaint. The rejection of the plaint was sought for three reasons :-
firstly, the suit was barred under the provisions of the SR Act; secondly,
the suit was frivolous and was filed as a subterfuge to defeat the legitimate
claim of defendant no.1; and thirdly, the suit has been deliberately
undervalued. Objections were filed to the said application of defendant
no.1. By order dated 19th May, 2012, the trial court dismissed the said
application. Being aggrieved, defendant no.1 filed C.R.P. No.5 of 2012
under Section 115 (Orissa amendment).
16. The revisional court considered the revision and allowed the
application filed under Order VII Rule 11 of CPC which had the effect
of finally disposing of the suit. It is against the said order that the plaintiff
filed the writ petition before the High Court which was allowed and the
matter was remanded to the revisional court for fresh consideration with
an observation that the revisional court may, in turn, remand the matter
to the trial court if necessary. This was on the premise that the revisional
court had exceeded the jurisdiction vested in it by acting illegally in allowing
the application filed under Order VII Rule 11 of CPC.
17. In order to consider the correctness of the impugned order
passed by the High Court, it would be useful to refer to Section 115 of
the CPC as well as the Orissa Amendment. For immediate reference,
the same are extracted as under:
"115. Revision - (1) The High Court may call for the record
of any case which has been decided by any Court subordinate to
such High Court and in which no appeal lies thereto, and if such
subordinate Court appears-
(a) to have exercised a jurisdiction not vested in it by law, or
(b) to have failed to exercise a jurisdiction so vested, or
(c) to have acted in the exercise of its jurisdiction illegally or with
material irregularity, the High Court may make such order in the
case as it thinks fit:
Provided that the High Court shall not, under this Section, vary or
reverse any order made, or any order deciding an issue, in the
course of a suit or other proceeding, except where the order, if it
M/S FROST INTERNATIONAL LIMITED v. M/S MILAN
DEVELOPERS AND BUILDERS (P) LTD. [B. V. NAGARATHNA, J.]
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had been made in favour of the party applying for revision would
have finally disposed of the suit or other proceedings.
(2) The High Court shall not, under this Section, vary or reverse
any decree or order against which an appeal lies either to the
High Court or to any Court subordinate thereto.
(3) A revision shall not operate as a stay of suit or other proceeding
before the Court except where such suit or other proceeding is
stayed by the High Court.
Explanation.-In this Section, the expression "any case which
has been decided" includes any order made, or any order deciding
an issue in the course of a suit or other proceeding."
ORISSA AMENDMENT
"115.