HIGH COURT OF ORISSA: CUTTACK CRP No.32 of 2010 From an order dated 31.08.2010 passed by the 1st Additional Civil Judge (Senior Division), Bhubaneswar in Civil Suit (M.S.) No.65/113 of 2010/2009. -------- Gopal Chandra Kar, S/o. Late Biswanath Kar, Plot No.304/1649, Bhoi Nagar, P.S. Saheed Nagar, Bhubaneswar and others … Petitioners -Versus- The Rotary Foundation of Rotary International, and another. … Opp. Parties For Petitioners : M/s. R.C. Sarangi, M.K. Pattnaik, S.S. Mohanty & A.K. Mohanty For Opp. Parties : Mr. B.H. Mohanty, M/s. R.R. Sahoo, S.M. Patnaik, D. Mohanty & S.K. Munda ---------- P R E S E N T: THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA Date of Judgment:18.11.2011 B.N. Mahapatra, J. In this revision petition challenge has been made to the order dated 31.08.2010 (Annexure-1) passed by the 1st Additional Civil Judge (Senior Division), Bhubaneswar in Civil Suit (M.S.) No.65/113 of 2010/2009 rejecting petitioners’ application under Order 7, Rule 11, C.P.C. 2. The petitioners are the defendants in C.S. (M.S.) No.65/113 of 2010/2009 (M.S.) in which a petition for rejection of plaint had been filed by the petitioners by invoking the jurisdiction under Order 7, Rule 11 (a) and (d), CPC. The learned 1st Additional Civil Judge (Sr. Division) rejected the said application vide order dated 31.08.2010 on the ground that the plaint does disclose cause of action and the suit appears not to be barred by limitation. Being aggrieved by the said order, the petitioners have filed this civil revision petition. 3. Mr. R.C. Sarangi, learned counsel appearing for the petitioners submitted that the impugned order dated 31.08.2010 is an unreasoned, non- speaking and cryptic order which does not disclose the factual basis for filing the petition under Order 7, Rule 11 (a) and (d), C.P.C. The said order does not contain the various grounds of challenge advanced in the petition filed under Order 7, Rule 11 (a) and (d) and also the averments made in the plaint claiming that the plaint does disclose cause of action and the suit is not barred by limitation. Though the petitioners had relied upon various judicial pronouncements along with written statements, the same were not taken into consideration by the learned 1st Additional Civil Judge (Senior Division), Bhubaneswar. The learned Court below has not only exercised the jurisdiction with material irregularities but also disposed of the application of the petitioners by exercising the jurisdiction in most illegal, arbitrary and high handed manner. In absence of the essential factual discussion and reasons, the impugned order has become totally unsustainable on account of illegal exercise of jurisdiction and as such the same is liable to be set aside. In support of his contention, Mr. Sarangi, learned counsel relied upon the judgment of the Hon’ble Supreme Court in the case of Raj Kishore Jha vs. State of Bihar and others, (2003) 11 SCC 519 and The State of Punjab vs. Bhag Singh, (2004) 1 SCC 547. 2 4. According to Mr.Sarangi, the plaint does not disclose the cause of action. Mentioning casual date in the body of the plaint designating the same to be date of cause of action ipso facto does not satisfy the requirement of Order 7 Rule 11 (a) of the C.P.C. The existence of a right to sue on uncontroverted allegations in the plaint is the primary factor to decide whether the plaint discloses cause of action or not. The claim of the plaintiffs is that the amount has been handed over to the Rotary Cosmopolitan on different dates and the agreement annexed with the plaint itself shows that the agreement has never been executed in between the plaintiff and any designated official of the club. Such Cosmopolitan club is bound to be impleaded as a party through any representative or all the representatives of the said cosmopolitan club. The agreement does not show that the defendants of the suit have received the amount in their personal capacity or in official capacity, so that a right to sue can be accrued to the present plaintiffs to directly implead the present petitioners in the suit as defendants and maintain the suit for recovery of the amount. The uncontroverted allegations in the plaint, if read together, it reveals that there is no scope to pass a decree against the petitioners. While deciding application under Order 7 Rule 11(a) and (d), the Court would record the whole plaint. In support of his contentions, Mr. Sarangi, learned counsel has relied upon decisions of the Hon’ble Supreme Court in the cases of Sopan Sukhdeo Sable & Ors., vs. Asst. Charity Commissioner & Ors., 2004 (1) CJD (SC) 114; ITC Ltd., vs. The Debts Recovery Appellate Tribunal & Ors., AIR 1998 SC 634; Kamlesh Babu & Ors. vs. Lajpat Rai Sharma & Ors., (2008) 2 Civil Court Cases 650 (SC); Hari 3 Shankar Jain vs. Sonia Gandhi, (2001) 8 SCC 233; M/s. B. Saxena vs. Arunima Kumari and others, (2010) 1 OLR 503 and Hanumappa & Ors. vs. Chikkannaiah & Ors., 2009 (1) Civil Court Cases 702 (Karnataka) (DB). 5. Mr. Sarangi further contended that the suit has been filed for recovery of money. Therefore, the same will be governed by Article 24 of the Indian Limitation Act and the limitation starts running from the time when the money is received. In the instant case, the limitation starts from the date when money is received by the cosmopolitan club and as per the averments in the plaint, money is received on 10.09.2003 (Annexure-5). Therefore, limitation starts from 11.09.2003. Section 27 has got no application when the limitation has already started running. In support of his contention, Mr. Sarangi has relied upon the judgment of the Hon’ble Supreme Court in the case of State of Tripura vs. Province of East Bengal, AIR 1951 SC 23. 6. Mr. B.H. Mohanty, learned counsel appearing for the opposite parties submitted that in the instant case the spectrum of Order 7, Rule 11 in the legal ambit needs to be kept in mind. The relevant facts which need to be looked into are the averments in the plaint. The whole plaint has to be considered and the whole averments in the plaint have to be seen to find out whether Clause (d) of Order 7 Rule 11, C.P.C. was applicable. In support of his contention, he relied upon a judgment of the Hon’ble Supreme Court in the case of Popat and Kotecha Property v. State Bank of India Staff Association, (2005) 7 SCC 510. The cause of action is a bundle of facts which is required to be proved by 4 evidence. Order 6, Rule 2(1), C.P.C. states the basic and cardinal rule of pleading and declares that the pleading has to state material facts and not the evidence. It shall contain only a statement in concise form of the material facts, but not the evidence by which they are to be proved. Similarly, Order 7 Rule, 1 (e), C.P.C. requires only to give the facts constituting the cause of action and when it arises. Opposite party is a registered body of International charitable organization governed by its own constitution and byelaws which have instituted suit for recovery of Rs.9.6 lakhs advanced to the petitioners, who are ultimately responsible for misutilisation, misappropriation and accountable in their individual capacity being the Primary Project Contact and Additional Project Contact. They are responsible for monitoring the project and financial accounting of the fund. They have not observed the norms laid down in the agreement to which they have subscribed. 7. The Matching Grant Project Number 22127 (for short, “MG Project”) was a project to provide safe drinking water to about 2000 under privileged villagers in Cuttack Sadar in Orissa by providing 2 bore wells, 2 sets of pump sets and accessories, pipe connection and fittings for two sets, two Generator sets (5 KVA), 2 overhead tanks, electricity connection and civil construction for Generator House and platform. Gopal Chandra Kar, Defendant No.1 was the Primary Project Contact for the MG Project. Prafulla Kumar Swain, Defendant No.2 was the Additional Project Contact for the MG Project who submitted the final report for the MG Project falsely certifying that the MG funds were spent as per the MG Application, MG Agreement, Terms and Conditions. 5 Sadasiva Mohapatra, Defendant No.3 is an Ex-President of the Rotary Club of Bhubaneswar Cosmopolitan, the host club, who forwarded the application for MG funds to the plaintiff No.1 for the MG Project. Defendant No.4 is the current President of the Rotary Club of Bhubaneswar Cosmopolitan who assumed office in succession. The Defendants had undertaken to abide by the terms and conditions of the MG Agreement, but Defendant Nos. 1 to 3 with oblique motive being hand in glove have deliberately flouted the norms/conditions and have committed various financial irregularities and mismanaged the funds. On completion of the MG Project, a final report was submitted on 03.04.2004 to plaintiff No.1 by Defendant No.2 wherein it was falsely certified that grant funds worth Rs.8,33,000/- were spent as per the application approved by Plaintiff No.1. 8. Pursuant to the final report, Plaintiff No.1 conducted an independent audit of various matching grants, including MG No.22127, through internationally reputed auditors viz. M/s. Price Waterhouse Coopers. As per the audit report dated 25.03.2006 submitted by Waterhouse Coopers, there are irregularities/discrepancies and misuse of funds granted for the MG Project. 9. Mr. Mohanty, seriously contended that the plaintiff in paragraph 17 of the plaint clearly narrated that the cause of action for the suit arose on 25 March 2006 when the plaintiff for the first time derived knowledge from the audit report that defendant nos. 1 and 3 had fraudulently misutilized/misappropriated the funds and on such subsequent dates when the plaintiff (s) demanded refund of the money through its various notices dated 04.05.2006, 19.01.2007, 29.05.2007, 17.12.2007 and 16.09.2008. 6 10. In paragraphs 15 to 17 of the plaint, the plaintiff-opposite parties mentioned that the suit is being filed within the prescribed period of limitation. The cause of the action for the suit arose on 25th March, 2006 when the plaintiffs for the first time derived knowledge from the audit report that Defendant Nos. 1 to 3 had fraudulently misutilized/misappropriated the funds and on such subsequent dates when the plaintiff (s) demanded refund of the money through its various notices. The suit is within the period of limitation. The law of limitation is founded on public policy, its aim being to secure the quiet of the community, to suppress fraud, and perjury and to present oppression. The Hon’ble Supreme Court in the case of Ramesh B. Desai & others v. Bipin Vadilal Mehta and others, AIR 2006 SC 3672, held that the plea of limitation cannot be decided as an abstract principle of divorced from facts as in every case the starting point of limitation has to be ascertained which is entirely a question of fact. The plea of limitation is a mixed question of law and fact. The words barred by law occurring in the Order 7, Rule 11(d), C.P.C. have been considered in Balsaria Construction Pvt. Ltd. vs. Hanuman Seva Trust (2006) 5 SCC 658 wherein it is held that the suit could not be dismissed as barred by limitation without proper pleadings, framing of issue of limitation and taking of evidence. Question of limitation is a mixed question of law and fact and ex facie on reading of the plaint, suit cannot be held to be barred by limitation. It shall be open to the petitioner-defendant to raise any plea available to it under the law including the plea of limitation, maintainability of the suit etc. It was further argued that the Hon’ble Supreme Court in the case of Ramesh B. Desai (supra), held that the 7 averments made in the plaint alone have to be seen and they have to be assumed to be correct. It is not permissible to look into the pleas raised in the written statement or to any piece of evidence. The suit is not covered under Article 24 of the Limitation Act because the suit is based on the financial irregularities and false and fabricated quotation and bills which came to the knowledge of the plaintiff-opposite parties only on receipt of the audit report on 25 March 2006. The present suit is covered under Section 17(1)(b) read with article 113 of the Limitation Act. Relying upon the judgment of this Court in the case of Jyotsnarani Padhi and others vs. Smt. Susila Padhi and others, 2008 (II) OLR 243, it was submitted that where the plaint was admitted, the suit could not be dismissed under Order 7, Rule 11, C.P.C. Concluding his argument, Mr. Mohanty submitted that the civil revision petition is liable to be rejected. 11. On the rival contentions advanced by the parties, the following questions fall for consideration by this Court (i) Whether the impugned order passed under Annexure-1 by the learned Trial Court is a speaking/reasoned order and therefore, the same is sustainable in law? (ii) If the answer to question No.(i) is in affirmative then whether the plaint averment does disclose the cause of action and the suit is not barred by limitation? 12. To deal with question No.(i), it is necessary to know what is contemplated under Clauses (a) and (d) of Order 7 Rule 11. The relevant provisions of the said Rule are extracted below: 8 “Rule 11. Rejection of Plaint.— The plaint shall be rejected in the following cases:— (a) where it does not disclose a cause of action; xxx xxx xxx (d) where the suit appears from the statement in the plaint to be barred by any law;” xxx xxx xxx 13. Thus, under Order 7 Rule 11 (a) and (d), C.P.C., a plaint shall be rejected where it does not disclose a cause of action and where the suit appears from the statement in the plaint to be barred by any law. 14. The settled proposition of law is that to reject a plaint on the ground that it does not disclose a cause of action, the trial court shall look at the plaint and nothing else. Therefore, from the averments made in the plaint, it is to be found whether real cause of action has been set out in the plaint or something purely illusory statement has been stated with a view to get out of Order 7 Rule 11 of the C.P.C. 15. In the case of T. Arivandandam v. T.V. Satyapal & Anr. AIR 1977 SC 2421, the Hon’ble Supreme Court has held as follows: “The Trial Court must remember that if on a meaningful - no 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 of the C.P.C. taking care to see that the ground mentioned therein is fulfilled. And if clear drafting has created the illusion of a cause of action, the Court must nip it in the bud at the first hearing by examining the party searchingly under Order 10 of the C.P.C. An activist Judge is the answer to irresponsible law suits. The Trial Court would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the 9 earliest stage. The Indian Penal Code is also resourceful enough to meet such men (Ch. XI) and must be triggered against them.” 16. The Hon’ble Supreme Court in the case of ITC Ltd., (supra), has held as under: “16. The question is whether a real cause of action has been set out in the plaint or something purely illusory has been stated with a view to get out of Order 7 Rule 11 the C.P.C. Clever drafting creating illusions of cause of action are not permitted in law and a clear right to sue should be shown in the plaint. (See T. Arivandandam v. T.V. Satyapal & Another, [1977 (4) SCC 467] “. 17. In Hari Shankar Jain (supra), the Hon’ble Supreme Court has held that “23. Section 83(1)(a) of RPA, 1951 mandates that an election petition shall contain a concise statement of the material facts on which the petitioner relies. By a series of decisions of this Court, it is well-settled that the material facts required to be stated are those facts which can be considered as materials supporting the allegations made. In other words, they must be such facts as would afford a basis for the allegations made in the petition and would constitute the cause of action as understood in the Code of Civil Procedure, 1908. The expression ‘cause of action has been compendiously defined to mean every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. Omission of a single material fact leads to an incomplete cause of action and the statement of claim becomes bad. The function of the party is to present as full a picture of the cause of action with such further information in detail as to make opposite party understand the case he will have to meet. (See Samant N. Balakrishna etc. vs. George Fernandez and Ors. Etc. (1969) 3 SCR 603, Jitender Bahadur Singh vs. Krishna Bihari (1969) 2 SCC 433. Merely quoting the words of the Section like chanting of a mantra does not amount to stating material facts. Material facts would include positive statement of facts as also positive averments of a negative fact, if necessary. In V.S. 10 Achuthanandan vs. P.J. Francis & Anr., (1999) 3 SCC 737, this Court has held , on a conspectus of a series of decision of this Court, that material facts are such preliminary facts which must be proved at the trial by a party to establish existence of a cause of action. Failure to plead “material facts” is fatal to the election petition and no amendment of the pleadings is permissible to introduce such materials facts after the time-limit prescribed for filing the election petition.” 18. In Sopan Sukhdeo Sable & Ors., (supra), the Hon’ble Supreme Court has held that while deciding the application under Order 7 Rule 11 (a) and (d), the Court would read the whole plaint and 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. 19. The principle underlying clause (d) of Rule 11 of Order 7, C.P.C. is that it should appear from the statement made in the plaint, to be barred by any law. Clause (d) of Rule 11 of Order 7, applies in those cases only, where a statement made by the plaintiff in the plaint, without any doubt or dispute shows, the suit is barred by any any law. It is therefore, necessary to find out from the statement made in the plaint, whether the suit is barred by any law. 20. Law is well settled that rejection of the plaint on the ground of limitation is contemplated under Order 7 Rule 11 (d), C.P.C. Thus, law within the meaning of Order 7 Rule 11 (d) must include law of limitation (See Hardesh Ores (P) Ltd. vs. Hede and Company, (2007) 5 SCC 614). 21. The Hon’ble Supreme Court in the case of Kamlesh Babu & Ors. (supra), has held as under: 11 “21. It is no doubt true, as was pointed out by this Court in Balasaria Construction (P) Ltd. (supra) and also in Narne Rama Murthy case (supra), that if the plea of limitation is a mixed question of law and fact, the same cannot be raised at the appellate stage. We have no problem with the said proposition of law. What we are concerned with is whether the said proposition is applicable to the facts of this case. In this case the plea of limitation had been raised in the written statement and though no specific issue was framed in respect thereof, a decision was given thereupon by the learned Trial Court. Apart from Section 3(1) of the Limitation Act, even Order 7 Rule 11(d) of the Code of Civil Procedure casts a mandate upon the court to reject a plaint where the suit appears from the statement in the plaint to be barred by any law, in this case by the law of limitation. Further, as far back as in 1943, the Privy Council in Lachhmi Sewak Sahu v. Ram Rup Sahu & Ors., AIR 1944 Privy Council 24 held that a point of limitation is prima facie admissible even in the court of last resort, although it had not been taken in the lower courts.” 22. Perusal of the petition filed under Order 7, Rule 11, C.P.C. before the learned Trial Court reveals that the petitioners have raised two specific pleas, i.e., the plaint does not disclose the cause of action and the suit is barred by limitation. 23. The Trial Court vide its order dated 31.08.2010 rejected the petition filed under Order 7, Rule 11, C.P.C. with the following observation: “… Perused the case record, the documents filed by the plaintiffs and other materials available on record. The plain reading of the matching agreement discloses that the present case is covered under clause-6 of that agreement. The contention of the counsel for the defendants that the present case is covered under clause -10 that agreement appears to be a misconceived one. The plaint when read as a whole, prima facie show that there is cause of action to file the suit and that the suit is not barred by law of limitation. Hence, the petition filed by the defendants 12 stands rejected being devoid of any merit. Put up on 8.9.2010 for hearing.” 24. Thus, the learned Trial Court has rejected the petition filed under Order 7, Rule 11, C.P.C. on the ground that reading of a plaint as a whole, prima facie shows that there is cause of action to file the suit and that the suit is not barred by law of limitation. There is no discussion in the impugned order of the learned Trial Court with reference to the various averments made in the plaint itself to come to the above conclusion. There is also no discussion in the impugned order as to why the various grounds taken in the petition under Order 7 Rule 11 (a) and (d) are not sustainable, except saying that the present case is covered under clause (6) of the agreement and the plea taken by learned counsel for the defendants that the case is covered under clause 10 of the agreement is not correct. 25. Clauses (6) and (10) of the said agreement basing on which the learned trial Court rejected the petition under Order 7, Rule 11 (a) and (d) are quoted below: “(6) All Matching Grant funds provided by TRF for this project shall not be used for any other purposes other than those approved by TRF. TRF shall be entitled to receive reimbursement for any and all funds deposited with, held by, or otherwise contributed to District 1040 and the Rotary Club of Bhubaneswar Cosmopolitan that are spent for unapproved purposes as well as any funds used to benefit a Rotarian or Rotary entity. In addition, TRF reserves the right to review the project at any time and suspend any or all payments if in its sole discretion progress is not considered to be satisfactory. xxx xxx xxx 13 (10) This agreement will automatically terminate in the event of the failure of District 1040 and the Rotary Club of Bhubaneswar Cosmopolitan to comply with the Terms and Conditions of Matching Grant Award and Acceptance due to an act of God, strike, war, riot, civil unrest, hurricane, earthquake or other natural disasters, acts of public enemies, or any reason beyond the reasonable control of the parties. In such an event, District 1040 and the Rotary Club of Bhubaneswar