VBC 1 APP274.10-23.11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. APPEAL NO.274 OF 2010 IN NOTICE OF MOTION NO.1934 OF 2005 IN COUNTER CLAIM NO.2508 OF 2004 IN SUIT NO.1330 OF 2000 Kanayalal Madhavji Thakkar. ...Appellant. Vs. Shree Padmanabh Builders. ...Respondent. .... Mr.Hiralal Thakkar, Senior Advocate with Mr.K.D.Shah for the Appellant. Mr.T.N.Subramaniam, Senior Advocate with Mr.Snehal Shah, Ms.Dipti Ponda and Ms.Ankensha Thakkar i/b.Purnanand & Co. for the Respondent. ..... CORAM : DR.D.Y.CHANDRACHUD AND ANOOP V. MOHTA, JJ. November 23, 2010. ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) : This appeal arises out of an order of a Learned Single Judge dated 24 November 2006 by which a Motion for the rejection of a plaint under Order 7 Rule 11(d) of the Code of Civil Procedure, 1908 was made absolute. The motion proceeded on VBC 2 APP274.10-23.11 the foundation that the claim of the Plaintiff to the counter claim (the original Defendant to the Suit) was ex-facie barred by limitation. 2. On 27 March 2000, Shri Padmanabh Builders (the original Plaintiff) instituted a suit against Kanayalal Madhavji Thakkar (the original Defendant) inter alia seeking a declaration that the Defendant does not have any right, title or interest in respect of the additional F.S.I. that may be available in respect of the suit properties in excess of 2455 sq.ft. already consumed by the Defendant under an agreement dated 1 October 1989 and that the Defendant does not have any right to sell or enter into any agreement for sale of units beyond 2455 sq.ft. granted under the aforesaid agreement. Injunctive relief was sought against the Defendant from carrying out any further construction and from entering into agreements for sale. The case of the Plaintiff was that the agreement dated 1 October 1989 was terminated by a letter dated 7 February 2000. By a further letter dated 24 February 2000, the Defendant was informed that in view of the circumstance that the Defendant had unauthorisedly consumed F.S.I. in excess of VBC 3 APP274.10-23.11 what was authorised under the agreement, the Plaintiff was entitled to terminate the agreement and that in any event, both the agreement and the Power of Attorney granted to the Defendant had automatically come to an end upon the completion of the construction by consuming a quantified F.S.I. of 2455 sq.ft. 3. A counter claim was lodged by the Defendant to the suit on 9 August 2004. The Motion which has been made absolute by the Learned Single Judge is for the rejection of the counter claim on the ground that it is barred by limitation. Hence, for convenience of reference, it would be appropriate to refer to the parties to the counter claim as the Plaintiff to the counter claim and the Defendant to the counter claim. The relief that has been sought by the Plaintiff to the counter claim is (i)A declaration that the Plaintiff is entitled to all rights, title and interest emanating from the development agreement dated 1 October 1989 and that the Power of Attorney executed by the Defendant to the counter claim continued to be subsisting and binding; (ii) A decree for specific performance to transfer all rights, title and interest in the suit property; and (iii)A declaration that the Defendant to the VBC 4 APP274.10-23.11 counter claim has no right or interest in the suit property. In paragraph 17 of the counter claim, the Plaintiff stated that in 1998-99 when he was in the process of carrying out further development in the suit property, one of the newly inducted partners of the Defendant tried to cause obstruction, taking advantage of the fact that the conveyance and Power of Attorney were unsigned documents. The counter claim adverts to the suit instituted in this Court and to the circumstance that an application for interim relief has been made in the suit. The counter claim contained a statement that by a notice dated 23 June 2004, the Defendant in collusion with the Co-operative Society tried to terminate the Power of Attorney and wanted to further develop the property with the balance loadable FSI. According to the Plaintiff, it appears that Defendants are trying to take control of the property by giving a notice dated 23 June 2004. In paragraph 26 of the counter claim, it has been averred that the cause of action for filing a counter claim is not barred by the law of limitation and it was lodged along with the Written Statement and after issuing a legal notice dated 27 July 2004. VBC 5 APP274.10-23.11 4. The Defendant to the counter claim moved a Motion under Order 7 Rule 11(d) which was made absolute by a Learned Single Judge. The Learned Single Judge noted that the counter claim would according to Counsel for the Plaintiff thereto, be governed by Articles 54 and 58 of the Limitation Act. Under Article 54, a suit for specific performance of a contract has to be instituted within three years of the date fixed for the performance of the contract and if no such date is fixed, within three years from the date of notice that performance was refused. Under Article 58, a right to institute a suit for a declaration arises when the right to sue first accrues and the suit has to be instituted within a period of three years from the accrual of the cause of action. The Learned Single Judge noted that the notice dated 23 June 2004 which is annexed to the counter claim contained a categoric averment that the Defendants to the counter claim had on account of the illegal acts of the plaintiff terminated the Power of Attorney and called upon the Plaintiff to return the same. As a matter of fact, the agreement and the Power of Attorney were terminated by a letter dated 7 February 2000 which is annexed at Exhibit ‘J’ to the original Plaint. Consequently, if the cancellation of the Power of VBC 6 APP274.10-23.11 Attorney gives the cause of action for the counter claim, the Learned Single Judge was of the view that the cause of action would accrue in February 2000 and not in 2004 as claimed by the Plaintiff to the counter claim. On these grounds, the Learned Single Judge held that accepting the statements of the Plaintiff in the counter claim on their face, the termination of the Power of Attorney on 7 February 2000 furnished a cause of action to the Plaintiff to file a counter claim. Hence, the counter claim which was filed on 18 August 2004 was held to be barred by limitation. 5. On behalf of the Appellant, the judgment of the Learned Single Judge is called into question on the following submissions: -(i) The letter dated 7 February 2000 addressed by the Defendant to the counter claim to the Plaintiff has not been referred to in the counter claim. The letter, it is urged, has been annexed as Annexure-J to the original Plaint instituted before this Court by the Defendant to the counter claim. Hence, it was urged that the letter dated 7 February 2000, in so far as it does not form part of the counter claim, cannot be adverted to, having regard to the plain language of Order 7 Rule 11(d); VBC 7 APP274.10-23.11 -(ii) It was urged that a plea of limitation would not amount to a plea that the suit is barred under any law within the meaning of Order 7 Rue 11(d). 6. On the other hand, it was urged on behalf of the Respondent that: -(i) The suit which the Respondent has instituted in this Court on 27 March 2000 was itself a repudiation of the right of the Plaintiff to the counter claim to avail of any right over and above the FSI of 2455 sq.ft. that has already been consumed under the agreement dated 27 October 1989. In the original Plaint in the suit, it is the case of the Plaintiff (the Defendant to the counter claim) that the agreement dated 1 October 1989 had been terminated on 7 February 2000. The counter claim which has been instituted on 9 August 2004 would, therefore, clearly be beyond the period of three years of the accrual of the right to sue; -(ii) The Plaintiff to the counter claim by a process of clever drafting cannot avoid the plain consequence of the circumstance VBC 8 APP274.10-23.11 that the agreement was terminated on 7 February 2000 by failing to advert to that letter specifically in the counter claim. The Plaintiff to the counter claim is aware of the suit instituted by the Defendant thereto in this Court which sets out the case of the Defendant that the agreement has been terminated on 7 February 2000 and the institution of the suit would itself amount to a notice of refusal to perform; -(iii) The Supreme Court has held in several cases that the question as to whether a plaint is liable to be rejected under Order 7 Rule 11(d), is a decision which has to be arrived at on the facts of each case. When, on the face of the averments they stand in the counter claim , it is evident that the claim is barred by limitation, the Court was within its jurisdiction to exercise its power to reject the Plaint. -7. While dealing with the rival contentions, it is of some significance in the facts of this case that the counter claim was lodged by the Plaintiff on 9 August 2004 with clear notice and knowledge of the case which has been set out by the Defendant to VBC 9 APP274.10-23.11 the counter claim in the suit instituted before this Court. As a matter of fact, the counter claim contains in paragraph 1, a reference at the outset to the institution of the suit. The documents which are relied upon in the counter claim include all correspondence prior to the date of the filing of the counter claim. In the suit which was original instituted before this Court on 27 March 2000, the case of the original Plaintiff was that the agreement dated 1 October 1989 stood terminated on 7 February 2000. The letter dated 7 February 2000, which is annexed at Exhibit 'J' to the Plaint states in plain and unmistakable terms that the agreement as well as all Powers of Attorney stand cancelled. On 24 February 2000, the original Plaintiff addressed a further letter calling upon the original Defendant not to act on the basis of the Power of Attorney. The Defendant was intimated that the Plaintiff is entitled to terminate the agreement dated 1 October 1989 as well as Power of Attorney in view of the unauthorised consumption of FSI by the Defendant and that in any event the agreement as well as the Power of Attorney have automatically come to an end upon the completion of the construction by consuming FSI quantified at 2455 sq.ft. under the agreement. It VBC 10 APP274.10-23.11 was in this background that the relief that is sought in the Plaint is a declaration that the original Defendant does not have any right, title or interest in respect of FSI in excess of 2455 sq.ft. consumed under the agreement dated 1 October 1989 and that the Defendant would have no right to sell any units beyond the aforesaid extent under the agreement. Injunctive and other reliefs were also sought. The Defendant to the suit has, in the counter claim, in this background and with the knowledge of the termination and of the refusal to perform sought a decree for specific performance of the development agreement dated 1 October 1989 and a declaration that the agreement entered into between the parties continues to subsist. The Plaintiff to the suit has founded the suit on the termination of the original agreement dated 1 October 1989. Faced with the claim of the Plaintiff in the suit, the Defendant to the suit has filed his counter claim seeking a declaration that the agreement continues to subsist and for a decree for specific performance. The counter claim contains an averment in paragraph 17 that in 1998-99, an obstruction was caused by a newly inducted partner of the Defendant to the counter claim during the course of development. The Plaintiff to the counter VBC 11 APP274.10-23.11 claim relies upon the notice dated 23 June 2004. The notice dated 23 June 2004 refers to the prior termination of the agreement. As a matter of fact, the notice upon which reliance has been placed in the counter claim, states as follows: “You are further aware that on account of various illegal acts done by you pursuant to the said power of attorney, our clients have terminated the power of attorney and called upon you to return the same. It appears that in spite of the termination of the said power of attorney, you are representing before the Society and other people as constituted attorney of our clients.” (emphasis supplied). 8. The issue before the Court is as to whether the Plaintiff to the counter claim can by a clever act of draftsmanship escape from the consequence of the counter claim being barred by limitation by omitting to refer to the termination dated 27 February 2000. The answer to this is in the negative. Order 7 Rule 11(d) of the Code of Civil Procedure, 1908 provides for the rejection of the Plaint inter alia whether the suit appears from the statements in the Plaint to be barred by any law. Now, it is a well settled position in law that it is the statements in the Plaint which have to VBC 12 APP274.10-23.11 be accepted on their face in arriving at a determination as to whether the suit is barred by any law. No amount of evidence can be let in for the purpose of making that determination. In this case, the Plaintiff to the counter claim has instituted the counter claim cognizant of the case of the Defendant who was the Plaintiff in the original suit and to the circumstance that it is the contention of the Defendant to the counter claim that the agreement of 1 October 1989 has been terminated on 7 February 2000. Both the letter dated 7 February 2000 as well as the very institution of the suit in this Court on 27 March 2000 constitute a notice of refusal to perform to the Defendant to the suit. A suit for a declaration had to be filed within a period of three years of the accrual of a right to sue while a suit for specific performance had to be filed within a period of three years of a notice of the refusal to perform. The suit has been filed beyond a period of three years. Hence, on the basis of the counter claim as it stands, and without adding or detracting anything from it, it is ex-facie clear that the claim is barred by limitation. VBC 13 APP274.10-23.11 9. Counsel appearing on behalf of the Appellant, however, sought to urge that the issue as to whether limitation can be a ground for rejecting a plaint under Order 7 Rule 11(d) is not by settled. 10. In this context, it would be necessary to advert to some of the well settled principles underlying the interpretation of Order 7 Rule 11 of the Code. In Sopan Sukhdeo Sable vs. Assistant Charity Commissioner,1 the Supreme Court held that the real object of Order 7 Rule 11 is to keep out of Courts irresponsible law suits. For the purpose of deciding an application under clauses (a) and (d) of Order 7 Rule 11, the averments in the Plaint are germane. The plea taken by the Defendant in the Written Statement would be wholly irrelevant at that stage. In exercise of its jurisdiction under Order 7 Rule 11 what is required is a meaningful and not a formal reading of the Plaint and clever drafting which creates an illusion of a cause of action ought not to detract from the jurisdiction of the Court on an application for rejection. In Popat and Kotecha Property vs. State Bank of 1 AIR 2004 SC 1801 VBC 14 APP274.10-23.11 India Staff Association,2 the earlier judgments on the subject were revisited and the Supreme Court held that under Order 7 Rule 11 an independent remedy is made available to the Defendant to challenge the maintainability of the suit irrespective of his right to contest it on merits. The use of the word “shall” casts a duty on the Court to perform its obligations in rejecting the plaint when it is hit by any of the infirmities provided in the four clauses of Rule 11. For that purpose, the statement of claim without addition or subtraction must show that it is barred by any law to attract the application of Order 7 Rule 11. A Bench of two Learned Judges of the Supreme Court in Balasaria Construction (P) Ltd. vs. Hanuman Seva Trust,3 referred the question as to whether the rejection of Plaint on the bar of limitation is within the scope of Rule 11(d) to a larger Bench. When the case came up before a Bench of three Learned Judges, Counsel for both the parties stated that it was not the case of either side that as an absolute proposition under Order 7 Rule 11(d) that an application can never be based on the law of limitation. Both the sides stated before the Court that the impugned judgment was based on the facts of that 2 (2005) 7 SCC 510 3 (2006) 5 SCC 662 VBC 15 APP274.10-23.11 particular case. In view of the statement, the question which was referred to a larger Bench was rendered academic and the case was sent back to the Bench for disposal on merits. Thereafter in Balasaria Construction (P) Ltd. vs. Hanuman Seva Trust,4 the Bench of two Learned Judges of the Supreme Court held that “the present suit could not be dismissed as barred by limitation without proper pleadings, framing of an issue of limitation and taking of evidence” Holding that the question of limitation was a mixed question of law and fact, the Supreme Court held that ex-facie in that case on a reading of the plaint, it could not be held that the suit was barred by time. In Hardesh Ores (P) Ltd. vs. Hede and Company,5 a Bench of two Learned Judges of the Supreme Court accepted a plea that the Plaint was liable to be rejected on the ground that the claim was barred by limitation. This was in the context of a suit for specific performance where under Article 54 of the Limitation Act, the suit should have been filed within three years from the date on which the Plaintiff had notice that the renewal of the agreement was refused by the Defendant. 4 (2006) 5 SCC 658 5 (2007) 5 SCC 614 VBC 16 APP274.10-23.11 11. In Kamala Vs. K.T.Eswara Sa,6 the Supreme Court held that the broad principle which has been laid down by the Court is that the Court would not consider any evidence or enter into a disputed question. 12. In view of the law laid down by the Supreme Court, on an application under Order 7 Rule 11(d), the issue as to whether the claim of the Plaintiff to the counter claim is barred by limitation must be decided on the face of the counter claim as it stands. There is no question at this stage of leading or letting in any evidence. This is one of those cases where on the face of the counter claim it is evident that the Plaintiff to the counter claim had notice of the termination of the agreement on 7 February 2000 and of the refusal of the Defendant to the counter claim to perform the agreement both by the notice of termination and from the reliefs claimed in the suit against him, which was instituted on 27 March 2000. Hence, the counter claim which was lodged on 9 August 2004 was well beyond the period of limitation and was barred by limitation. 6 AIR 2008 SC 3174 VBC 17 APP274.10-23.11 13. For the reasons aforesaid, we do not find any infirmity in the judgment of the Learned Single Judge. The appeal shall stand dismissed. ( Dr.D.Y.Chandrachud, J.) ( Anoop V. Mohta, J.)