IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE KURIAN JOSEPH & THE HONOURABLE MR. JUSTICE K.T.SANKARAN FRIDAY, THE 19TH DECEMBER 2008 / 28TH AGRAHAYANA 1930 RFA.No. 166 of 2007() --------------------- I.A.NO.5243/2005 IN OS.452/2002 of I ADDL.SUB COURT, ERNAKULAM .................... APPELLANT/PLAINTIFF --------------------------------------- M/S.CANARA BANK, A BODY CORPORATE AND CONSTITUTED UNDER BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKING) ACT, 1970 HAVING ITS HEAD OFFICE AT BANGALORE & A BRANCH AT BANERJI ROAD, ERNAKULAM. BY ADV. SRI.P.GOPINATH RESPONDENT(S): DEFENDANTS ------------------------- 1. M/S.GARTS IND TEX (P) LTD., A PRIVATE LIMITED COMPANY, HAVING ITS REGISTERED OFFICE AT 43/1340 D, ABHILASH BUILDINGS, ST.BENEDICT ROAD, KOCHI-18, REPRESENTED BY ITS DIRECTOR, BABY SRAMBICKAL, SRAMBICKAL HOUSE, ELANKUNNAPPUZHA, PIN- 682 503. 2. DR.VARGHESE MUNDACKAL, S/O.JOSEPH, MUNDACKAL HOUSE, KOTHAMANGALAM. 3. M.C.SAJUMON, 43/1340, ABHILASH BUILDING, ST.BENEDICT ROAD, ERNAKULAM. 4. BABY SRAMBICKAL, SRAMBICKAL HOUSE, ELAMUNNAPUZHA, PIN- 682 502. ADV. DR.VARGHESE MUNDAKKAL(PARTY-IN-PERSON) FOR R2 THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 06/11/2008, THE COURT ON 19/12/2008 PASSED THE FOLLOWING: KURIAN JOSEPH & K.T.SANKARAN, JJ. ----------------------------------------- R.F.A.No.166 of 2007 ----------------------------------------- Dated this the 19th day of December, 2008 JUDGMENT Kurian Joseph,J. The inherent powers of the Court to pass such orders required in the ends of justice and for preventing abuse of the process of court have been saved under Section 151 of the Code of Civil Procedure. Certain specific provisions have also been provided in the Code to deal with such situations, in dealing with false and vexatious claims and abuse of the process of the court. In this appeal we are called upon to deal with some such powers specifically provided under the Code. 2. The appeal is filed against the Order dated 27-3-2006 in I.A.No.5243/2005 in O.S.No.452/2002 on the file of the I Additional Sub Court, Ernakulam. The plaintiff is the appellant. Parties are referred to as plaintiff and defendants. The plaintiff Bank instituted the suit for realisation of amounts advanced to the first defendant firm. Defendants 3 and 4 are the sureties. According to the plaintiff the second defendant had executed a power of attorney in favour of the 4th defendant and using the R.F.A.No.166/2007 -:2:- said power of attorney the 4th defendant mortgaged the property belonging to the second defendant towards security. According to the second defendant, the 4th defendant had forged the power of attorney and as soon as he came to know of the same, he filed a suit, O.S.No.1568/2003 before the Munsiff Court, Ernakulam, for a declaration that the power of attorney is null and void. (The said suit was later transferred to the Sub Court and renumbered as O.S.No.29/2005 to be tried along with O.S.No.452/2002). 3. On the date of execution of the power of attorney, ie. on 17-10-1997, the second defendant was not in India and the passport was produced before the court to establish his case. It was also brought to the notice of the court that the plaintiff had not produced the original of the power of attorney. Thus, according to the second defendant, since the whole case is rested on a forged power of attorney, no cause of action is made out and the suit is liable to be rejected under Order VII Rule 11 (a) of the Code of Civil Procedure. I.A.No.5243/2005 was filed for that purpose. The plaintiff Bank contended that the application is premature and it is intended only to circumvent the limitation pleaded by the Bank in O.S.No.29/2005. It was also R.F.A.No.166/2007 -:3:- contended that any order passed in I.A.No.5243/2005 would affect the trial and disposal of O.S.No.29 of 2005. 4. The petitioner-second defendant produced copy of his passport, Ext.A1, along with the original Ext.A2, the complaint filed by him against the Notary Public, before whom the power of attorney is said to have been executed, the final report in Crime No.406/2004 of Central Police Station, Ext.A6 affidavit filed by the Notary Public in the suit, Ext.A7 notice and Ext.A8 order passed by the Banking Ombudsman. The court below, on the basis of the evidence that the petitioner was not available in India on the date of the execution of the power of attorney, came to the conclusion that no cause of action is made against the petitioner-second defendant and against his property. Hence O.S.No.452/2002 was dismissed on the ground that the plaint does not make out any cause of action, under Order VII Rule 11 (a) of the Code of Civil Procedure. Aggrieved, the plaintiff has come up in appeal. 5. Heard Sri.P.Gopinatha Menon, learned counsel appearing for the appellant-plaintiff and Dr.Varghese Mundackal, the 2nd defendant, who is a lawyer himself. We have also perused the records. At the outset we make it clear that the R.F.A.No.166/2007 -:4:- court below patently erred in dismissing the suit under Order VII Rule 11(a) of the Code of Civil Procedure. The provision only enables the court to reject the plaint, in case no cause of action is made out and not to dismiss it. The rejection of the plaint is only on account of institutional defects; it is not on merits. Such institutional defects are curable also. That is why the plaintiff in such circumstances is entitled also to file a fresh suit in respect of the same cause of action. On the other hand, on dismissal of a suit such a privilege is not available, since the dismissal has the effect of adjudication on merits. While a plaint can be rejected on institutional defects, a suit is dismissed on non-institutional grounds. Only a plaint duly instituted becomes a suit. Thus, a plaint can be rejected, whereas a suit cannot be rejected but can only be dismissed. If the plaint is rejected under Order VII Rule 11 (a), it is a deemed decree under Section 2(2) of the Code of Civil Procedure and the plaintiff is entitled to file an appeal. 6. The next question is whether on facts, the plaint in this case can be rejected. The following are the reliefs claimed in the suit:- a) Pass a decree for Rs.8,91,151/- in favour of plaintiff and against the defendant with future interest at R.F.A.No.166/2007 -:5:- 17.76% per annum with quarterly rest. b) Order hypothecated goods mentioned in plaint 'A' schedule be sold and the sale proceeds after deducting expenses for sale he paid to the plaintiff towards decreetal amount. c) Pass a decree for sale of plaint 'B' schedule immovable property and allow plaintiff to adjust the amount towards decreetal amount. d) Award cost of the plaintiff. e) To pass such other orders which plaintiff may pray from time to time which the court deems fit and proper to grant. It cannot be disputed that as far as the second defendant/petitioner in the I.A. is concerned, he is affected only by relief (c). Reliefs (a) and (b) are against the first defendant firm and defendants 3 and 4, the sureties, who have also executed personal guarantee with the Bank for the loan advanced to the firm. It is the contention of Dr.Varghese Mundackal, that relief (c) with regard to the sale of plaint B Schedule property cannot be granted at all since the mortgage is based on a forged document. Hence it is prayed that the suit itself may be rejected. We are afraid the contention cannot be appreciated. It is now settled law that a plaint cannot be partially rejected, as held by the Supreme Court in Roop Lal Sathi v. Nachhattar Singh Gill, (1982) 3 SCC 487 and in Popat and R.F.A.No.166/2007 -:6:- Kotecha Property v. SBI Staff Association (2005) 7 SCC 510. Order VII Rule 11(a) of the Code of Civil Procedure does not contemplate such partial rejection. Of course, Order VI Rule 16 permits the court to strike out the pleadings at any stage of the proceedings in case the court finds that such pleadings are unnecessary, scandalous, frivolous or vexatious or such pleadings may tend to prejudice, embarrass or delay the fair trial of the suit or which is otherwise an abuse of the process of the court. Order I Rule 10(2) empowers the court to strike out the name of any party who is improperly joined. Order I Rule 10(1) deals with permission at any stage of the suit for substituting the plaintiff or adding any plaintiff; whereas under Order I Rule 10(2) it is clearly stated that the power for striking out the parties can be exercised at any stage of the proceedings, in contra distinction to the expression 'suit' used in Rule 10(1). Under Order VI Rule 16 also while dealing with striking out pleadings the expression used is 'proceedings' and hence the power of the court to strike out pleadings in the given circumstances can be exercised at any stage of the proceedings. Thus it is fairly clear that the power to strike out a party and strike out a pleading subject to the satisfaction by the court of R.F.A.No.166/2007 -:7:- the conditions stipulated in Order I Rule 10(2) and Order VI Rule 16 can be exercised at any stage of the proceedings including the stage of institution of the plaint. Such powers have been conferred on the court since it is the duty of the court to prevent abuse of its process. That is not the power that is invoked or which can be invoked in the instant case. The second defendant has sought for rejection of the plaint under Order VII Rule 11(a) of the Code of Civil Procedure on the ground that no cause of action is made out against him, which is not permissible under law. 7. Rejection of a plaint is for institutional defects. Dismissal generally is on account of lack of merit. Falsity or otherwise of pleadings in the plaint is a matter of merit to be found in favour or against only on trial. Rejection is not on trial. The rejection can also be at post institutional stage on grounds like non-payment of balance court fee, under valuation, insufficient court fee etc. as held in Saleem Bhai v. State of Maharashtra (2003) 1 SCC 557. In a recent decision of the Supreme Court in C.Natarajan v. Ashim Bai, AIR 2008 SC 363 it was also held that:- “An application for rejection of the plaint can be R.F.A.No.166/2007 -:8:- filed if the allegations made in the plaint even if given face value and taken to be correct in their entirety appear to be barred by any law. The question as to whether a suit is barred by limitation or not would, therefore, depend upon the facts and circumstances of each case. For the said purpose, only the averments made in the plaint are relevant. At this stage, the court would not be entitled to consider the case of the defence.” Thus the settled position is that the power to reject the plaint can be exercised at any stage of the proceedings; however, for the exercise of such power the plaint alone is to be looked into and not the defence. 8. It is contented that the 2nd defendant has not executed the power of attorney and hence he may not be called upon to unnecessarily face the ordeal of a trial since there is no cause of action against him. Whether the plaint discloses cause of action is a question of fact which has to be gathered on the basis of averments made in the plaint in the entirety taking those averments to be correct. Likelihood of dismissal of suit cannot be a ground for rejection of plaint so long as plaint discloses some cause of action which requires a decision by the court. (See, Mayar (H.K.) Ltd. vs. Owners and Parties, Vessel M.V.Fortune Express, (2006) 3 SCC 100.) In Saleem Bhai v. State of Maharashtra (2003) 1 SCC 557 it was also laid down that, for the purposes of deciding an application under Order 7 R.F.A.No.166/2007 -:9:- Rule 11(a), the averments in the plaint are germane and that the pleas in the written statement would be wholly irrelevant at that stage. Inviting reference to T.Arivandandam v. T.V.Satyapal, (1977) 4 SCC 467, it is submitted that the court should exercise its power under Order VII Rule 11 CPC and the court should nip in the bud bogus litigations. The Supreme Court held: “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, it should exercise its power under Order VII, Rule 11 C.P.C. taking care to see that the ground mentioned therein is fulfilled. If clever 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 X, C.P.C. An activist judge is the answer to irresponsible law suits. The trial Courts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage. The Penal Code is also resourceful enough to meet such men (Ch.XI) and must be triggered against them. ... ... It may be a valuable contribution to the cause of justice if counsel screen wholly fraudulent and frivolous litigation refusing to be beguiled by dubious clients. And remembering that an advocate is an officer of justice he owes it to society not to collaborate in shady actions. The Bar Council of India, shall also activate this obligation.” Manifestly vexatious and meritless plaints should not be permitted to be instituted. Such litigations should be nipped in the bud. However, it has to be noted that the power that is R.F.A.No.166/2007 -:10:- exercised by the court after examining the parties under Order X is not rejection of the plaint under Order VII Rule 11(a). Such examination is a post institutional event and hence there can only be dismissal of the suit on the basis of such examination. Of course nothing prevents the court from conducting appropriate enquiries with the plaintiff, if required, in order to ascertain as to whether the averments disclose a cause of action. For the only reason that averments in the plaint disclose a weak case for the plaintiff, or that on the averments in the plaint, the plaintiff is not likely to succeed, a plaint cannot be rejected. Those are all matters for adjudication as held by the Supreme Court in Mohan Rawale v. Damodar Tatyaba, 1994 (2) SCC 392. It has also to be noted that merely because there is no merit in some of the allegations or because some of the allegations are bereft of material facts, the plaint cannot be rejected on the ground that it does not disclose a cause of action. The court at the stage of institution cannot dissect a pleading into several parts and consider whether each one of them discloses a cause of action. In D.Ramachandran v. R.V.Janakiraman, AIR 1999 SC 1128, the Supreme Court has dealt with this aspect. It has been held at paragraph 10 therein that:- R.F.A.No.166/2007 -:11:- “There is no merit in the contention that some of the allegations are bereft of material facts and as such do not disclose a cause of action. It is elementary that under O.VII, R.11(a) C.P.C., the Court cannot dissect the pleading into several parts and consider whether each one of them discloses a cause of action.” As we have already noted above, there are several reliefs in the plaint. For the only reason that there is no cause of action as against one of the defendants, the plaint cannot be rejected. On conclusion of the trial, necessarily a suit will have to be dismissed as against the defendant against whom no case was made out and established. In such situations the said defendant is also entitled to claim compensatory costs under Section 35A. We may also hasten to add that there are other avenues open to such a defendant, including the criminal court, as held by the Supreme Court in Arivandandam's case (supra). 9. Dr.Varghese Mundackal, the second defendant, faced with such a situation, submitted that the trial court may be directed to expedite the trial and dispose of the suits within a time limit. Having regard to the earnest submissions made by Dr.Varghese Mundackal we are also of the view that the cases should be disposed of expeditiously. 10. The order in I.A.No.5243/2005 in O.S.No.452/2002 on the file of the First Additional Sub Court, Ernakulam is hence set R.F.A.No.166/2007 -:12:- aside. The application is dismissed. There will be a direction to the First Additional Sub Court, Ernakulam to include O.S.No.452/2002 and O.S.No.29/2005 in the special list for February, 2009 and dispose of the suits by conducting trial on a day-to-day basis in the said month itself. The parties shall co- operate with the court to dispose of the cases as above. The appeal is allowed as above. (KURIAN JOSEPH, JUDGE) (K.T.SANKARAN, JUDGE) ahg. KURIAN JOSEPH & K.T.SANKARAN, JJ. --------------------------- R.F.A.No.166 of 2007 ---------------------------- JUDGMENT 19th December 2008