Hardesh Ores Pvt. Ltd. vs Hede And Company [Alongwith Civil ...

3. The representative facts giving rise to these appeals are taken from the pleadings in suit filed by Hardesh Ores Pvt. Ltd. The appellants herein, namely, Hardesh Ores Pvt. Ltd. in civil appeal arising out of SLP(C) No. 106/2007 (for short 'Hardesh') and Sociedade de Fomento Industrial Pvt. Ltd. in civil appeal arising out of SLP(C) No. 640/2007 (for short 'Fomento') respectively entered into two agreements with the respondent Hede & Co. (for short 'Hede') on 23.10.1996. The agreement with Hardesh was for extraction of ore from the mine in question whereas the agreement with Fomento was for purchase of minerals extracted from the mine. Both the agreements contained similar terms and conditions. As per Clause 2.1 of the Agreement, the agreement though executed on 23.10.1996 was to come into force from 1.1.1997 and was to remain in force for a period of 5 years from such date. Clause 2.2 of the agreement provided that on the expiry of every 5 years the agreement shall stand renewed for further periods of like duration at the sole option of Hardesh on the same terms and conditions as contained in the original agreement. Hardesh was entitled to exercise its option during the entire period of lease in respect of the said mine and renewals thereafter, and until such time as remaining deposits of ore in the said mine could be economically exploited. Clause 2.3 gave the right to Hardesh to terminate the agreement by giving two calendar months prior notice in writing to the respondent-Hede of its intention to do so. Clause 2.5 of the agreement provided inter alia that in case Hardesh was forced to abandon work in the said mine/land on account of any lawful or legal claim made and/or objection raised by any person including the holder of surface right or on account of any injunction being passed by any Court of Law or on account of any fault of the respondent, the agreement shall not stand terminated but the operation thereof shall stand suspended for such time. In the event such a condition/situation continued to exist for a period exceeding six calendar months, Hardesh shall be entitled to terminate the agreement after giving 30 days notice in writing. Clause 9.2 of the agreement ensured that the respondent shall not in any manner interfere or obstruct Hardesh from carrying on the work of extraction, raising, loading or delivering the ore and its other functions under and in accordance with the agreement.

4. Two suits for injunction were filed by the appellants herein on 4.10.2005. The reliefs claimed in the suit of Hardesh were as follows:

5. In the plaint reference was made to the agreements that were entered into between the parties. It was also stated that there were privately owned lands comprised within the said mine and no consent had been obtained from the surface right owners by the respondent and the same was to be obtained subsequently, which necessitated the incorporation of Clause 2.5 in the agreement. The agreement was to commence from January 01, 1997 but on 12.12.1996 in view of an order of the Supreme Court dated 12.12.1996 prohibiting mining operations in the authorised area, mining operations could not be commenced. In view of the situation that arose on account of the order of Supreme Court which necessitated permission being sought from the Central Government for commencing mining operations, as also in view of the fact that the consent of the surface right owners had not been obtained, on the proposal of the respondent, the appellants exercising their right under Clause 15 of the agreement authorised the respondent to carry on extraction operation in the pits already opened. It is the case of the appellant that appellant had taken possession of the mine immediately after coming into effect of the contract on 1.1.1997. The respondent extracted the ore from the mine already opened pursuant to the authorisation given as per Clause 15 of the Agreement. This arrangement was of a temporary nature. Some obstruction was raised by the surface right owners in January, 1998 which was reported to the respondent. The respondent promised to sort out the problem with the surface right owners by getting their consent in writing. It is admitted in the plaint that although the said agreements were to come into force on 1.1.1997 no mining operations could be commenced in view of the order of the Supreme court dated 12.12.1996.

6. The case of the appellant in the plaint is that the extraction agreement was initially for a period of five years from 1.1.1997 with a right of renewal at the option of the appellant on the same terms and conditions. In view of the original period of 5 years coming to an end on 31.12.2001, in terms of Clause 2.2 of the agreement appellant Hardesh exercised its option to renew the said agreement for further period of 5 years. This was conveyed to the respondent vide letter date 4.12.2001 which was received by it on 7.12.2001. According to the appellant with the exercise of option by appellant Hardesh the agreement stood renewed upto 31.12.2006. However, the appellant Hardesh received a letter dated 29.12.2001 from the respondent alleging that the plaintiff-appellant was not entitled to exercise the option for renewal. The letter dated 4.12.2001 annexed to the plaint has been marked as Exh. 41 and its reply dated 31.12.2001 has been marked as Exh. 43.

8. In this background the appellant issued a notice dated 27.4.2005 to the respondent requesting them to furnish to the appellant within 15 days of the receipt of the notice the documents evidencing the consent obtained from Salgaonkar sisters. The notice also stated as follows:

9. The said letter was annexed as Exh. 48. The respondent failed to furnish the documents, as requested, and, therefore the appellant issued notice dated 17.5.2005 withdrawing the authorization granted by the appellant under Clause 15 of the Extraction Agreement and called upon the respondent to resist from doing any extraction or selling ore to any party within 30 days of service of notice failing which the appellant asserted its right to enter into the mine to give effect to the agreement. The respondent replied by its letter dated 24.6.2005 refusing to comply with the demand contained in the notice. The appellant asserted that in view of Clauses 15 and 20 of the agreement the appellant had exclusive right to carry on extraction and not the respondent. It was also stated in the plaint that there were valid, subsisting and binding agreements between the plaintiffs (Hardesh and Fomento) and the defendant- respondent and that Hardesh and Fomento were at all material times and even today ready and willing to perform the terms of the agreement. It was asserted that the plaintiffs-appellants had performed their obligations under the agreements. The Extraction Agreement was specifically enforceable and the appellant had performed its obligations and were willing to fully carry out its obligations as per the said agreement. In the circumstances, it was submitted that the appellant was entitled to an order of preventive injunction and as also temporary injunction in the manner prayed for in the suit.

It is the case of the appellant-plaintiff that the cause of action arose to the plaintiff with the expiry of notice period dated 17.5.2005. On such pleas the prayers which have been extracted in earlier part of the judgment were made in the suit.

10. An application was filed on behalf of the respondent under Order VII Rule 11 of the Code of Civil Procedure submitting that there was absence of cause of action and also the plaint was barred by limitation. Subsequently, the plea of absence of cause of action was given up and only the plea of bar of limitation under the Limitation Act was pressed. It was submitted that Article 54 of the Limitation Act applied and that a suit for specific performance of the contract should have been filed within 3 years from the date the appellant-plaintiff had notice that the renewal of the agreement was refused by the respondent. In the instant case the refusal was communicated on 29.12.2001 and, therefore, the suit should have been filed within 3 years thereafter.

11. The Trial Court by its order of 23.2.2006 allowed the application and dismissed the suit as barred by limitation. It observed that from a mere perusal of the pleadings contained in paragraphs 47 to 51 of the plaint it appeared that the appellant had asserted that the agreements were specifically enforceable. A reading of the plaint established that the foundation of the appellant's suit was for specific performance of the renewal of the agreement dated 23.10.1996, the cause of action for which arose on 29.12.2001 when they received reply of the respondent denying that the agreement stood renewed. Since the suit was filed much after the expiry of 3 years from that date, it was hopelessly barred by limitation.

24. The next averment in the plaint which is relevant is paragraph 23 thereof wherein the appellant-plaintiff stated that since the original period of 5 years was to end on 31.12.2001 in terms of Clause 2.2 of the agreement, the appellant-plaintiff exercised its option to renew the said agreement for further period of 5 years which was conveyed to the respondent vide its letter dated 4.12.2001 and which was received by the respondent-defendant on 7.12.2001. In the same paragraph it is stated that the extraction agreement entered into between the plaintiff-appellant and the defendant-respondent was operative and stood renewed upto 31.12.2006. A copy of the letter dated 4.12.2001 has been annexed to the plaint and marked as Exh. 41. The plaintiff-appellant further goes on to say that it received the reply from the defendant-respondent dated 29.12.2001 alleging that the plaintiff-appellant was not entitled to exercise the option of renewal. The said letter has been annexed to the plaint and marked as Exh. 43. A mere perusal of the letter dated 4.12.2001 addressed by the appellant to the respondent is enought to satisfy the Court that in terms of Clause 2.2 of the agreement the appellant exercised its option to renew the captioned agreement for a further period of 5 years commencing from 1.1.2002 on the same terms and conditions as contained in the original agreement. The letter clearly states that after 31.12.2001 the captioned agreement will stand renewed for the period 1.1.2002 to 31.12.2006. To this the respondent-defendant replied by its letter dated 29.12.2001, the relevant part whereof reads as follows:

26. We shall now advert to some of the facts stated in the plaint itself. The case of the appellant-plaintiff is that since it was not possible to commence mining operation after taking possession of the mine, in exercise of its right under Clause 15 of the agreement, it permitted the respondent to carry on mining operations confined to the pits already opened up. Its case was that under its permission the respondents were carrying on limited mining operation. The appellants were awaiting permission of the Central Government under the Forest Conservation Act as also consent of the surface right holders permitting them to carry on mining operations. When the original term of the lease expired, they exercised their option to get the lease renewed for a further period of 5 years but the respondents refuted their claim and denied the fact that the lease stood renewed automatically. The option was exercised by the appellant and refuted by the respondent in December, 2001. Thereafter nothing much appears to have happened and during this period the respondent carried on mining operations. It was only on 15.5.2005 that the appellant Hardesh wrote to the respondent stating that they had been permitted to extract ore from the broken pits in the forest area under Clause 15 of the Extraction Agreement. The appellant also permitted the respondent to sell the ore to others like Dempo or Chowgules since Fomento was not interested in purchasing the low grade ore. The communication also referred to the option exercised by the appellant for renewal for a period of 5 years from 1.1.2002 to which the respondent replied saying that they were not entitled to exercise any option. The letter then goes on to say that the appellants were led to believe that the respondent had obtained the consent from the surface right owners of the privately owned land within the mining area about which no information had been given to the appellants. Therefore, by letter dated 27.4.2005 the respondent were called upon to furnish the documents evidencing consent given by the surface right owners. It was further stated that if no documents, as aforesaid, were furnished within a period of 15 days from the date of receipt of this notice or if no reply was received, the appellants shall presume that such consent had been obtained since the respondents were doing the extraction in the area of the captioned mining lease. Since no documents were furnished pursuant to notice dated 27.4.2005, the appellants assumed that such consent had been obtained. It, therefore, withdrew the permission given to the respondents under Clause 15 of the Extraction Agreement so that the appellants could make preparation to start the extraction work. The last paragraph of this letter reads as under:

28. The respondent strongly relied on the decision of this Court in Srinivasa Murthy's case (supra). That was a case where the plaintiffs alleged in the plaint that their father had incurred some debts and had therefore borrowed a sum of Rs. 2000 from the predecessor in title of the defendants. Only by way of security for the loan advanced, a registered sale deed had been executed on 5.5.1953 with a contemporaneous oral agreement that on return of the borrowed sum with interest payable thereon @ 6% per annum a registered reconveyance deed shall thereafter be executed in favour of the borrower. The case of the plaintiff was that despite the registered sale deed, the plaintiff continued to be in possession of the suit lands. The receipt was obtained on 25.3.1987 from the defendants and the original registered sale deed dated 5.5.1953 was returned to the first plaintiff with an oral promise by the defendants to execute the registered document in favour of the plaintiff/borrower. On reading of all the averments of the plaint, it appeared that the cause of action for obtaining a registered reconveyance deed from the defendants in favour of the plaintiff first arose on 25.3.1987 when the entire loan amount was alleged to have been paid and an oral promise was given by the defendants to reconvey the suit lands. In the mutation proceedings an order was passed in favour of the defendants and the said order was confirmed in appeal by order of the Assistant Commissioner dated 28.4.1994. The cause of action is said to have arisen when the appellate authority confirmed the order of the lower authority directing mutation of the names of the defendants and then again in the first week of July, 1995 when the defendants were alleged to have made an attempt to interfere with the plaintiff's possession and enjoyment of the suit lands. The suit was filed on 26.8.1996 in which the reliefs claimed were, (a) declaration that the plaintiffs are absolute owners of the suit lands and (b) permanent injunction restraining the defendants from wrongfully entering the scheduled property and from interfering with the peaceful possession and enjoyment of scheduled lands.

29. This Court after examining the pleadings observed that the foundation of the suit was that the registered sale deed dated 5.5.1953 was in fact only a loan transaction executed to secure the amount borrowed from the plaintiffs' predecessor. The amount borrowed was alleged to have been fully paid back on 25.3.1987 and in acknowledgment thereof a formal receipt was obtained. At the same time there was an alleged oral agreement by the defendants to reconvey the property to the plaintiffs by registered deed. This Court held that on the basis of the averments contained in the plaint relief of declaring the registered sale deed dated 5.5.1953 to be a loan transaction and second relief of specific performance of oral agreement of recoveyance of property by registered document ought to have been claimed in the suit. A suit merely for declaration that the plaintiffs are absolute owners of the suit lands could not have been claimed without seeking a declaration that the registered sale deed dated 5.5.1953 was a loan transaction and not a real sale. The cause of action for seeking such a declaration and for reconveyance deed according to the plaintiffs own averments arose on 25.3.1987 when the plaintiff is claimed to have obtained the entire loan amount and obtained a promise from the defendants to reconvey the property. The mutation proceedings did not furnish any independent or fresh cause of action to seek a declaration of the sale deed of 5.5.1953 to be merely a loan transaction. The foundation of the suit was clearly the registered sale deed of 1953 which is alleged to be a loan transaction and the alleged oral agreement of reconveyance of the property on return of borrowed amount. This Court went on to observe,

22. We shall therefore proceed on the basis of averments contained in the plaint and the documents annexed to it.

34. We are, therefore, satisfied that the Trial Court as well as the High Court were justified in holding that the plaint deserved to be rejected under Order VII Rule 11 CPC since the suit appeared from the statements in the plaint to be barred by the law of limitation. We, therefore, find no merit in these appeals and the same are accordingly dismissed. No order as to costs.