Case: I.T.C. Ltd, Calcutta Vs. The Debts Recovery App.Tribunal

3. The appellant was the 5th defendant in the suit filed by the 3rd respondent, namely, the Corporation Bank which has its zonal office at Bangalore. The suit was filed in the year 1985 by the said Bank against defendants 1 to 4 belonging to Tadikonda family residing at Guntur in Andhra Pradesh and against the appellant I.T.C. Limited. The relief claimed in the suit was for a sum of Rs. 52,59,639.66. The defendants 1 to 4 above mentioned are respondents 4 to 7 in this appeal. The first respondent is the Debt Recovery Appellate Tribunal and the 2nd respondent is the Debt Recovery Tribunal. After the suit was filed in the Civil Court it was transferred to the Debt Recovery Tribunal on 9.10.1995. Before the said Tribunal the appellant filed an application under Order 7 Rule 11 of the Civil Procedure Code for rejecting the plaint so far as the appellant was concerned on the ground that no valid cause of action had been shown against the appellant. The said application was rejected by the Tribunal on 12.12.1996 holding as followsfiled. Heard. Cause of action is a mixed question of fact and law. Hence I.A. 3 cannot be entertained at this stage. Post for evidence".4. Against the said order, the appellant filed an appeal before the Appellate Tribunal which was dismissed by the said Tribunal on 3.3.1997 holding that in view of the averments in the plaint and particularly para 12, the question about the liability of the appellant was to be determined at the trial on merits. It stated that the appellant had admittedly received Rs. 32 lacs under the Bills of Exchange or Letters of Credit and the question whether the appellant was justified in receiving the said amount or not and whetherwas entitled to recover the said amount from the appellantwere to be determined only at the trial. Accordingly the appeal was dismissed in limine.5. The appellant filed Writ Petition 8564/1997 in the Karnataka High Court which was again dismissed by an order dated 9.4.1997 holding that the question has to be decided at the trial and that it could not be stated that there was no cause of action at all disclosed in the plaint against the appellant. Against the said judgment the appellant filed Writ Appeal 2876/1997 which was dismissed on 14.8.1997 holding that at the stage of an application under Order 7 Rule 11 C.P.C. in order to find out whether the plaint did not disclose a cause of action, the Court should not look into anything else except the plaint. Further, after the issues were framed and the case was posted for evidence, it was not desirable to consider the application filed under Order 7 Rule 11, C.P.C.

Court's reasoning:
It will be noticed that Sztejn was a case where fraudulent documents were presented which simulated shipping of goods which were not only not shipped but on the other hand the seller shipped some rubbish deliberately. Therefore the allegations in the complaint filed by the buyers in that case were based upon the above factsi.e. presentation of fraudulent documents where goods were deliberately not shipped and an attempt was made to pass off rubbish as the goods ordered foramounted to fraud.25. As stated above,of goods by the seller could be due to a variety of tenable or untenable reasons, the seller may be in breach of the contract but that by itself does not permit a plaintiff to use the word fraud in the plaint and get over any objections that may be raised by way of filing an application under Order 7 Rule 11 CPC. As pointed out by Krishna Iyer, J. in T. Arivandandams case, the ritual of repeating a word or creation of an illusion in the plaint can certainly be unravelled and exposed by the Court while dealing with an application under Order 7 Rule 11 (a). Inasmuch as the mere allegation of drawal of monies without movement of goods does not amount to a cause of action based on fraud, the Bank cannot take shelter under the words fraud or misrepresentation used in the plaint.