Court’s Decision
The Bombay High Court dismissed an appeal challenging the lower appellate court’s order which had set aside the rejection of a plaint under Order VII Rule 11 CPC. The Court held that the pleadings disclosed sufficient cause of action and that issues of fraud, misrepresentation, and limitation required detailed examination at trial. The Court reiterated that “arguable submissions regarding maintainability cannot justify rejection of plaint under Order VII Rule 11”, and emphasized that a full-fledged trial was necessary before reaching conclusions.
Facts
The dispute arose between two brothers who jointly purchased a house property in Aurangabad in 2008. Subsequently, one brother requested the other to transfer the property in his name for the limited purpose of raising a bank loan. Accordingly, a registered conveyance deed dated 2 December 2014 was executed, later revealed to be a gift deed, followed by a correction deed on 5 August 2015.
In 2017, after intervention by relatives, a Memorandum of Understanding (MoU) was signed, wherein the appellant assured to re-transfer the property. However, it was discovered that no loan had ever been taken and that the transfer was allegedly secured by fraud and misrepresentation. In March 2019, the plaintiff’s ownership was formally denied, prompting him to file a suit for partition, possession, and injunction.
The defendant (appellant) argued that the registered gift deed vested absolute ownership in him, and since it was never challenged, the suit was not maintainable. He also raised a plea of limitation, asserting the suit was filed five years after execution of the gift deed.
The Trial Court accepted the plea of no cause of action and rejected the plaint under Order VII Rule 11(a) CPC. However, the plea of limitation was not accepted. On appeal, the lower appellate court reversed the rejection and remanded the matter for trial. The defendant then approached the High Court.
Issues
- Whether a suit for partition and possession was maintainable without seeking declaration to set aside the registered gift deed.
- Whether the plaint disclosed any cause of action or was liable to be rejected under Order VII Rule 11(a) CPC.
- Whether the suit was barred by limitation under Order VII Rule 11(d) CPC.
Petitioner’s Arguments (Appellant)
The appellant argued that once the gift deed of 2014 was executed and registered, ownership ceased to be joint. Without specifically challenging and seeking declaration against the gift deed, no partition suit could lie. It was contended that the plaintiff had attempted to create an illusory cause of action by clever drafting. The suit, filed in 2019, was also barred by limitation.
The appellant relied on Dahiben v. Arvindbhai (2020) to argue that plaints disclosing no cause of action must be nipped in the bud. Reliance was also placed on Rajendra Bajoria v. Hemant Jalan (2021) and Ramisetty Venkatanna v. Nasyam Jamal Saheb (2023) to contend that suits based on illusory or cleverly drafted pleadings should be rejected at the threshold.
Respondent’s Arguments
The respondent countered that the gift deed was a product of fraud and misrepresentation, executed under the belief that the transfer was temporary for securing a loan. He argued that the MoU of 2017 confirmed the nominal nature of the transfer, and when no loan was taken and re-transfer was avoided, the fraud became evident. The denial of ownership in 2019 provided the cause of action.
It was contended that the suit was within limitation as per Article 59 of the Limitation Act, because limitation begins when fraud is discovered, not from the date of the document. Reliance was placed on G. Nagraj v. B.P. Mruthunjayanna (2023), where the Supreme Court held that inconsistent averments do not automatically bar a suit if fraud and misrepresentation are pleaded.
The respondent also argued that a similar rejection plea in another suit between the parties had been dismissed by both the Trial Court and confirmed up to the Supreme Court, showing consistency in judicial reasoning.
Analysis of the Law
The Court examined the scope of Order VII Rule 11 CPC. It reiterated that rejection of plaint is permissible only where:
- No cause of action is disclosed, or
- The suit is barred by law on the face of the plaint.
The Court held that fraud and misrepresentation, if pleaded, create triable issues that cannot be brushed aside summarily. Further, limitation is a mixed question of law and fact, especially when the plaintiff claims lack of knowledge of the true nature of the transaction until later.
The Court considered Article 59 of the Limitation Act, noting that suits to cancel instruments on grounds of fraud commence from the date fraud becomes known, not from execution of the document.
Precedent Analysis
- Dahiben v. Arvindbhai (2020) – Explained scope of Order VII Rule 11; plaint can be rejected if it discloses no cause of action. Distinguished as fraud was pleaded here.
- Rajendra Bajoria v. Hemant Jalan (2021) – On rejection of sham suits; distinguished as present case disclosed arguable cause.
- K. Akbar Ali v. K. Umar Khan (2021) – Laid down principles on rejection of plaint; applied to show arguable pleadings must go to trial.
- Raghwendra Sharan Singh v. Ram Prasanna Singh (2020) – Held suit barred after 22 years of inaction; distinguished as plaintiff here acted within a reasonable time.
- Ramisetty Venkatanna v. Nasyam Jamal Saheb (2023) – Found suit vexatious due to illusory cause of action; distinguished as fraud and MoU corroborated plaintiff’s claim.
- G. Nagraj v. B.P. Mruthunjayanna (2023) – Held that inconsistent averments don’t negate cause of action; relied upon to uphold trial.
Court’s Reasoning
The Court reasoned that a meaningful reading of the plaint disclosed cause of action, as allegations of misrepresentation and fraud were specifically pleaded. The plaintiff claimed ignorance of the nature of the gift deed and supported his case with the 2017 MoU, showing assurances of re-transfer.
The Court emphasized that fraud vitiates all transactions and must be objectively scrutinized through trial. It rejected the appellant’s plea that the suit was barred by limitation, noting that the cause arose only in 2019 when ownership was denied.
It concluded that arguable issues regarding validity of the gift deed, limitation, and maintainability required full evidence. Hence, rejection under Order VII Rule 11 CPC was unjustified.
Conclusion
The Bombay High Court dismissed the appeal and affirmed the lower appellate court’s order remanding the matter for trial. It held that fraud and misrepresentation allegations must be tested on evidence and cannot be struck down at the preliminary stage. The Court clarified that whether the suit ultimately succeeds or fails is a matter for trial, not for rejection at inception.
Implications
- Strengthens the principle that courts must not reject plaints at the threshold if triable issues of fraud and misrepresentation are raised.
- Clarifies limitation law in fraud cases—limitation begins upon discovery of fraud, not at execution of the document.
- Reinforces pro-justice approach that disputes must be decided on merits through evidence, not dismissed on technical grounds.
- Provides guidance on proper application of Order VII Rule 11 CPC in property and partition disputes.
