Delhi High Court Clarifies Scope of Amendments in Refiled Suits Under Order XXIII Rule 1(3) CPC: Sets Aside Trial Court Order Rejecting Refiled Suit and Permits Addition of Parties and Claims

Court’s Decision

The High Court of Delhi set aside the Trial Court’s order rejecting the appellant’s plaint under Order VII Rule 11 of the CPC. It ruled that adding parties and modifying claims in a refiled suit pursuant to liberty granted under Order XXIII Rule 1(3) CPC did not render the plaint legally barred. The matter was remanded to the Trial Court for further proceedings, including examining whether the suit qualifies as a commercial dispute.

Facts of the Case

1. Agreement and Termination:
   • In 2009, the appellant entered into an agreement with the respondent for the right to process uPVC window sections into structural elements.
   • The agreement stipulated jurisdictional clauses and detailed obligations on both parties.
   • In 2015, the appellant terminated the agreement, alleging breaches, and sought encashment of a letter of credit (LOC) worth ₹13,27,968, which was dishonored.
2. Initial Litigation (Pune Suit):
   • The appellant filed a recovery suit in Pune. However, due to jurisdictional defects, the appellant sought and was granted liberty to withdraw the suit under Order XXIII Rule 1(3) CPC, with permission to refile.
   • The Pune Court explicitly allowed the appellant to file a fresh suit.
3. Subsequent Litigation (Delhi Suit):
   • The appellant filed the new suit in Delhi, naming additional respondents and modifying the claims to include further interconnected transactions and liabilities.
   • The Delhi suit claimed ₹22,45,071 with interest and sought to recover the unpaid amounts under the LOC.

Issues

1. Whether the addition of new parties and amended claims in the refiled suit violated the permission granted under Order XXIII Rule 1(3) CPC.
2. Whether the plaint was barred under:
   • Order VII Rule 11 (grounds for rejection of plaint).
   • Order II Rule 2 (bar on splitting claims or causes of action).

Petitioner’s Arguments

1. Justification for Amendments:
   • The addition of new respondents was essential to reflect the interconnected nature of the parties, preventing multiplicity of suits.
   • The claims in the Delhi suit arose from the same transaction as the Pune suit, thus falling within the liberty granted by the Pune Court.
2. Nature of Defects in Pune Suit:
   • The original suit was withdrawn due to jurisdictional issues, a procedural defect recognized under Order XXIII Rule 1(3) CPC.
   • Amendments were made to avoid procedural gaps in the fresh suit.
3. Applicability of Precedents:
   • Relied on N.D. Tiwari v. Rohit Shekhar, where the term “subject matter” was interpreted broadly, allowing amendments as long as the core transaction remained the same.

Respondent’s Arguments

1. Violation of Order XXIII Rule 1(3):
   • Claimed that the appellant exceeded the scope of liberty granted by the Pune Court by adding new parties and claims in the Delhi suit.
   • The changes altered the nature of the original suit, which was impermissible under law.
2. Bar Under Order II Rule 2:
   • Argued that the appellant could not raise claims in the Delhi suit that were not included in the Pune suit.
   • Alleged that the claims were relinquished in the earlier suit.
3. Misuse of Legal Process:
   • Accused the appellant of using the liberty granted to rectify substantive defects, which is not allowed under Order XXIII Rule 1(3).

Analysis of the Law

1. Order XXIII Rule 1(3) CPC:
   • The Court clarified that amendments made pursuant to liberty granted under Order XXIII Rule 1(3) are permissible as long as they do not change the “subject matter” of the suit.
   • The term “subject matter” is broader than “cause of action.” Here, the claims in both suits arose from the same agreement and transactions, justifying the amendments.
2. Order II Rule 2 CPC:
   • The bar under this provision applies when a plaintiff omits to claim a relief in an earlier suit and subsequently attempts to claim it in a fresh suit without liberty.
   • Since the Pune Court granted explicit liberty to file afresh, the bar did not apply.
3. Order VII Rule 11 CPC:
   • Rejection of the plaint is permissible only if:
     • No cause of action is disclosed, or
     • The suit is barred by law.
   • The Trial Court’s rejection was held premature as the appellant’s averments, if proven, could result in relief.
4. Precedent Analysis:
   • N.D. Tiwari v. Rohit Shekhar: Permitted filing of a fresh suit under Order XXIII Rule 1(3) CPC, as the term “subject matter” allowed broader changes than the “cause of action.”
   • V. Rajendran v. Annasamy Pandian: Formal defects like jurisdictional issues justify withdrawal and refiling of suits with amendments.

Court’s Reasoning

1. The appellant demonstrated that all respondents were interconnected through the agreement, and the transactions involved multiple entities that necessitated their inclusion in the fresh suit.
2. The claims in the Delhi suit were identical in substance to the Pune suit but incorporated additional developments and respondents to provide a complete picture.
3. The Trial Court’s dismissal under Order VII Rule 11 was erroneous as it prematurely barred the appellant from proving its claims.

Conclusion

The High Court held that:

1. The appellant acted within the scope of the liberty granted under Order XXIII Rule 1(3) CPC.
2. The Delhi suit was not barred under Order II Rule 2 CPC as liberty to refile was explicitly granted by the Pune Court.
3. The addition of parties and claims did not alter the subject matter of the suit and was permissible.

The Trial Court’s order was set aside, and the case was remanded for further proceedings.

Implications

1. The judgment affirms that procedural defects prompting withdrawal and refiling of suits must be liberally interpreted to allow amendments.
2. It reinforces the principle that courts must prioritize substantive justice over technicalities, ensuring that legitimate claims are not dismissed prematurely.

Also Read – Delhi High Court Overturns Trial Court’s Dismissal of Suit Under Order VII Rule 11 CPC: “Amendments and Addition of Parties Permissible to Cure Formal Defects Under Order XXIII Rule 1(3)”