Plaint Liable To Be Rejected When Relief Sought Is To Restrain Defendant From Initiating Prosecution Against Plaintiff : Supreme Court

A Bench comprising Justices M.R. Shah and B.V Nagarathna allowed a plea assailing the order of the Orissa High Court, which had set aside the order of the revisional court rejecting the plaint, on the ground that it exceeded its jurisdiction in doing so, and remanded the matter back for fresh consideration.

Factual Background

The appellant had issued notice to the respondent no.1 under Section 138 of the Negotiable Instruments Act, 1881 alleging dishonour of certain cheques. The respondent no. 1 filed a suit seeking declaration that the cheques which were dishonoured were handed over as security and the appellant had no right over the cheques as they had not held their end of the bargain. The appellant filed an application under Order VII Rule 11 of CPC seeking rejection of the plaint, which was refused. The revisional court allowed the Order VII Rule 11 application and rejected the plaint. Writ petition was filed by the respondent no. 1 before the Orissa High Court, which had set aside the order of the revisional court finding that it had exceeded its jurisdiction, and remanded the matter for fresh consideration.

Contentions raised by the appellant

Advocate, Mrs. Rajdipa Behura appearing on behalf of the appellant submitted that the plaint lacked cause of action and was barred under Section 41 of the Specific Relief Act. It contended that the trial court did not appreciate the grounds raised in the application seeking rejection of the plaint. She argued that the High Court had misconstrued the Orissa amendment to Section 115 of the CPC. The maintainability of the Writ Petition filed challenging the revisional court's order was also questioned.

Contentions raised by the respondents

Advocate, Mr. Anirudh Sanganeria appearing on behalf of the respondent no. 1 argued that when the plaint is rejected by allowing an Order VII Rule 11 application, it results in a decree being passed under Section 2(2) of the CPC and therefore the High Court was right in finding that the revisional court had exceeded its jurisdiction.

Analysis by the Supreme Court

On perusal of Section 115 of the CPC (Orissa Amendment) the Court noted that revisional court was conferred the power to reverse an order which would finally dispose of the suit or other proceedings. Therefore, it held that by allowing the application seeking rejection of plaint, the revisional court had not exceeded its jurisdiction. Referring to a catena of judgments, the Court was of the view that the plaint, in the present case, disclosed a cause of action, therefore it could not have been rejected on the said ground. The objection that the plaint was barred under Section 34 of the Specific Relief Act would not hold water as an omission on the part of the plaintiff to pray for further consequential relief is relevant only at the time of final adjudication of the suit and not at the preliminary stage. The other reason cited for seeking rejection of the plaint was that the respondent no. 1 had prayed for a declaration that the cheque issued in the name of the appellate was only a security and not liable to be encashed. The appellant argued that in essence, the respondent no.1 attempted to frustrate the possibility of the appellant initiating action under the NI Act. The Court referred to Section 118 (a) of the NI Act which reads as under -

118. Presumptions as to negotiable instruments - Until the contrary is proved, the following presumptions shall be made -

(a) of consideration —that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;

It noted that there is a presumption that the negotiable instrument was made for a consideration. The Court noted that in the present case it was evident that the cheque was dishonoured. It was accepted that the reliefs sought in the plaint indeed frustrated the right of the appellant to take steps under the NI Act for dishonour of cheque. Citing Cotton Corporation of India Limited v. United Industrial Bank Limited And Ors. (1983) 4 SCC 625, Ratna Commercial Enterprises Ltd v. Vasutech Ltd. AIR 2008 Del 99 and referring to Section 41(b) and (d) of the Specific Relief Act, the Court noted that a suit to restrain a person from instituting or prosecuting any proceeding is not maintainable.

The Court held -

"On a holistic reading of the plaint and on consideration of the reliefs sought by the plaintiff, we find that the said reliefs are barred by law inasmuch as no plaintiff can be permitted to seek relief in a suit which would frustrate the defendants from initiating a prosecution against plaintiff or seeking any other remedy available in law."

In the light of the same, the Court held that the declaratory reliefs sought in the plaint are barred by law. It set aside the order of the High Court and restored that of the revisional court rejecting the plaint.

Case Name: M/s. Frost International Limited v. M/s. Milan Developers And Builders (P) Limited And Anr.

Citation: 2022 LiveLaw (SC) 340

Case No. and Date: Criminal Appeal No. 1689 of 2022 | 1 April 2022

Corum: Justices M.R. Shah and B.V. Nagarathna

Headnotes

Section 118(a) of the Negotiable Instruments Act, 1881 - presumption as to negotiable instruments - every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration

Section 41(b) and (d) of Specific Relief Act, 1963 - injunction can be refused when sought to restrain any person from institution or prosecuting any proceedings in a court not subordinate to that from which the injunction is sought - injunction can be refused when sought to restrain any person from instituting or prosecuting any proceeding in a criminal matter

Order VII Rule 11 CPC - suit seeking declaration that the cheque issued in the name of the appellant was a security and the appellant had no right to encash it - in essence, the suit attempts to frustrate the possibility of the appellant initiating action under the provision of the NI Act for dishonour of cheque - such reliefs are barred by law - revisional court was just in allowing application under Order VII Rule 11 seeking rejection of plaint.