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Astral Cables Limited Vs. the National Small Industries Corporation Limited - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberO.S.A.NOS.306 to 308 of 2010
Judge
ActsCode of Civil Procedure (CPC) - Order 14 Rule 8 read with Order 7 Rule 11; Companies Act; Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972 - Section 3
AppellantAstral Cables Limited
RespondentThe National Small Industries Corporation Limited
Appellant AdvocateMr.Rajendra Prasad Dayal, Adv.
Respondent AdvocateMr.Ajoy Kumar Gnanam, Adv.
Cases ReferredSee Azhar Hussain v. Rajiv Gandhi
Excerpt:
.....is a clear right to sue. where the allegations made in the plaint prima facie discloses a cause of action, plaint cannot be rejected. while considering the application under order vii rule 11 c.p.c., the court is not required to take into consideration the defence set up by the defendant in his written statement. the question whether the plaint discloses any cause of action is to be decided by looking at the plaint averments and not the defence set up in the written statement. while considering the application under order vii rule 11 c.p.c., the strength or weakness of the plaintiff's case is not to be seen. since in the instant case appellant/ plaintiff has supplied cables to t.n.e.b., the bills are discounted by the 1st respondent based on the tripartite agreement. the plaint averments.....
Judgment:
COMMON

1. These appeals arise out of common order dated 18.2.2010, whereby the learned single Judge allowed the application - O.A.No.372 of 2005 filed by the 1st respondent under Order XIV Rule 8 of Original Side Rules read with Order 7 Rule 11 C.P.C. rejecting the plaint insofar as the 2nd defendant is concerned. Consequentially the learned single Judge dismissed the applications against defendant No.2 and vacated the interim injunction granted in so far as the 2nd defendant.

2. The facts are not in dispute. The appellant/plaintiff is a limited Company having its registered office at Delhi and supplying cables to the Electricity Boards. The 1st respondent National Small Industries Corporation (in short, "NSIC") is a Government Company incorporated under the Companies Act having its registered Office at NSIC Bhawan, near Okhla Industrial Estate, New Delhi. The 2nd respondent Tamil Nadu Electricity Board (in short, "TNEB") placed three purchase orders on the appellant/plaintiff Company - (i) P.O.No.49, dated 10.6.1999, (ii) P.O.No.125 dated 30.10.1999 and (iii) P.O.No.186 dated 27.3.2000. The subject matter in dispute in C.S.No.309 of 2005 is in respect of purchase order No.125/99-2000 on 30.10.1999 for supply of -120 Kms of 3.5 x 240 Sq.mm. Cables. For supply of cables of various measurements to TNEB, the plaintiff/appellant availed financial assistance under the Bill Discounting System of the 1st respondent NSIC. The appellant supplied 59.127 Kms of cables from time to time. The case of Appellant/Plaintiff is that plaintiff could not effect the supply of balance quantity due to several acts of commission and omission on the part of TNEB. According to appellant, first defendant TNEB owes a sum of Rs.86,15,524.34, for which it has failed and neglected to pay inspite of several demands.

3. Further case of appellant is that without taking any action on the bills discounted by it, the 2nd defendant initiated action against the Plaintiff under Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972 and the amount claimed by the 2nd Defendant was sought to be recovered as arrears of land revenue. Earlier, the appellant had filed Writ Petition in W.P.No.43495 of 2004 on the file of Allahabad High Court, but the writ petition was dismissed, which came to be challenged before the Supreme Court by way of Special Leave Petition in S.L.P.No.4003 of 2005 and the said S.L.P. was dismissed with certain observations giving liberty to the plaintiff to implead T.N.E.B. Alleging that the cause of action has arisen at Chennai against both the T.N.E.B., as well as the 1st respondent, the appellant has filed the suit for (i) recovery of a sum of Rs.86,15,524.34ps with interest at the rate of 15.75% per annum with monthly rests and (ii) for permanent injunction restraining the 2nd defendant from initiating action against the plaintiff or its Director under Section 3 of U.P.Public Moneys (Recovery of Dues) Act, 1972 in respect of the amount due by the 1st defendant.

4. The 2nd respondent TNEB is resisting the suit contending that the appellant received the payment for all the quantity of cable supplied ie., 55,855 Kms of cables under the purchase order P.O.125/99-2000 either directly from TNEB or through the 2nd defendant under Discounting facility. TNEB has further averred that out of 19.346 Km cables discounted by the 1st respondent, TNEB reimbursed to NSIC for 4.555 km cables and for the balance 14.791 Kms of cables, 1st defendant TNEB will have to give payment to NSIC - 2nd defendant. However, it is further averred that without referring to other purchase orders plaintiff has earlier filed C.S.No.452 of 2004 in respect of P.O.NO.49 dated 10.6.1999. This suit - C.S.No.309 of 2005 has been filed in respect of purchase order - P.O.No.125 dated 30.10.1999. The TNEB has averred that as per records available with TNEB, the total amount from the TNEB to the plaintiff in all the three purchase orders work out to rs.10,97,674/- after recovery of dues to the Board. But even the said amount cannot be paid as there is a sum of Rs.48,74,528.905 is payable to 2nd defendant towards discounting the bill caused at the instance of the appellant.

5. The 2nd respondent NSIC has filed the application A.No.3028 of 2005 in O.A.No.372 of 2005 under Order XIV Rule 8 of Original Side Rules read with Order VII Rule 11 C.P.C. to reject the plaint as against 2nd defendant. The respondent NSIC prayed for rejection of the plaint on the grounds that as per the agreement between the plaintiff and 1st respondent dated 19.7.2000, the terms of contract are governed by U.P.Public Moneys (Recovery of Dues) Act and Section 3(3) and 3(5) of the Act bars the Civil suit. The first respondent sought for rejection of the plaint alleging that the 1st respondent's Head Office is at New Delhi and the agreement dated 19.7.2000 was entered only in New Delhi and no part of cause of action has arisen at Chennai and the plaint is liable to be rejected against the 1st respondent/defendant, as no cause of action has arisen and the civil suit is barred under U.P.Public Moneys (Recovery of Dues) Act.

6. The learned single Judge held that no leave has been obtained to file suit against 2nd defendant and no part of cause of action has arisen in Chennai against 2nd Defendant. Learned single Judge pointing out that the agreement dated 19.7.2000 between the appellant and 1st respondent was entered into at Noida and as per the terms and conditions of the agreement, the dues under agreement shall be recovered as arrears of land revenue under the U.P.Public Moneys (Recovery of Dues) Act and sub-clause (3) of Section 3 of the said Act bars a civil suit. The learned single Judge further observed that the observation in S.L.P.No.4003 of 2005 is limited only to C.S.No.452 of 2004 and taking advantage of the said observation the plaintiff cannot maintain the present suit C.S.No.309 of 2005.

7. Learned counsel for the appellant raised strong objection to the impugned findings that no leave has been obtained for filing suit against 1st respondent NSIC. having its head office at New Delhi. The learned counsel would submit that by order dated 28.3.2005 leave was granted to sue the 1st respondent. Before considering the other submissions, even at the outset it is to be pointed out that the observation of the learned single Judge that no leave was obtained for filing suit against the 1st respondent is factually incorrect. In paragraphs No.9 and 11 of the order under appeal, the learned single Judge observed that no leave has been obtained. In our considered view, the said finding of the learned single Judge is factually incorrect. By perusal of the records, we find that on 28.3.2005, leave was granted to file the suit against the 2nd defendant.

8. The learned single Judge allowed the application and rejected the plaint as against the 1st respondent mainly on two grounds:- (i) no cause of action has arisen in Chennai and(ii) sub-clause (3) of Section 3 of U.P.Public Moneys (Recovery of Dues) Act bars a civil suit.

9. The learned counsel for the appellant has contended that the cause of action for the relief of injunction restraining the 1st respondent from initiating any action against the appellant or its Director for recovery of the bill discount amount arose in Chennai for the reason that the cables were supplied to T.N.E.B. in Chennai and that the T.N.E.B., being the party to the bills, had to pay the discounted bills amount to the 1st respondent. The learned counsel would further contend that as per order VII Rule 11 C.P.C., any petition under Order VII Rule 11 C.P.C. has to be decided on plaint averments and the documents thereon and while so the learned single Judge erred in considering the defence plea of the respondents set out by them.

10. Contending that Section 20 refers to Court within whose local limits the defendant inter alia carries on business, the learned counsel placed reliance upon New Moga Transport Co. v. United India Insurance Co. Ltd.,(2004) 4 SCC 677 = (2004) 3 CTC 154, wherein, the Supreme Court observing that the Courts within whose jurisdiction the Company has subordinate office shall have jurisdiction, has held as under:

"9. Normally, under clauses (a) to (c) of Section 20, the plaintiff has a choice of forum and cannot be compelled to go to the place of residence or business of the defendant and can file a suit at a place where the cause of action arises. If the defendant desires to be protected from being dragged into a litigation at some place merely because the cause of action arises there it can save itself from such a situation by an exclusion clause. The clear intendment of the Explanation, however, is that where the corporation has a subordinate office in the place where the cause of action arises it cannot be heard to say that it cannot be sued there because it does not carry on business at that place. Clauses (a) and (b) of Section 20 inter alia refer to a court within the local limits of whose jurisdiction the defendant inter alia carries on business. Clause (c) on the other hand refers to a court within the local limits of whose jurisdiction the cause of action wholly or in part arises.

10. On a plain reading of the Explanation to Section 20 CPC it is clear that the Explanation consists of two parts: (i) before the word or appearing between the words office in India and the words in respect of, and (ii) the other thereafter. The Explanation applies to a defendant which is a corporation, which term would include even a company. The first part of the Explanation applies only to such corporation which has its sole or principal office at a particular place. In that event, the court within whose jurisdiction the sole or principal office of the company is situate will also have jurisdiction inasmuch as even if the defendant may not actually be carrying on business at that place, it will be deemed to carry on business at that place because of the fiction created by the Explanation. The latter part of the Explanation takes care of a case where the defendant does not have a sole office but has a principal office at one place and has also a subordinate office at another place. The expression at such place appearing in the Explanation and the word or which is disjunctive clearly suggest that if the case falls within the latter part of the Explanation it is not the court within whose jurisdiction the principal office of the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone has the jurisdiction in respect of any cause of action arising at any place where it has also a subordinate office.

11. Section 20 C.P.C. is a general section covering all personal actions. Such personal actions shall be instituted in a Court within whose local jurisdiction (1) the defendant actually resides or carries on business & c., on (b) any of the defendants where there are more than one) actually resides (c) the cause of action or a part of it arises.

12. It is fairly well settled that cause of action consists of bundle of facts, which give cause to enforce the right. The expression "cause of action" means bundle of facts, which the plaintiff must prove in order to entitle him to have a judgment in his favour by the Court. Where any part of cause of action has accrued within the jurisdiction of Court would depend upon the facts and circumstances of given case. In so far as the 1st respondent NSIC the plaintiff has averred that part of cause of action has arisen in Chennai. While considering application under Order VII Rule 11 C.P.C. Court need not traverse beyond the plaint averments.

13. Learned counsel for the appellant contended that under Order VII Rule 11 C.P.C., want of territorial jurisdiction is no ground for the rejection of plaint. It was further contended that if it was found that the original side of Madras High Court has no jurisdiction to try the same, the Court ought to have returned the plaint under Order VII Rule 10 C.P.C. instead of rejecting the plaint under Order VII Rule 11 C.P.C. In support of his contention, the learned counsel placed reliance upon decision of the Supreme Court in the case of SONIC SURGICAL VS. NATIONAL INSURANCE COMPANY LIMITED, ((2010) 1 SCC 135). The learned single Judge referred to the said decision and considered the matter at length on the aspect of cause of action. The learned single Judge rejected the plaint mainly on the ground that no part of case of action has arisen in Chennai. In our considered view, whether the plaint discloses any cause of action or not, the Court has to find out from the allegations made in the plaint itself and not beyond it as to whether a frivolous litigation has been filed by the plaintiff. What is required to be disclosed by the plaintiff is a clear right to sue. Where the allegations made in the plaint prima facie discloses a cause of action, plaint cannot be rejected. While considering the application under Order VII Rule 11 C.P.C., the Court is not required to take into consideration the defence set up by the defendant in his written statement. The question whether the plaint discloses any cause of action is to be decided by looking at the plaint averments and not the defence set up in the written statement. While considering the application under Order VII Rule 11 C.P.C., the strength or weakness of the plaintiff's case is not to be seen. Since in the instant case appellant/ plaintiff has supplied cables to T.N.E.B., the bills are discounted by the 1st respondent based on the tripartite agreement. The plaint averments are to the effect that part of cause of action has arisen in Chennai. While so, the learned single Judge was not right in rejecting the plaint on the ground that no part of cause of action has arisen in Chennai. Even though we set aside the findings of the learned single Judge on the said ground of cause of action, we concur with the ultimate conclusion of the learned single judge rejecting the plaint as against 2nd defendant, however on different ground that the Civil Suit filed by the appellant/plaintiff is barred under U.P.Public Moneys (Recovery of Dues) Act.

14. Contending that for the purpose of invoking Order VII Rule 11(d) of C.P.C, no amount of evidence or defence plea could be looked into, learned counsel placed reliance upon a decision of the Supreme Court in KAMALA AND OTHERS VS. K.T.ESHWARA SA AND OTHERS (AIR 2008 SC 3174). Considering the scope of Order VII Rule 11(d) of C.P.C., the Supreme Court held as under:

"15. Order VII, Rule 11(d) CPC has limited application. It must be shown that the suit is barred under any law. Such a conclusion must be drawn from the averments made in the plaint. Different clauses in Order VII, Rule 11 should not be mixed up. Whereas in a given case, an application for rejection of the plaint may be filed on more than one ground specified in various sub-clauses thereof, a clear finding to that effect must be arrived at. What would be relevant for invoking clause (d) of Order VII, Rule 11 CPC is the averments made in the plaint. For that purpose, there cannot be any addition or subtraction. Absence of jurisdiction on the part of a court can be invoked at different stages and under different provisions of the Code. Order VII, Rule 11 of the Code is one, Order XIV, Rule 2 is another. ....

26. Order VII Rule 11(d) of the Code serves a broad purpose as has been noted in Liverpool & London S.P. & I Association Ltd. v. M.V. Sea Success I & Anr. [(2004) 9 SCC 512] in the following terms:

" The idea underlying Order 7 Rule 11(a) is that when no cause of action is disclosed, the courts will not unnecessarily protract the hearing of a suit. Having regard to the changes in the legislative policy as adumbrated by the amendments carried out in the Code of Civil Procedure, the courts would interpret the provisions in such a manner so as to save expenses, achieve expedition and avoid the court's resources being used up on cases which will serve no useful purpose. A litigation which in the opinion of the court is doomed to fail would not further be allowed to be used as a device to harass a litigant. [See Azhar Hussain v. Rajiv Gandhi (1986) Supp SCC 315" at pp. 324-35]" But therein itself, it was held: "Whether a plaint discloses a cause of action or not is essentially a question of fact. But whether it does or does not must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is as to whether if the averments made in the plaint are taken to be correct in their entirety, a decree would be passed." Keeping the above principles in mind, we proceed to consider whether under Order VII Rule 11(d) C.P.C., the plaint shall be rejected where the suit appears from the statement in the plaint to be barred by any law.

15. The learned counsel for the appellant has contended that the duty of the Court is to examine the plaint averments to find out whether the plaint is barred by any law. Admitted fact is that the appellant Company approached the 1st respondent TNEB for availing the facility of discounting of bills against the supply of cables under the purchase order from Tamil Nadu State Electricity Board, Chennai. Initially, the facility of discounting was extended to the appellant for a sum of Rs.1 Crore. It is borne out from the records that on 11.7.2000, the appellant approached the 1st respondent for enhancement of the limit of discounted bills for Rs.1 Crore to Rs.2 Crores. A fresh agreement covering the enhanced limit of the discounted bills was entered into on 19.7.2000. In the said agreement, Clauses 6 and 8 are relevant, which read as under:-

"6. The Second Party is responsible to compensate to the First party on account of any losses suffered because of short comings and deficiencies in handling the order by the Second Party.

8. That the party of the Second Part understands and agrees that the dues under this agreement shall be recovered as arrears of land revenue udner U.P.Public Moneys (Recovery of Dues) Act, 1972."

16. Under the said agreement, the appellant has clearly accepted that the 1st respondent NSIC can initiate action under U.P.Public Moneys (Recovery of Dues) Act, 1972 for recovery of the dues. In the plaint, the appellant has not referred to the said agreement dated 19.7.2000. But the appellant/plaintiff admits of having entered into agreement with 1st respondent for availing the facility of discounting of bills against the supply of cables. In fact, the sheet anchor of the plaintiff's case itself is the discounting of bills by the 1st respondent based on the said agreement. It is pertinent to note that the plaintiff has referred to W.P.No.43495 of 2004 filed before the Allahabad High Court, wherein the agreement dated 19.7.2000 was filed as Annexure. It is borne out from the records that the appellant/plaintiff is bound by the terms of agreement that the dues to be recovered under the U.P.Public Moneys Recovery of Dues Act lays down special procedure for recovery of public dues under the Act. Sub-clause 5 of Section 3(1) bars a civil suit. Sub-clause 5 of Section 3(1) bars a civil suit. Section 3(1) sub-clause 5 reads as under: "Save as otherwise expressly provided in the proviso to Sub-section (4) of this Section or in Section 183 of the U.P. Land Revenue Act, a1901 or Section 287-A of the Uttar Pradesh Zamindari Abolition and land Reforms Act 1950 every certificate sent to the Collector under Sub-section (1) shall be final and shall not be called in question in any original suit, application (including any application under the Arbitration Act, 1940) or any reference to arbitration, and no injunction shall be granted by any court or other authority in respect of any a action taken or intended to be taken in pursuance of any power conferred by or under this Act."

17. Even though the appellant has not made specific averments as to the agreement dated 19.7.2000, the appellant cannot deny the said agreement dated 19.7.2000 under which the appellant has availed the facility of discounting. In the instant case, the recovery certificate issued to recover the dues as arrears of land revenue is under challenge. Section 3(1) sub-clause (5) of U.P. Public Moneys (Recovery of Dues) Act is an express bar for invoking the jurisdiction of the Civil Court. That apart, Section 3(1) Sub-clause (5) also interdicts the Civil Court to grant any injunction. Even going by the plaint averments, the civil suit filed against 2nd defendant is barred under U.P. Public Money (Recovery of Dues) Act. The suit filed as against 2nd defendant is liable to be rejected under Order VII Rule 11(d) of C.P.C.

18. It may incidentally be noted that the the appellant has chosen to challenge the recovery certificate before the Delhi High Court in W.P.No.43495 of 2004, which came to be challenged before the the Supreme Court in S.L.P.No.4003 of 2005 and the S.L.P. also came to be dismissed with the following observations: "The Special leave petition is dismissed.

However, the petitions are allowed liberty of moving an appropriate application seeking impleadment of NSIC., the respondents Nos.4 and 5 herein, in the civil suit which the petitioners have already filed against Tamil Nadu State Electricity Board and seek interim relief therein. Such applications as and when made, shall be heard and decided by the Court seized of the civil suit on their own merits."

19. As rightly observed by the learned single Judge, the above observations referred only to the suit C.S.No.452 of 2004 filed by the appellant/plaintiff in respect of P.O.No.49 dated 10.6.1999, which is also pending.

20. The plaint filed as against defendant No.2 is apparently barred. Even going by the plaint averments, the plaint as against the 1st respondent is barred under Section 3(1) sub-clause (5) and even though we differ from the views taken by the learned single Judge on the cause of action, we do not find any reason to interfere with the ultimate conclusion of the learned single judge rejecting the plaint as against the 2nd defendant.

21. In the result, the O.S.A.No.306 of 2010 is dismissed. Consequently, the other two appeals in O.S.A.Nos.307 and 308 of 2010 are also dismissed.


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