APEX COURT HELD THAT
Civil Procedure Code, 1908 — Order VII Rule 11(a) & (d) — Rejection of plaint — Meaningful reading of plaint — Benami transaction — Suit based on alleged Will — Whether plaint liable to be rejected at threshold.
Plaintiff filed suit seeking declaration of ownership over suit schedule properties on basis of alleged Will dated 20.04.2018 said to have been executed by deceased K. Raghunath in his favour, contending that though properties stood in name of deceased, consideration for purchase had flown from plaintiff because statutory restrictions under Karnataka Land Reforms Act prevented him from purchasing agricultural lands in his own name. Defendants filed application under Order VII Rule 11(a) & (d) CPC contending that plaint itself disclosed benami transaction barred under Sections 4 and 6 of Prohibition of Benami Property Transactions Act, 1988. Trial Court rejected plaint holding that suit was barred by Benami Act, but High Court restored suit.
Held, while deciding application under Order VII Rule 11 CPC, Court must undertake meaningful and substantive reading of plaint along with documents relied upon therein and not merely formal reading of pleadings. If clever drafting creates illusion of cause of action or conceals statutory bar, Court is duty-bound to reject plaint at threshold. Court can examine real substance of claim to determine whether transaction pleaded is benami in nature, even if plaint does not expressly use word “benami”. (Paras 4 to 5.4, 8 to 8.9)
Benami Transactions (Prohibition) Act, 1988 — Sections 2(9), 4 & 6 — Fiduciary relationship — Employer and employee — Exception to benami transaction — Pleading requirement.
Plaintiff contended that properties purchased in name of deceased K. Raghunath were protected under fiduciary exception contained in Section 2(9)(A)(ii) of Benami Act on ground that relationship between plaintiff and deceased was one of trust and confidence akin to employer and employee relationship. Defendants contended that plaint contained no foundational pleadings regarding fiduciary relationship and that ordinary employer-employee relationship could not automatically be treated as fiduciary relationship.
Held, for invoking statutory exception under Section 2(9)(A)(ii) of Benami Act, foundational pleadings regarding fiduciary relationship are necessary. Mere assertion of trust or employer-employee relationship is insufficient unless pleadings disclose legally recognized fiduciary obligations involving entrustment, confidence and duty of loyalty. (Paras 5.5 to 5.8, 6.4 to 6.5)
Civil Procedure Code, 1908 — Order VII Rule 11 — Scope of consideration — Defence in written statement irrelevant — Court confined to plaint averments and documents filed with plaint.
Defendants relied upon pending criminal proceedings alleging fabrication of Will and forgery of stamp papers. Plaintiff contended that while considering rejection of plaint, Court cannot examine defence or disputed questions relating to genuineness of Will.
Held, while adjudicating application under Order VII Rule 11 CPC, Court is confined to averments contained in plaint and documents relied upon therein. Defence raised in written statement, disputed questions of fact, or pending criminal proceedings cannot be considered at threshold stage. Genuineness of Will and rival factual contentions are matters for trial. (Paras 6.1, 6.2, 6.7 and 8.4)
Civil Procedure Code, 1908 — Duty of Court at stage of institution of suit — Mechanical registration of plaint impermissible — Frivolous or legally barred suits liable to be rejected suo motu.
Supreme Court examined scheme of Sections 26, 27 and 35A CPC and Orders IV, V, VI, VII and XIV CPC relating to institution of suits, pleadings and rejection of plaint.
Held, Trial Court has obligation to scrutinize plaint before admitting suit and cannot mechanically register plaint merely because it is presented. If plaint on meaningful reading appears frivolous, vexatious, barred by law, suppresses material facts or creates illusory cause of action through clever drafting, Court must reject plaint even without waiting for defendant to seek such relief. (Paras 9 to 9.4)
Pleadings — Suppression of material facts — Fraud on Court — Effect.
Supreme Court reiterated principles governing pleadings and disclosure obligations while considering maintainability of plaint.
Held, material facts are those facts which constitute complete cause of action and directly affect maintainability of suit. Suppression of material facts resulting in creation of illusory cause of action amounts to fraud upon Court and disentitles litigant from equitable relief. Court must firmly deal with plaints concealing relevant facts to circumvent statutory bars. (Paras 9.5 and 9.6)
