DRT | Rejection Of Application Under Order 7 Rule 11 Will Not Operate As Res Judicata On Deciding Issue Of Limitation: Allahabad High Court

The Allahabad High Court has held that rejection of application under Order VII Rule 11 of the Civil Procedure Code will not operate as res judicata on deciding issue of limitation raised at the time of final hearing.

The Court held that question of limitation being a mixed question of law and fact requires evidence to be led by contesting parties. The issue of limitation as such cannot be decided at the stage of deciding application under Order VII Rule 11 of CPC unless the pleading in the plaint show the plaint to be barred by limitation, it said.

While dealing with rejection of application under Order VII Rule 11 of CPC by the Debt Recovery Tribunal, Justice Manish Kumar Nigam held,

“The issue of limitation being generally a mixed issue of fact and law and is subject to the evidence led by the parties. The findings recorded by the Court/Tribunal while deciding the application under Order 7 Rule 11 C.P.C. will not operate as res judicata.”

The Court reiterated that for deciding an application under Order VII Rule 11 of CPC, the averments made in the plaint are to be seen. If the averments so made are barred by any law, including the law of limitation, the plaint is liable to be rejected.

The Court placed reliance on P.V. Guru Raj Reddy and Another Vs. P. Neeradha Reddy and others where the Supreme Court held that stringent conditions have been laid down for rejecting plaint under Order VII Rule 11 of CPC as it leads to termination of a civil action at the threshold. It had been held that any written statement filed by the defendant is immaterial for the purpose of deciding an application under Order VII Rule 11 of CPC.

“It is only if the averments in the plaint ex facie do not disclose a cause of action or an a reading thereof the suit appears to be barred under any law, the plaint can be rejected. In all other situations the claims will have to be adjudicated in the course of trial.”

Factual Background

From 1994-96, IDBI granted the financial assistance to the tune of Rs. 7.60 crores to Respondent No.2 – Gilt Pack Ltd. Company with petitioner as the on the basis of Deed of Guarantee dated 24.3.1994, 16.11.1994 and 26.9.1996.

In 2016, Respondent No.1 – Stressed Asset Stabilisation Fund, the assignee of the original lender IDBI, filed an original application before the Debt Recovery Tribunal, Jabalpur seeking payment of Rs. 394,41,00,970/- towards the loan as on 1.7.2016 together with further interest thereon on contractual rates w.e.f. 1.7.2016 from the defendants therein.

Petitioner filed an application under Order VII Rule 11 of CPC on grounds that original application was filed after a lapse of 19 years from the date of execution of Deed of Guarantee executed by the petitioner. it was contended that the claim of respondent No.1 is time barred. This application under Order VII Rule 11 of CPC was rejected. Appeal against the same was filed before Debt recovery Appellate Tribunal, Allahabad.

The Appellate Tribunal disposed of the appeal permitting the appellant-petitioner to raise his contentions/grievances whatever he has, with regard to the maintainability of Original Application in view of limitation before the DRT by way of any application. It was directed that if such application is filed by the petitioner, it shall be dealt with at the time of final hearing of the said Original Application. The appeal was not entertained on merits as the case was pending before the DRT.

Counsel for petitioner argued that the DRAT had not set aside the order rejecting the application under Order VII Rule 11 of CPC which will attract the principle of res-judicata when the subsequent application is filed by the petitioner in pursuance of the order of the Appellate Tribunal.

High Court Verdict

The Court observed that Order VII Rule 11 of CPC provides a plaint shall be rejected if from the statement made in the plaint, a suit appears to be barred by any law, including law of limitation.

“Order VII Rule 11(d) CPC provides that the plaint shall be rejected “where the suit appears from the statement made in the plaint to be barred by any law”, hence, in order to decide whether the suit is barred by law, it is the statement in the plaint will have to be construed. The Court while deciding such an application under Order 7 Rule 11 C.P.C. must have due regard only to the statements made in the plaint. Whether the suit is barred by any law must be determined from the statements in the plaint and it is not open to decide the issue on the basis of any other material including the written statement in the case.”

The Court placed reliance on Srihari Hanumandas Totala vs. Hemant Vithal Kamat and others where the Supreme Court has laid down two guiding principles for deciding an application under Order VII Rule 11 (d) of CPC

1. To reject a plaint on the ground that the suit is barred by any law, only the averments in the plaint will have to be referred to;

2. The defense made by the defendant in the suit must not be considered while deciding the merits of the application.

Further, relying on the decision of Supreme Court in Ramesh B Desai and others vs. Vipin Vadilal Mehta and others, the Court held that “question of limitation is generally a mixed question of law and fact.”

The Court observed that a perusal of the original application filed by Respondent No.1 – Stressed Asset Stabilisation Fund does not disclose any fact to bar the suit on grounds of limitation. The Court observed that the submissions made by the petitioner including submission regarding lapse of 16 years, cannot be gone into at the stage of deciding application under Order VII Rule 11 of CPC.

The Court held that the claim of the petitioner regarding limitation and other things can only be considered once the issues regarding the same have been framed by the Tribunal and by considering the evidence led by the parties. It cannot be decided not at the stage of deciding the application under Order VII Rule 11 CPC.

Further, the Court held that the DRT has to look at the pleading and evidences led by both parties while dealing with the original application, therefore, any finding recorded by the DRT at the time of rejection of application under Order VII Rule 11 CPC will not act as res-judicata regarding the issue of limitation.

Relying on the decisions of Supreme Court in Union of India and another v. British India Corporation Ltd. and others, Gannmani Anasuya and others v. Parvatini Amarendra Chowdhary and others and Noharlal Verma v. District Cooperative Central Bank Limited, Jagdalpur, the Court held that the issue of limitation is mixed question of facts and law and can be decided based on evidence led by the parties.

Accordingly, the writ petition was disposed of with a direction to DRT to decide the case as per directions of DRAT.

Case Title: Saurabh Kalani v. Stressed Asset Stabilisation Fund And 7 Others [WRIT – C No. – 35362 of 2023]

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