Civil Suit Rejected Under Order VII Rule 11 CPC Does Not Bar Consumer Complaint: Delhi State Commission

The Delhi State Consumer Disputes Redressal Commission, presided over by Ms. Bimla Kumari, has allowed an appeal and set aside an order of the District Consumer Forum which had dismissed a consumer complaint as barred by the principle of res judicata. The State Commission held that rejection of a civil suit under Order VII Rule 11 of the Code of Civil Procedure, 1908, on technical grounds such as limitation or lack of jurisdiction, does not amount to adjudication on merits and therefore does not bar a fresh examination of the dispute by the consumer forum.

Brief Facts

The complainant, Ms. Shobha Rani, was engaged in the business of sale and purchase of photographic material at Chandni Chowk, Delhi. She had obtained a burglary and fire insurance policy for a sum of ₹20,00,000 from National Insurance Co. Ltd. ( Opposite Party) to cover the stock lying in her shop.

On 17.05.1995, a fire broke out in Vishal Market, completely destroying her shop and business records. Following the incident, the complainant lodged a claim for the insured amount of ₹20,00,000. However, the insurer assessed the claim at ₹5,46,000, which the complainant accepted, alleging that the acceptance was under protest.

Aggrieved, the complainant filed a complaint seeking recovery of the balance amount of ₹8,64,407. The complaint was initially dismissed by the District Forum but was later restored pursuant to an appeal and remand by the State Commission.

Parallelly, the complainant had also instituted a civil suit in 2004 for recovery of ₹14,54,000 against the insurer and Punjab National Bank. The civil court rejected the plaint under Order VII Rule 11 CPC, holding the suit to be barred by limitation and also noting lack of civil court jurisdiction in view of proceedings involving the bank.

Subsequently, when the consumer complaint was revived, the District Forum again dismissed it on the ground that the civil court's order operated as res judicata. Aggrieved by this order, the complainant filed the present appeal before the State Commission.

Arguments of the Opposite Party

The insurer contended that since the complainant had already pursued a civil recovery suit on the same cause of action, which was decided against her, the consumer complaint was not maintainable. It was further argued that the complainant had accepted the settlement amount towards full and final settlement.

It was also contended that the civil suit had been rightly rejected as barred by limitation, having been filed approximately eight and a half years after the incident.

Observations & Findings

The State Commission observed that a plaint rejected under Order VII Rule 11 CPC does not result in a decision on merits. It held that the District Forum had erred in treating the rejection of the civil suit as a bar under the doctrine of res judicata.

The Commission noted that adjudication of res judicata requires examination of pleadings, issues, and findings in earlier proceedings, which is beyond the limited scope of an inquiry under Order VII Rule 11 CPC. It further observed that the civil court had rejected the suit on grounds of limitation and lack of jurisdiction, and not after adjudicating the dispute on merits.

Relying on decisions of the Supreme Court, the Commission reiterated that the plea of res judicata cannot be conclusively determined at the stage of rejection of a plaint and that such rejection does not preclude fresh adjudication before a competent forum.

Accordingly, the State Commission allowed the appeal, set aside the order passed by the District Consumer Forum (West), Janakpuri, and remanded the matter for fresh adjudication on merits. The District Forum was directed to dispose of the complaint expeditiously, preferably within three months.

Case Title: Ms. Shobha Rani v. National Insurance Co. Ltd.

Case No.: First Appeal No. 50/2010

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