Order 7 Rule 11 CPC | Plaint Can't Be Rejected Over Deficiency In Valuation, Court Fee Without Giving Chance To Rectify: Supreme Court

The Supreme Court recently held that a litigant cannot be automatically non-suited under Order 7 Rule 11 CPC over deficiency in valuation of the suit or payment of court fee. As the two are curable defects, an opportunity must be given to the litigant to rectify and suit rejected only if there is non-compliance."the rejection of a plaint under Order VII Rule 11(b) or (c) is not automatic upon a finding of undervaluation or deficit court fee; rather, it is conditional upon non-compliance with the opportunity so granted by the Court", it said.A bench of Justices PS Narasimha and Alok Aradhe delivered the judgment, holding,"A plain and conjoint reading of clauses (b) and (c) of Order VII Rule 11 of the Code makes it abundantly clear that the power to reject a plaint on the grounds enumerated therein, is not to be exercised in the first instance, without affording an opportunity to the plaintiff. The statutory scheme contemplates a two-step process.Firstly, the Court must form an opinion that the relief claimed is undervalued or that the court fee paid is insufficient. Secondly, upon such determination, the Court is obligated to require the plaintiff to correct the valuation and/or supply the requisite court fee within a time to be fixed by it. It is only upon failure of the plaintiff to comply with such direction within the stipulated time, that the consequences of rejection of the plaint can ensue."The Court was dealing with the appellant's challenge to a Madras High Court order, whereby the revision preferred by the respondents was allowed and the trial court's order rejecting the Order 7 Rule 11 CPC application set aside. This resulted in rejection of the appellant's plaint.The plaint was filed seeking inter-alia a mandatory injunction directing the respondents to execute the Memorandum of Agreement finalized between the parties. Under this MoA, a property was to be sold to the respondents through 8 separate sale deeds (via SPVs acting as nominees) for a consideration of Rs.58.6 crores. While the 8 separate sale deeds were executed, the respondents apparently did not execute the MoA or fulfil their reciprocal obligations under it.The respondents filed for rejection of the plaint under Order 7 Rule 11 CPC, claiming that it did not disclose a cause of action, the relief was undervalued, and the plaint was insufficiently stamped. The trial court however held in favor of the appellant, noting that the issues raised merited a full trial. The respondents filed a revision before the High Court, which was allowed and the plaint rejected.Among other things, the High Court observed that the MoA did not constitute an enforceable contract and once the sale deeds were executed, no independent cause of action survived for enforcement of any prior or collateral arrangement. It also observed that the plaint was essentially a claim for recovering of Rs.53-55 crores, as such, ad valorem court fee was to be paid but the appellant did not do so.Aggrieved, the appellant approached the Supreme Court. After considering the material, the top court observed that the plaint clearly disclosed - (a) the existence of a negotiated commercial arrangement, (b) its partial implementation through execution of sale deeds, (c) the subsistence of reciprocal obligations, and (d) the alleged breach thereof by the defendants. Thus, there was an intelligible cause of action, warranting a full trial instead of summary rejection.Further, the Court held that the High Court erred in examining whether the MoA was enforceable and concluding that no cause of action survived. The same amounted to conducting a mini-trial, which was impermissible in law. "The Court, at this stage, is required to assume the averments in the plaint to be true and determine whether they disclose a right to sue; it is not open to the Court to test their correctness or to weigh them against the defence", it said.Rejection of the plaint on the ground of improper valuation and non-payment of appropriate court fee was also found unsustainable. The Court observed that the High Court merely noted deficiency in valuation of the suit and court fee, without determining what would have been the proper valuation and court fee. "In the absence of such a finding, the direction, if any, to correct the valuation could not have been meaningfully complied with by the plaintiff. The failure to record such a determination further vitiates the impugned order."It was also noted that an error regarding valuation or court fee is a curable defect and an opportunity to rectify such errors acts as a safeguard against non-suiting of a litigant over a defect that can be remedied."The deficiency in valuation or court fee does not, by itself, render the suit non-maintainable at the threshold. It is a defect which is capable of being remedied, and the law expressly provides a mechanism for such rectification. The High Court, in overlooking this statutory requirement, has effectively denied the appellant an...

Order 7 Rule 11 CPC | Plaint Can't Be Rejected Over Deficiency In Valuation, Court Fee Without Giving Chance To Rectify: Supreme Court

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Order 7 Rule 11 CPC | Plaint Can't Be Rejected Over Deficiency In Valuation, Court Fee Without Giving Chance To Rectify: Supreme Court

Debby Jain

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