Citation Codes

Equivalent Citations

citation codes

Judges

S Ravindra Bhat

Acts

Order 7 Rule 11 of the Code of Civil Procedure, 1908,
Section 23 of the Indian Contract Act, 1872.
Section 7(iv)(c) of the Court Fees Act, 1870,
SECTION 245 INCOME TAX ACT 1961
Article 54 of the Limitation Act, 1963
Order 7, Rule 11, CPC,
Order 7 Rule 11 (d).
Order II Rule 2,
Order 7, Rule 11,

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Order 7 Rule 11 Application — IA No. 4533/2006 in CS (OS) 294/2006: Structured Summary

Factual and Procedural Background

The present order disposes of IA No. 4533/2006, an application under Order 7 Rule 11 of the Code of Civil Procedure, 1908, seeking rejection of the plaint in CS (OS) No. 294/2006. The plaintiff and defendant are members of the Rai family (brothers) and, after family disputes in January 2000, the parties orally entered into a family arrangement on 7 February 2000, and subsequently modified and reduced the terms to writing on 19 March 2000 (the "Rai Family Agreement").

The plaint alleges extensive transfers/allocations of shares, properties and trusts in favour of the plaintiff's family pursuant to the family settlement, and projects that many of these obligations have been at least partially executed. The plaintiff alleges that the defendant has attempted to resile from the family arrangement (by, inter alia, cancelling agreements to sell, initiating recovery actions in July 2005, lodging complaints with cooperative society authorities and seeking to challenge share transfers), and seeks a mandatory injunction directing implementation of the family arrangement and a permanent injunction restraining the defendant from creating third-party interests in the properties.

The defendant filed an application under Order 7 Rule 11 seeking rejection of the plaint on multiple grounds: that the document relied on was merely a "wish list"; the suit is time-barred (limitation); the plaint is undervalued for court-fees; failure to take leave in a prior related suit (Order II Rule 2); non-joinder of beneficiaries/necessary parties; and that the agreement is void as opposed to public policy under Section 23 of the Indian Contract Act, 1872. The court heard argument and reserved its decision in the present order.

Legal Issues Presented

Whether the plaint should be rejected under Order 7 Rule 11 CPC for failure to disclose a cause of action or on grounds of hopeless/frivolous litigation.
Whether the plaintiff's claim seeking specific performance/implementation of the family arrangement is time-barred under the Limitation Act.
Whether the plaint is liable to be rejected for non-joinder of necessary parties (notably the companies and beneficiaries) such that effectual adjudication is impossible.
Whether the plaint has been undervalued for the purposes of court-fees and jurisdiction, and whether the valuation is demonstrably arbitrary.
Whether the present suit is barred because leave to file it was not sought in a prior related suit (Order II Rule 2).
Whether the family agreement is void as opposed to public policy under Section 23, Indian Contract Act, 1872 (as contended by the defendant).

Arguments of the Parties

Defendant's Arguments

The document dated 19.3.2000 (the family arrangement) is not binding and was merely a "wish list"; the plaintiff had admitted this before the Settlement Commission — therefore the suit should be dismissed.
The suit is time-barred. Under Article 54 of the Limitation Act, 1963, specific performance claims are barred after three years from the date fixed for performance or from notice of refusal; there was no fixed date and the plaintiff had notice as early as 2002 of denial (the "wish list" admission).
The plaint is grossly undervalued: the plaintiff quantifies a money claim of at least Rs. 65 crores but values the suit for injunction relief at only Rs. 21 lakhs — indicative of intentional undervaluation to avoid court fees.
The suit is barred under Order II Rule 2 since leave to file the present suit was not sought in a previous suit (CS (OS) No. 1158/2005).
Beneficiaries of the alleged arrangement have not been impleaded and certain companies are necessary parties; absence of necessary parties mandates rejection.
The agreement is void as being opposed to public policy under Section 23 of the Indian Contract Act, 1872.

Plaintiff's Arguments

Countering limitation: The plaintiff (through submissions) maintained that the parties acted upon the family settlement and took steps to effectuate it on several dates (2001, 2004 etc.), and the defendant continued to carry out acts consistent with the settlement; the defendant's repudiation was only clearly expressed in 2005, from which date limitation should run.
The Courts generally enforce bona fide family arrangements and should not lightly interfere; courts have upheld such settlements unless fraud is proved — reliance placed on multiple precedents supporting enforcement of family arrangements.
Regarding valuation, the plaintiff's counsel argued that at the time of filing the exact value of shares and benefits was imprecise and a notional valuation was given; where no relief is sought directly against companies, their non-joinder is not fatal at this stage.
On Order II Rule 2, the plaintiff submitted that the previous suit was not filed by him (but by other relatives), so the requirement of leave did not arise as against him personally.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Hardesh Ores (P) Ltd. v. Hede & Co., (2007) 5 SCC 614	Authority relied upon for the proposition that courts may reject plainly hopeless litigation and the plaint can be struck out under Order 7 Rule 11.	Noted as relied upon by counsel for the defendant; the court considered the broader proposition but applied the Liverpool & London test and the plaint's averments, and did not accept the limitation-based rejection at this stage.
N.V. Srinivasa Murthy v. Mariyamma, (2005) 5 SCC 548	Relied upon by defendant to support early rejection of plaints that disclose no cause of action.	Considered in argument; the court applied the settled test from Liverpool & London and did not hold the plaint liable for rejection on that basis at this stage.
T. Arivandandam v. T.V. Satyapal, 1977 (4) SCC 467	Relied upon for the power to reject plainly hopeless claims under Order 7 Rule 11.	Not adopted as a basis to reject the plaint after examining the plaint averments; court declined to reject on limitation grounds at the demurrer stage.
Sahu Madho Das v. Mukund Ram, AIR 1955 SC 481	Authority cited for the principle that courts enforce bona fide family arrangements.	The court cited and relied on the principle that Indian courts tend to uphold family settlements and that such settlements should not be disturbed on trivial grounds (see further reliance on Kale).
Kale & Others v. Deputy Director of Consolidation, (1976) 3 SCC 119	Principles on enforcement of family settlements: courts lean in favour of upholding family arrangements and may apply estoppel where a party enjoyed benefits and later seeks to unsettle the arrangement.	The court expressly relied on Kale: it quoted the passage and applied the principle that family settlements are to be upheld against technical objections and that estoppel may be applied to shut out belated challenges.
KK Modi v. KN Modi, (1998) 3 SCC 573	Authority used to support the proposition that courts should not lightly interfere with family settlements and that they are governed by special equities.	Relied upon by plaintiff's counsel; the court recognized the line of authority favouring enforcement of family arrangements when considering whether to reject the plaint.
Hari Shankar Singhania v. Gowri Shankar Singhania, (2006) 4 SCC 658	Supports the principle that courts should enforce family settlements and avoid disturbing them on technicalities.	Noted as part of the weight of authority favouring enforcement; informed the court's caution about rejecting family-arrangement-based suits at the demurrer stage.
Manish Mohan Sharma v. Ram Bahadur Thakur, (2006) 4 SCC 416	Recent reiteration of the principles governing family settlements.	Cited by the court as part of the consistent line of authorities that favour upholding bona fide family arrangements.
Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success, (2004) 9 SCC 512	Test for rejection under Order 7 Rule 11 CPC: pleadings must be read in entirety as true; the court is to decide from the plaint whether a decree could be passed; no elaborate enquiry into disputed facts at this stage; a weak case is not a ground to strike out if it discloses a cause of action.	The court applied and quoted Liverpool & London extensively to explain the standard for rejecting a plaint under Order 7 Rule 11 and to justify why a detailed inquiry into disputed facts (e.g., limitation contested by evidence of emails) was inappropriate at this stage.
Tara Devi v. Thakur Radha Krishna Maharaj, (1987) 4 SCC 69	Principles on valuation of reliefs for court-fees: plaintiffs may estimate valuation, but the court can examine and revise valuation if demonstrably arbitrary.	Relied upon in the court's analysis on valuation; the court applied this principle to conclude that although a plaintiff can value reliefs, the valuation in this case (Rs. 21 lakhs against averments indicating ~Rs. 75 crores) was arbitrary and required correction.
Sathappa Chettiar v. Ramanathan Chettiar, AIR 1958 SC 245 (1958 SCR 1024)	Part of the authority that a plaintiff has the right to value reliefs; courts ordinarily accept the plaintiff's estimate but can intervene where valuation is arbitrary.	Referenced within the court's valuation discussion to support the principle that valuation ordinarily rests with the plaintiff subject to the court's supervisory power.
Meenakshisundaram Chettiar v. Venkatachalam Chettiar, (1980) 1 SCC 616	Further authority on plaintiff's right to make estimation for reliefs and the court's role in examining demonstrative undervaluation.	Cited to support the court's conclusion that plaintiff's valuation could be examined and revised where arbitrary; used to justify the order for re-valuation and payment of appropriate court fees.
Sujir Keshav Nayak v. Sujir Ganesh Nayak, 1992 (1) SCC 731	Sets out the law on valuation and court fee: (1) where fee linked to jurisdiction defendant may raise objection; (2) in courts of unlimited jurisdiction plaintiff's valuation usually accepted; (3) even in such courts valuation can be examined if arbitrary.	The court reproduced and relied on these principles to conclude that while plaintiff has a right to value, the present valuation was arbitrary and required correction; accordingly the court directed revaluation and payment of requisite court fees.
R. S. Jadhav Desai v. S. V. Jadhav Desai, AIR 1918 PC 188	Earlier authority considered in the context of valuation and court fee jurisprudence (cited in the Sujir Nayak discussion).	Noted as part of precedential history on valuation; contributed to the legal framework the court applied in assessing whether the plaint was undervalued.
Abdul Hamid Shamsi v. Abdul Majid, (1988) 2 SCC 575	Considered in the valuation jurisprudence; part of the authorities reviewed by the court in relation to plaintiff's right to value reliefs.	Formed part of the legal background relied upon to determine that the plaint's valuation was demonstrably arbitrary and required correction.

Court's Reasoning and Analysis

The court structured its analysis around the legal standard applicable to an Order 7 Rule 11 application and the specific contentions raised by the defendant:

Standard for rejection under Order 7 Rule 11: The court reminded itself of the Liverpool & London test: on an application to reject a plaint the court must read the plaint itself, assume averments in the plaint to be correct, and determine whether they disclose a cause of action; it must not undertake elaborate inquiry into disputed or complicated questions of law or fact at this stage. A weak case is not alone a ground to strike out.
Limitation plea: The defendant relied on emails and an alleged admission before the Settlement Commission (2002) that the 19.3.2000 instrument was a mere "wish list" and not acted upon. The court acknowledged these prima facie indications but emphasized that the plaint itself contains express averments (notably para 6 and associated material) that the parties, including the defendant, took steps to effectuate the settlement on various dates (2001 and 2004). Given the limited scope of inquiry on Order 7 Rule 11, and the principle that the court should not conduct detailed factual scrutiny at this stage, the court concluded it could not agree that the entire action was time-barred. The court observed that some discrete claims might be time-barred but refused to reject the whole plaint where other causes of action may survive for trial.
Non-joinder of companies and beneficiaries: The court applied the test for necessary parties — whether effectual adjudication is impossible without them — and concluded that absence of the companies would not prevent trial because no relief had been claimed directly against those companies at this stage; the plaintiff seeks implementation of the family settlement and shareholding adjustments which are matters for evidence at trial. Thus the court did not accept the non-joinder objection as a ground for rejection.
Order II Rule 2 / prior suit leave: The court noted that the question of seeking leave to file the present suit would only arise if the previous suit had been filed by the same plaintiff. As the present plaintiff was not the plaintiff in the earlier suit (CS (OS) No. 1158/2005), the court found the plea based on Order II Rule 2 to be untenable at the demurrer stage.
Valuation and court-fee: After reviewing authorities (Tara Devi, Sujir Keshav Nayak and related decisions), the court reiterated that while a plaintiff ordinarily has the right to estimate valuation for reliefs (particularly in courts of unlimited jurisdiction), that right is not absolute and the court can examine and revise a demonstrably arbitrary valuation. A plain reading of the family settlement and the plaint's averments indicated assets and obligations materially in excess of Rs. 75 crores, whereas the plaint valued the reliefs for court-fees at Rs. 21,00,000/-. The court found this valuation arbitrary and held that the suit had not been properly valued for court-fee purposes.
Overall disposition of the Order 7 Rule 11 application: Taking the above into account, the court concluded that the defendant's contentions did not warrant rejection of the plaint in toto at this preliminary stage (limitation, non-joinder and Order II Rule 2 objections were rejected as bases for dismissal at this stage). However, because the valuation was found arbitrary, the court exercised its supervisory power to require correction: the plaintiff was directed to properly value the suit and pay the requisite court-fees within four weeks.

Holding and Implications

DISPOSED OF — The court disposed of IA No. 4533/2006 by refusing to reject the plaint under Order 7 Rule 11 on the grounds urged by the defendant (including the broad limitation plea, non-joinder of companies, and the Order II Rule 2 objection). The court held that:

The plea that the entire action is time-barred could not be accepted at the demurrer stage because the plaint itself pleads steps to effectuate the settlement on dates that might keep some causes of action alive; detailed factual inquiry was inappropriate under Order 7 Rule 11.
The absence of companies as parties did not make effectual adjudication impossible at this stage because no direct relief was claimed against them; issues of shareholding and implementation are to be tested at trial.
The contention based on Order II Rule 2 failed because the present plaintiff was not the plaintiff in the earlier suit, so the leave requirement did not apply in the manner suggested by the defendant.
The plaint, however, was demonstrably undervalued for court-fee purposes: the court found the stated valuation (Rs. 21,00,000/-) arbitrary in light of the averments and assets indicated (about Rs. 75 crores); accordingly the plaintiff was directed to re-value the suit and pay the requisite court-fee within four weeks.

Implications: The direct effect is that the plaint was not rejected and the suit proceeds to trial subject to compliance with the court's direction on correct valuation and payment of court-fees within the specified period. The order is procedural in nature and does not purport to lay down any new precedent; it applies existing authorities (notably Kale; Liverpool & London; Tara Devi; Sujir Keshav Nayak) to the facts and procedural posture of this case.

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Anil Rai v. Vinay Rai

1. This order will dispose of IA No. 4533/2006 preferred under Order 7 Rule 11 of the Code of Civil Procedure, 1908, for rejection of the plaint. The brief facts necessary for the present purposes are as follows.

IA 4533/2006 IN CS (OS) 294/2006 Page 1

2. The plaintiff is a member of the Rai family, comprising his father, mother, two sisters and the defendant, his brother. The plaintiff avers that in January 2000 disputes arose between him and the defendant, after which due to intervention of family members, the parties orally entered into a family arrangement on 7th February 2000. However, on 19.03.2000 the parties agreed to modifications in the terms of settlement, which was reduced to writing in the form of „Rai Family Agreement‟. The details of the family arrangement, and steps taken by the parties, to effectuate it, are as follows, according to the plaintiff:

Amorphous, IILM, and Rai School as his 32,24,800 shares by it in Usha Dranger (P) personal property, which he may keep, for Ltd. to RKKR Infotech (P) Ltd., a company either himself or gift to the daughters or controlled by the Plaintiff‟s family on 29th anybody else except to any one of Varun, January, 2001. Amit or Anand in which case it will be equally shared between the three. 2. Usha Group Company transferred 34,90,000 shares held by it in Usha Amorphous Metals Ltd. to RKKR Infotech (P) Ltd. on 29.01.2001, a company controlled by the Plaintiff‟s family.

3. IILM and Rai School have also continued to remain under the control of the Plaintiff‟s family.

2. Properties worth Rs. 25 crores will be Properties worth Rs. 25 Crore were put in a trust to be managed by Anil transferred to the Plaintiff‟s family by the Rai/Malvika Rai with Aarti and Ahladini Defendant (as confirmed by his hand as the beneficiaries. This again either may written note of Feb., 2002) as under:

IA 4533/2006 IN CS (OS) 294/2006 Page 2 go to them at the time of their marriage or be kept under trust as security for them for (i) Pappankala Chawla property consisting life. However, in case it goes to Varun, of land is owned by four Companies, Amit or Anand it will be shared equally namely, M/s Dimsy Food and Chemicals among them. Pvt. Ltd. Dwarka Properties Pvt. Ltd. Delhi Cylinder and Tranding Pvt. Ltd. and Venue Video Pvt. Ltd. Shares of these companies were subscribed/transferred between November 2002 and February 2004 by/and in favour of the entities of the Plaintiff‟s family.

(ii) The Gurgaon property consisting of land owned by M/s. Usha Cooperative House Building Society Ltd. After the family settlement in March 2000, members of the Society belonging to Usha Group had resigned and employees of IILM Group had taken over the membership and management of the Society. This is clearly evident from the minutes of the general body meeting of the Society held on 17.12.2001 whereby elections of the new managing committee had been conducted under the supervision of Dr. M.C. Gupta of Usha Group and new managing committee was elected from the then members.

(iii) Possession of Plot No. B-II/56, Mohan Cooperative Industrial Estate had been given to the Plaintiff‟s family and is owned by Burr Brown Communication Pvt. Ltd.

IA 4533/2006 IN CS (OS) 294/2006 Page 3 whose shares were transferred in favour of the Plaintiff‟s family.

(iv) Possession of Plot No. B-II.91, Mohan Co-operative Industrial Estate, New Delhi, has been given to the Plaintiff‟s family.

(v) Possession of Plot No. B-II.92, has been given to the Plaintiff‟s family.

Agreement to sell was also executed on 17.10.2001 by RKKR Udyog in favour of RKKR Infotech (P) Ltd. and General Power of attorney executed.

(vi) Possession of Plot No. B-II.93, has been given to the Plaintiff‟s family.

Agreement to sell was also executed on 16.10.2001 by Usha Spinning & Weaving Mills Ltd. in favour of RKKR Infotech (P) Ltd. and General Power of Attorney executed.

(vii) In case of land and building at Usha Plaza, M.I. Raod, Jaipur, the same has been sold under an Agreement to Sell to Ram Krishan Kulwant Rai Education Society for which part consideration has been paid, and the rest of the property has been gifted to the Society of the Plaintiff‟s family. The property is having built up area of 2506 sq. ft. as follows out of which possession of 447 sq. ft. in basement has been handed over to the society promoted by the Plaintiff‟s family and area of 1612 sq. ft.

has been occupied by a tenant for which IA 4533/2006 IN CS (OS) 294/2006 Page 4 symbolic possession had also been given to Society promoted by the Plaintiff‟s family for which lease was expiring on 16.10.2004 Therefore on expiry of lease the tenant wrote to the Society of Plaintiff‟s family vide their letter dated 4th June 2004 (Ref.

No.AO/JPR/006/001) asking for renewal, which was replied by the society of Plaintiff‟s family vide its letter dated 26.06.04 stating that the Society intended to use the premises for its own purposes and asked for vacation by 16.10.04. The tenant i.e. UAE Exchange and Financial Services Ltd. further wrote on 13.07.04 (Ref. No. UAEFS/2600/Lease-011/04) stating that they were willing to vacate the mezzanine Floor and agreed to pay for area of 1050 sq. ft. at enhance rate @ Rs. 28622.50 P.M. In response to their letter, Society again wrote on 24.07.04 for not agreeing for renewal.

The tenant aggrieved due to non-renewal approached. The Usha Housing Development Company Ltd. and in collusion with it entered into an agreement and is still continuing to occupy the premises premises. Society promoted by the Plaintiff‟s family has filed a Suit which is pending in the Addl. District Judge-II, Civil Court Jaipur in respect of this property.

(vii) Similarly, possession of property IA 4533/2006 IN CS (OS) 294/2006 Page 5 located at Usha Niketan, D-76, Ghiya Marg, bani Park, Flat Nos. 104 to 107, 207, 304 to 307 and 404 at Jaipur having a total area of 11425 sq. ft. has been handed over to the Society promoted by the Plaintiff‟s family which was transferred under an Agreement to sell for which part consideration has been paid and the balance has been gifted to the Society promoted by the Plaintiff‟s family.

(ix) Possession of Commercial flat located in Usha Preet Complex at 138/42, Malviya Nagar, Bhopal (M.P.) admeasuring 5063 sq. ft. has been given out of which 2040.78 sq. ft. is occupied by the Society promoted by the Plaintiff‟s family and balance area has been occupied by different tenants.

Pursuant to family agreement, two of the five tenants had started paying rent to the Society promoted by the Plaintiff‟s family and the other tenants are neither paying to Plaintiff nor to defendant. Recently the two tenants namely Inline Medical and Sagar Infotech have also stopped paying rent to the Society promoted by the Plaintiff‟s family, payment has been made for part of the amount under an Agreement to Sell and the rest of the balance had been gifted to the Society promoted by the Plaintiff‟s family.

It is most respectfully submitted that now, in an attempt to resile out of the above agreement, the Defendant has sought to IA 4533/2006 IN CS (OS) 294/2006 Page 6 initiate cases of recovery of amounts against the Society by issuing notices in July, 2005.

(x) Flat Nos. 309 and 311 at Ansal Chamber-1, Bhikaji Cama Place, New Delhi valued at Rs. 51 lakhs have been sold under an Agreement to Sell to a Society promoted by the Plaintiff‟s family and the entire consideration with respect to the said flats has been paid.

(xi) Property located at Plot No.20, Sector 11, Belapur, Ne Mumbai of which defendant had identified 25549 sq. ft. built up area in the building known as Usha Chambers as the share of Plaintiff family for which the defendant subsequently billed to a company of the Plaintiff family amounting of Rs. 64,16,428/- vide letter dated 10.01.2004.

Space No. Floor Area 38 GF 39 GF 301 to 311 3rd Floor 407 4th Floor 507 5th Floor IA 4533/2006 IN CS (OS) 294/2006 Page 7 607 6th Floor 707 7th Floor 25549 sq.ft.

The possession of this property has been held by the Defendant due to non payment of the bill by Plaintiff owing to dispute on the amount raised in the bill by the Defendant spent for development of the share of property of the Plaintiff‟s family.

3. Properties worth 15 crores will be Plot No.1 and 88 MCIE, New Delhi, land at given to KR (Shri Kulwant Rai) and BR Daulatabad and Chattarpur Farm and a one (Smt. Bimla Rai) which will be in trust to thousand square yard plot behind Mohan the five grand children (Varun, Amit, Cooperative Industrial Estate of Aarti, Anand and Ahladini) equally after approximate values of Rs. 4.75 crores are in them. the name of Shri Kulwant Rai and Smt. Bimla Rai and will be retained by them.

Properties for the balance amount, however have not been transferred by the defendant so far.

4. Cash of Rs. 10 crores will be given to The said amounts have not been transferred both Mr. Kulwant Rai and Mrs. Bimla Rai by the Defendant. to be spent by them as they like and gifted by them as they like in the course of their life and afterwards.

5. The house will remain 1/3 each To implement this Clause, 42801 shares of between Mr. Kulwant Rai, the Defendant one of the three co-owner company, namely and the Plaintiff and after Mr. Kulawant Allied Finance Pvt. Ltd. were transferred in IA 4533/2006 IN CS (OS) 294/2006 Page 8 Rai and Mrs. Bimla Rai it will be 50.50 favour of the family trust of the Plaintiff‟s between the Plaintiff and the Defendant. family on 6th October 2001. As regards the second company, viz., New Peak Real Estate (P) Ltd., 99% shares were purchased by M/s Bimla Rai, mother of the parties and wife of Shri Kulwant Rai, is the sole beneficiary. Physical custody of the records of the company is with the Defendant which is to handed over. Similarly, the property is being enjoyed by way of three co-tenancies as mentioned in the clause.

6. Apart from the exclusion made in point Mr. Anand Rai, son of the Plaintiff had not 1,2,3,4,5 above everything else (including joined the business of the company as he all companies, assets, properties, liabilities, was completing his studies. Now that his businesses, investments, trusts etc.) will be studies are getting completed in May 2006, shared 1/3rd each between Varun, Amit he is to join the business as 1/3rd partner as and Anand as equal partners. provided in this clause.

7. VR will be Chairman and CEO of the The Defendant has been incomplete control Group in the next 7-10 years. The of the management and affairs of the group management control of the Group will be business. with him. When he retires, Varun will take over as the next Chairman.

8. It is agreed that a minimum of Rs. 10 Time for implementation has not come. crores each will be spent on the weddings However, the Plaintiff‟s family has, in view of the two girls. A security or pledge of of the conduct of the Defendant trying to assets for the same amount may be kept if resile out of this agreement, requested him necessary so that in case one does not pay to create the security/pledge as provided for that money, then those assets may be sold in the Agreement. for marriage expenses.

9. Anand as a partner will be a part of the Time for implementation has not arrived as top management of the Group whenever he Mr. Anand Rai till now was completing his IA 4533/2006 IN CS (OS) 294/2006 Page 9 joins the business. studies and had not joined as a partner.

However, now that his studies are coming to an end even this clause needs to be implemented.

10. AR will be responsible on behalf of the The Plaintiff carried out the functions of PR Group for Public Relations, liaison with and liaison as requested by the Defendant. the Government, Politics and Press. He In order to maintain family peace and give a may also run the electronics division as free hand to the Defendant, the plaintiff did part of the Group if he so desires. Anil Rai not interfere in the day-to-day functioning will continue as Co-Chairman as long as of the Group Companies. However, this is Vinay Rai is Chairman. not a waiver of this term but only an attempt to avoid any conflict.

3. The plaintiff avers that the details would disclose that family arrangement was partially executed and implemented by both the parties and the have been taking benefits thereunder. He states that, the defendant has developed malafide intentions and is now trying to dispute the validity of the arrangement. He states that by notice dated 26.10.2005, the company controlled by the defendant sought to cancel the agreement to sell executed between the parties in pursuance of the family arrangement and sought possession of the premises at Bani Park, Jaipur. Further at the instance of the defendant, some promoter members working for him and who had earlier resigned from the Usha Co-Operative House Building Society, Gurgaon lodged a complaint on 6.9.2005 in the office of the Asst. Registrar of Co-Operative Societies, Gurgaon against the present office bearers of the plaintiff‟s family. Similarly, it is averred that the defendant through the Group Company is also seeking to challenge share transfers in Usha Drager Pvt. Ltd. and Usha Amorphous Metals Pvt. Ltd., which were affected in discharge of the obligations IA 4533/2006 IN CS (OS) 294/2006 Page 10 under the agreement. The plaintiff further avers that the due to tensions created by the defendant in the residential home of the parties and forced his mother and wife to file a suit before this Court, being CS (OS) No. 1158 of 2005, seeking demarcation of separate portions for themselves separate from the defendant.

4. The plaintiff also states that having taken advantage of the said family arrangement the defendant cannot now to resile from it. The arrangement remains partially executable, and that he has performed his part of the obligations. It is stated that the defendant in the aforementioned suit, in his written statement has denied the validity of the said agreement. The defendants had therein contended that the agreement was a mere proposal and was just a „wish list‟, and never acted upon. The plaintiff also avers about the statement before the Settlement Commission under Section 245 of the Income Tax Act, 1961, wherein he spelt out the manner in which he proposed to perform his obligation under the arrangement. The plaintiff states that since the family has interests in various trusts, in which the he and his family members are beneficiaries, the defendants in order to defeat the rights of the plaintiff under the family arrangement may dispose of properties. He further states that no accounts have been rendered in relation to properties and business being nagged by the defendant. Therefore, the plaintiff urges the Court to pass an order of mandatory injunction directing the parties to give full effect to the family arrangement of 19.03.2000 and also a permanent injunction restraining the defendant from creating third party interests in the aforesaid properties or in any manner dealing with suit properties.

5. The defendant in his application has taken the following grounds, urging the rejection of the plaint. At the outset, he denies that document of 19.3.2000 relied by the IA 4533/2006 IN CS (OS) 294/2006 Page 11 plaintiff was only a wish list and was not to be acted upon by the parties. He relies on the statement made by the plaintiff before the Settlement Commission, where he had allegedly admitted that the document of 19.3.2000 was only a wish list. It is submitted that the suit is liable to be dismissed on this ground alone.

6. It is next submitted that the suit is time barred since it seeks to enforce the so-

called family arrangement dated 19.3.2000 by filing the suit on 14.2.2006. As per Article 54 of the Limitation Act, 1963 the limitation period for filing a suit for specific performance is three years from the date fixed for performance, or, if no such date is fixed, when the plaintiff has the notice that the performance is refused. In this regard it is submitted that, although the arrangement was never to be acted upon, there was no specific date fixed for the performance. Moreover, as per the admission of the plaintiff before the Settlement Commission on 10.4.2002, the instrument was a wish list and not to be acted upon; that, it is submitted served as notice of denial of validity of the instrument.

7. The defendant further states that the suit has been improperly valued for the purposes of court fee and jurisdiction and is accordingly liable to be rejected. It is submitted that the plaintiff has quantified his money claim in the minimum sum of Rs. 65 crores, but has valued the suit for the relief of mandatory injunction for a paltry sum of Rs. 21 lacs, which goes to show that the suit has been grossly undervalued for the purpose of court fee.

8. It is also submitted by the defendant that not leave to file the present suit was sought in the previous suit CS (OS) No. 1158/2005. Therefore, the suit is also liable to rejected under Order 7 Rule 11 (d). Additionally, in the prayer the defendant also urges that suit be rejected on the ground that the beneficiaries of the alleged arrangement have IA 4533/2006 IN CS (OS) 294/2006 Page 12 not been impleaded and that the agreement itself is void as being opposed to pubic policy under Section 23 of the Indian Contract Act, 1872.

9. Mr Kailash Vasudev, learned Senior counsel for the plaintiff submitted that the averments in the plaint and the documents, taken together, point to the suit being time barred. He contended that the plaintiff was aware that the family settlement upon which the suit is primarily founded, was executed in the year 2000. The plaintiff became aware that the defendant was unwilling to take steps towards its implementation, as according to him, the document was a mere wish list, containing pious hopes which the parties expected would mature; it did not contain any mutual obligations. This position of the defendant was made known in communications and e-mails to the plaintiffs, addressed as early as in the year 2002; the same are part of the record. Therefore, the suit should have been filed within the period of three years, reckonable from that time. However, the suit has been filed in February, 2006, and is time barred. Therefore, applying the principle underlying Order 7, Rule 11, CPC, the court should reject the plaint. Reliance was placed on the judgments of the Supreme Court, reported as Hardesh Ores (P) Ltd. v. Hede & Co.,(2007) 5 SCC 614, N.V. Srinivasa Murthy v. Mariyamma, (2005) 5 SCC 548 and T.

Arivandandam v. T.V. Satyapal 1977 (4) SCC 467, for the proposition that clever drafting of pleadings by a litigant should not obscure the real nature of the action, and the court should exercise its power to nip patently hopeless or frivolous litigation in the bud, by exercising its power to reject the plaint, at any stage. In this case, submitted counsel, the plaint averments, which included the list of documents filed along with the suit, showed that the alleged cause of action arose as early as in 2002; the suit therefore was clearly time barred.

IA 4533/2006 IN CS (OS) 294/2006 Page 13

10. It was next contended that the court should also reject the suit for the reason that parties necessary for an effective adjudication of the disputes have all not been impleaded. Counsel urged that the plaintiff seeks injunctive relief to effectuate a settlement and understanding, which involves transfer of shares; the plaintiff has not even disclosed the defendant‟s extent of shareholding in each company. Besides, the company, being an independent juristic entity, is a necessary party in whose absence effective and full adjudication of all disputes is impossible. The suit is, therefore, barred for non-

joinder of necessary parties, and therefore, has to be rejected.

11. Counsel also submitted that the plaintiff has grossly undervalued the reliefs in the suit. He relied on the documents, particularly the family settlement, placed on record by the plaintiff, and contended that a reasonable and fair estimate of the share claimed in the various assets are substantial, and over Rs. 700 crores. The plaintiff should therefore, have valued them correctly, instead of valuing the reliefs only having regard to the pecuniary jurisdiction of the court. The court should not accept the plaintiff‟s valuation, which is intentionally depressed, to avoid paying proper court fee. Counsel relied on the decisions reported as .....

12. It was also urged that this court should reject the plaint, because the plaintiff did not seek leave of the court to file the second suit, fully knowing that the subject matter of this suit could have well been incorporated in the previous suit. Not having done so, the plaintiff cannot now be heard saying that the suit is not barred; applying the principles embedded in Order II Rule 2, this court should not entertain the present suit.

13. Mr. Arvind Nigam, learned counsel, on the other hand, submitted that the application should be rejected. Adverting to the defendant‟s plea of limitation, it was IA 4533/2006 IN CS (OS) 294/2006 Page 14 urged that the suit was filed within the period of time prescribed. Counsel urged that the parties to the family settlement understood it to be binding, and even acted on it. He referred to Para 6 of the plaint and submitted that the court, while considering whether a suit is filed within the period of limitation, has to see all the pleas in the plaint, as well as the documents filed along with it. In this case, the plaintiff had urged, clearly, that steps to effectuate the settlement were taken by both parties on various dates; the defendant, notwithstanding his e-mail communication of 2002, continued to effectuate the settlement through various acts, either himself, or through others; the categorical repudiation of his liabilities was expressed in 2005; reckoned from then, the present suit is filed within the period of limitation.

14. Counsel relied on decisions reported as Sahu Madho Das v. Mukund Ram, AIR 1955 SC 481 and Kale & Others v. Deputy Director of Consolidation, (1976) 3 SCC 119, to canvass the proposition that the Courts have generally relied on family arrangements and enforced them, overlooking trivial and technical objections. He contended, relying upon these decisions that object of such family arrangements is to protect the family from long drawn disputes and that unless, fraud is proved, courts should enforce the family arrangement. Further, courts have enforced family arrangements made honestly, even though made on the basis of error or mistake of all parties. Counsel further placed reliance on KK Modi v. KN Modi, (1998) 3 SCC 573, Hari Shankar Singhania v. Gowri Shankar Singhania, (2006) 4 SCC 658 and Manish Mohan Sharma v. Ram Bahadur Thakur, (2006) 4 SCC 416, to assert that Court must not lightly interfere with family settlements, and since these instruments are governed by special equities, they are to be enforced. Therefore, it is urged that at this stage of demurer, absent a specific plea of IA 4533/2006 IN CS (OS) 294/2006 Page 15 fraud, the Court must not reject the suit on the ground that defendant challenges the validity or existence of the family arrangement.

15. Learned counsel appearing on behalf of the defendants submitted that valuation of the suit is correct. At the stage of filing the suit, the value of the shares in the company and the various benefits accruing to the plaintiffs were of imprecise value; therefore, the relief was given notional valuation. It was also urged that the suit was not barred by reason of Order II Rule 2, since the previous suit was not filed by the plaintiff, but his other relatives. As regards the objection of not impleading the companies was concerned, counsel submitted that no relief against the companies has been sought; the plaintiff merely seeks effectuation of the settlement, which would result in change in the pattern of the shareholding. That would be ascertained at the stage of evidence.

16. It is well settled that the court, at the stage of considering an application under Order 7, Rule 11, has to examine only the plaint averments, and the list of documents filed along with the suit. Other pleas, advanced by parties, including the pleadings in the written statement, cannot be considered by the court. The defendant‟s plea about the suit being time barred, is based on e-mail communications exchanged between the parties. No doubt, they prima facie indicate that the defendant had expressed his view that the family settlement (of which the plaintiff seeks implementation by this suit) is a mere "wish list"

and not binding upon him; also, undoubtedly that was expressed in 2002. Yet, the court cannot be unmindful of express averments in the plaint, particularly various parts of Para 6, to the effect that parties, including defendant, took steps to give effect to the settlement on various dates, in 2001 and 2004. The court cannot also ignore the dicta of the Supreme IA 4533/2006 IN CS (OS) 294/2006 Page 16 Court, in Kale v. Dy. Director of Consolidation, (1976) 3 SCC 119, where, after noticing a number of Indian and English authorities on the subject, the court observed as follows:

"The courts have, therefore, leaned in favour of upholding a family arrangement instead of disturbing the same on technical or trivial grounds. Where the courts find that the family arrangement suffers from a legal lacuna or a formal defect the rule of estoppel is pressed into service and is applied to shut out plea of the person who being a party to family arrangement seeks to unsettle a settled dispute and claims to revoke the family arrangement under which he has himself enjoyed some material benefits."

It further observed that:

"(1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family; (2) The said settlement must be voluntary and should not be influenced by fraud, coercion or undue influence;"

This position of law has been reiterated in a series of judgments, the latest one being Manish Mohan Sharma (supra).

17. The Supreme Court in Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success (2004) 9 SCC 512, while dealing with the law relating to rejection of plaint under Order 7 Rule 11 of the Code of Civil Procedure, 1908, observed as follows:

"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. In ascertaining whether the plaint shows a cause of action, the court is not required to make an elaborate enquiry into doubtful or complicated questions of law or fact.

So long as the claim discloses some cause of action or raises some questions fit to be decided by a judge, the mere fact that the case is weak and not likely to succeed is no ground for striking it out. The purported failure of the pleadings to disclose a cause of action is distinct from the absence of full particulars."

IA 4533/2006 IN CS (OS) 294/2006 Page 17

18. In the present case, the state of pleadings in the suit being what it is, the court cannot agree with the defendant‟s contention that the action is time barred.

May be, in regard to some claims, the suit could be time barred; however, the court cannot, at this pre-trial stage, undertake a detailed scrutiny. Another cardinal rule which guides courts is that the plaint cannot be rejected in part, if it contains multiple causes of action. Assuming that claims to some causes might be barred, the existence of others which may be established at the trial stage should impel the court to tread softly. For these reasons, the plea of limitation cannot be accepted.

19. So far as the contention regarding non-joinder of the companies is concerned, the court is inclined to agree with the plaintiff‟s contentions. The test to determine whether a party is necessary or proper is whether effectual adjudication is impossible in its or their absence. Here, the absence of the companies would not hinder the trial; no relief has been claimed against anyone of them. At this stage, it appears that the plaintiff is merely asking for implementation of the family settlement whereby the share holding pattern had to be divided in a particular manner. Those aspects are details to be seen at the stage of trial, after recording evidence, not now. Likewise, the question of seeking leave from the court would have arisen if the other suit had been filed by the plaintiff;

undeniably he is not plaintiff, in that case. The plea of suit being barred on that score too, has to fail.

IA 4533/2006 IN CS (OS) 294/2006 Page 18

20. That brings the discussion to the question of objection regarding court fee.

In Tara Devi v. Thakur Radha Krishna Maharaj ((1987) 4 SCC 69) the Supreme Court observed that :

"It is now well settled by the decision of this Court in Sathappa Chettiar v. Ramanathan Chettiar (1958 SCR 1024 : AIR 1958 SC 245) and Meenakshisundaram Chettiar v. Venkatachalam Chettiar. ((1980) 1 SCC 616) that in a suit for declaration with consequential relief falling under Section 7(iv)(c) of the Court Fees Act, 1870, the plaintiff is free to make his own estimation of the reliefs sought in the plaint and such valuation both for the purposes of court fee and jurisdiction has to be ordinarily accepted. It is only in cases where it appears to the court on a consideration of the facts and circumstances of the case that the valuation is arbitrary, unreasonable and the plaint has been demonstratively undervalued, the court can examine the valuation and can revise the same."

In Sujir Keshav Nayak, Appellant V. Sujir Ganesh Nayak 1992-(1)-SCC 731, after considering previous decisions reported as R. S. Jadhav Desai v. S. V. Jadhav Desai (AIR 1918 PC 188); Abdul Hamid Shamsi v. Abdul Majid ((1988) 2 SCC 575) the court upheld the plaintiff‟s right to value the suit for accounting according to his own estimate; it was also held that he has not been given the absolute right or option to place any valuation whatever in such relief. The court also noticed the previous decision in Meenakshisundaram Chettiar v. Venkatachalam Chettiar. ((1980) 1 SCC 616), where it was observed that even though in suit for accounting the loss of revenue is ensured by statutory provision yet a plaintiff has a duty to give a fair estimate of the amount for which he sues. The court, after reviewing all decisions, held that:

" The law on this aspect, thus, should be taken to be as under :

(1) Where the question of court fee is linked with jurisdiction a defendant has a right to raise objection and the court should decide it as a preliminary issue.

IA 4533/2006 IN CS (OS) 294/2006 Page 19 (2) But in those cases where the suit is filed in court of unlimited jurisdiction the valuation disclosed by the plaintiff or payment of amount of court fee on relief claimed in plaint or memorandum of appeal should be taken as correct.

(3) This does not preclude the court even in suits filed in courts of unlimited jurisdiction from examining if the valuation, on averments in plaint, is arbitrary."

19. The plaintiff therefore, has ordinarily the right to value his reliefs for the purpose of court fees as well as jurisdiction. Yet, this right is not an unqualified right, since even in suits preferred in courts of unlimited jurisdiction (like the present case) the court has the right to examine if the valuation, on averments in plaint, is arbitrary. In the light of this discussion, it is necessary to see whether the valuation is appropriate, or arbitrary.

20. A bare reading of the Family settlement, and averments in the suit (described in tabular form, in Para 2 of this order, show that the sum total of assets and cash obligations involved, are approximately above Rs. 75 crores. In the circumstances, the suit valuation, for purposes of court fees, at Rs 21,00,000/- made, in the suit, is arbitrary.

It is therefore, held that the suit has not been valued properly for the purposes of court fees.

21. In the above circumstances, the plaintiff is granted four weeks time to properly value the suit, having regard to averments in the suit, and pay the requisite court fees. The application is accordingly disposed of in these terms.

Anil Rai v. Vinay Rai

Order 7 Rule 11 Application — IA No. 4533/2006 in CS (OS) 294/2006: Structured Summary

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Defendant's Arguments

Plaintiff's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Anil Rai v. Vinay Rai

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