Case Note & Summary
The appellant, M/s. Marg Limited, a real estate developer, purchased land in Chennai in 2002 and constructed a commercial IT building. In 2011 and 2015, it availed loans from Standard Chartered Bank, creating equitable mortgages over the property. Due to financial difficulties, the loan became an NPA, and the Bank initiated recovery proceedings under the SARFAESI Act. In 2022, the appellant and the Bank entered into a one-time settlement (OTS) for Rs.55 crores, but the appellant failed to pay the full amount. In January 2023, a fresh settlement was reached for Rs.32.50 crores. Simultaneously, the appellant negotiated with the respondents for the sale of the property. A Memorandum of Agreement (MoA) was drafted by the respondents' counsel on 17.02.2023, and after negotiations via WhatsApp, the MoA was finalized on 07.03.2023. The appellant executed the MoA, but the respondents did not sign it. The transaction involved sale through eight separate sale deeds for Rs.58.60 crores, with Rs.32.50 crores payable to the Bank. On 03.04.2023, the Bank received Rs.32.50 crores and handed over title deeds to the respondents. On the same day, eight sale deeds were executed and registered on 19.04.2023. In June 2024, the appellant filed a suit seeking mandatory injunction to enforce the MoA, alleging that the respondents failed to fulfill obligations including payment of balance consideration linked to refurbishment and leasing. Alternatively, reconveyance was sought. The respondents filed an application under Order VII Rule 11 CPC to reject the plaint. The trial court dismissed the application, holding that the plaint disclosed a cause of action. The High Court, in revision, allowed the application, rejecting the plaint on grounds that the MoA was not a concluded contract, the sale deeds transferred rights, and the suit was for recovery requiring ad valorem court fees. The Supreme Court allowed the appeal, holding that the High Court erred by conducting a mini-trial and ignoring the composite nature of the transaction. The Court emphasized that at the stage of Order VII Rule 11, only the plaint averments and documents relied upon are to be considered, and the plaint disclosed a cause of action. The deficiency in court fees, if any, was a curable defect. The impugned order was set aside, and the suit was restored for trial.
Headnote
A) Civil Procedure - Rejection of Plaint - Order VII Rule 11 CPC - Cause of Action - The court must examine the plaint as a whole; if the averments prima facie disclose a cause of action, the plaint cannot be rejected. The High Court erred by undertaking a mini-trial and ignoring the composite nature of the transaction. (Paras 17-19) B) Civil Procedure - Court Fees - Curable Defect - Deficiency in court fees is a curable defect; the court must give an opportunity to rectify before rejecting the plaint. The High Court's finding that the suit was for recovery requiring ad valorem fees was premature. (Paras 12, 14) C) Contract Law - Concluded Contract - Memorandum of Agreement - An MoA not signed by one party may still be enforceable if acted upon and consensus ad idem is demonstrated through conduct. The High Court erred in holding the MoA unenforceable without trial. (Paras 7, 13, 19)
Issue of Consideration
Whether the High Court was justified in rejecting the plaint under Order VII Rule 11 CPC on the grounds that it did not disclose a cause of action and was insufficiently stamped, and whether the court could undertake a detailed examination of facts at the threshold stage.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court order dated 28.07.2025, and restored the trial court order dated 24.09.2024. The suit is to be tried on merits. The Court held that the plaint disclosed a cause of action and the High Court impermissibly conducted a mini-trial. The deficiency in court fees, if any, is a curable defect.
Law Points
- Order VII Rule 11 CPC
- cause of action
- rejection of plaint
- court fees
- mini-trial
- composite transaction
- concluded contract
- MoA
- sale deed
- equitable mortgage
- SARFAESI Act
