Case Note & Summary
The respondent, Smt. Suman Ikhankar, filed a civil suit (R.C.S. No. 220/2011) against the applicant, Indiabulls Housing Finance Limited, and two others seeking declarations that a mortgage deed executed by her in favor of the applicant was an outcome of forgery and fraud, and therefore not binding on her. The suit was based on a loan agreement between the parties. The applicant appeared and filed two applications: one under Section 9A of the Code of Civil Procedure, 1908 (CPC) for framing a preliminary issue on jurisdiction, and another under Order 7 Rule 11 CPC for rejection of the plaint. The trial court rejected both applications by order dated 22/07/2016, holding that the plaint could not be rejected on the ground of lack of jurisdiction. The applicant challenged this order in the Bombay High Court. The High Court considered whether the civil court had jurisdiction given the existence of an arbitration clause in the loan agreement. The court held that allegations of fraud and forgery are not arbitrable and must be adjudicated by a civil court. The plaint disclosed a cause of action and could not be rejected under Order 7 Rule 11. The court also noted that the applicant had not filed any application under Section 8 of the Arbitration and Conciliation Act, 1996 for reference to arbitration. The revision application was dismissed, and the trial court was directed to proceed with the suit.
Headnote
A) Civil Procedure Code - Section 9A - Preliminary Issue of Jurisdiction - The court must decide jurisdiction as a preliminary issue when raised under Section 9A CPC - The trial court correctly held that the suit is not barred by jurisdiction as the dispute involves allegations of fraud and forgery which are not arbitrable (Paras 4-10). B) Civil Procedure Code - Order 7 Rule 11 - Rejection of Plaint - Plaint cannot be rejected under Order 7 Rule 11 if it discloses a cause of action - The plaint alleging fraud and forgery in execution of mortgage deed discloses a cause of action and cannot be rejected (Paras 4-10). C) Arbitration and Conciliation Act, 1996 - Section 8 - Arbitration Agreement - Disputes involving allegations of fraud and forgery are not arbitrable and must be decided by a civil court - The existence of an arbitration clause does not oust the jurisdiction of the civil court when the validity of the underlying contract is challenged on grounds of fraud (Paras 5-10).
Issue of Consideration
Whether the civil court has jurisdiction to entertain a suit challenging a mortgage deed as fraudulent and forged, despite the existence of an arbitration clause in the loan agreement, and whether the plaint is liable to be rejected under Order 7 Rule 11 CPC.
Final Decision
The revision application is dismissed. The order dated 22/07/2016 passed by the 3rd Joint Civil Judge (Sr.Dn.), Nagpur is confirmed. The trial court is directed to proceed with the suit in accordance with law.
Law Points
- Section 9A CPC
- Order 7 Rule 11 CPC
- jurisdiction of civil court
- arbitration clause
- fraud and forgery
- mortgage deed
- preliminary issue
