Civil Court Jurisdiction Sustained Over Allegations of Fraud and Malice Despite Statutory Bar under Slum Act

The Plaintiffs, original developers of three slum rehabilitation schemes, were terminated by the Slum Rehabilitation Authority (SRA) and replaced by Defendant No. 4

The Plaintiffs alleged that their removal and the subsequent appointment of Defendant No. 4 resulted from a fraudulent conspiracy involving the Defendants, including state officials and "blacklisted" developers

Following the dismissal of their Special Leave Petition by the Supreme Court on 12th April 2019, which granted liberty to pursue remedies for breach of contract and damages, the Plaintiffs filed this suit seeking declarations of entitlement to benefits, compensation, and damages

Defendants 11, 12, 4, 3, and 19 filed applications under Order VII Rule 11 of the CPC for rejection of the plaint on grounds of limitation, bar of jurisdiction under the Slum Act, non-compliance with pre-institution mediation, and Order II Rule 2

1. Whether the suit is barred by limitation considering the COVID-19 extension granted by the Supreme Court

2. Whether the jurisdiction of the Civil Court is barred under Section 42 of the Maharashtra Slum Areas Act, 1971

3. Whether the suit is liable for rejection for non-compliance with mandatory pre-institution mediation under Section 12A of the Commercial Courts Act, 2015

4. Whether the suit is barred under the principle of Order II Rule 2 of the CPC due to a pending counterclaim in a separate suit

The Court applied Order VII Rule 11 of the CPC regarding the rejection of a plaint

It relied on the Supreme Court's decision in Cognizance for Extension of Limitation, In Re, which provided that if the balance period of limitation remaining as of 1st March 2022 is greater than 90 days, the longer period applies

Regarding the bar under Section 42 of the Slum Act, it cited Qari Mohammed Zakir Hussain v. MCGM and Om Shree Sai Developers v. State of Maharashtra, establishing that Civil Courts retain jurisdiction where acts are alleged to be fraudulent, malicious, or not in good faith

For Section 12A of the Commercial Courts Act, it applied Yamini Manohar v. T.K.D. Keerthi and Dhanbad Fuels, which state that the court must holistically assess if urgent interim relief is "contemplated" from the plaintiff's standpoint to bypass mediation

Finally, it applied Cuddalore Powergen Corp v. Chemplast Cuddalore, holding that the bar under Order II Rule 2 requires an identity of cause of action and cannot be decided on a "reductive approach" at the threshold

The Court found the suit within limitation because the cause of action arose on 3rd October 2018; as of 15th March 2020, the balance period was over 1.5 years, which remained available post-COVID extension (until 17th September 2023), making the 11th September 2023 filing timely

On the statutory bar, the Court reasoned that since the Plaintiffs specifically pleaded detailed particulars of fraud, collusion, and malice (vitiating "good faith"), the bar under Section 42 of the Slum Act did not apply, as such triable issues of civil nature are within the plenary jurisdiction of the Civil Court under Section 9 CPC

Regarding Section 12A, the Court held that the Plaintiffs genuinely "contemplated" urgent relief to protect private rights against ongoing construction by Defendant No. 4, thus exempting them from pre-institution mediation

Regarding Order II Rule 2, the Court determined that the Plaintiffs' counterclaim in a separate suit was based on contractual breach, whereas the present suit was based on fraud, meaning the causes of action were not identical and required trial evidence

The Court dismissed all Interim Applications for rejection of the plaint. Finding that the applications were an attempt to delay proceedings and defeat the object of the Commercial Courts Act, the Court directed the Applicants/Defendants to pay costs of ₹2,00,000 per application to the Plaintiffs