Order VII Rule 11 cannot reject a counterclaim disclosing a pleaded cause of action against the plaintiff.

The respondent-plaintiff instituted a suit seeking declaration of title, cancellation of sale deeds executed by defendant No.1 in favour of defendants Nos.2–5, and permanent injunction concerning the suit property.

The plaintiff claimed that he had purchased the property through a registered sale deed dated 10 July 1984 and alleged that defendant No.1 had fraudulently relied upon a forged Will dated 10 December 1985 to execute sale deeds in favour of defendants Nos.2–5.

Defendants Nos.2–5, the present appellants, filed a written statement and counter-claim. They asserted that they had purchased the property for consideration from defendant No.1, had received possession, and had been induced to enter into the transactions through collusion between the plaintiff and defendant No.1.

Their counter-claim sought relief against both the plaintiff and defendant No.1, including recovery of the sale consideration and other consequential reliefs.

The plaintiff applied under Order VII Rule 11 CPC for rejection of the counter-claim, contending that it was barred by limitation and that no relief had been claimed against the plaintiff.

By order dated 3 November 2023, the Trial Court rejected the limitation objection but allowed the application on the ground that the counter-claim was essentially directed against defendant No.1, a co-defendant, and was therefore impermissible.

The appellants filed the present appeal with a delay of 108 days.

The delay arose because the original suit had been dismissed for want of prosecution on 28 November 2023, leading the appellants to believe that the threat to their title had ended; they challenged the rejection of the counter-claim after the plaintiff sought restoration of the suit.

1. Whether the appellants had shown sufficient cause for condonation of the delay in filing the appeal against rejection of their counter-claim?

2. Whether the counter-claim disclosed a cause of action and sought relief against the plaintiff so as to survive an application under Order VII Rule 11 CPC?

3. Whether the Trial Court was entitled, while deciding the application under Order VII Rule 11 CPC, to rely upon external documents, assess the truth or specificity of the pleadings, and examine the merits of the alleged collusion?

Under Section 5 of the Limitation Act, 1963, the expression “sufficient cause” must receive a liberal construction advancing substantial justice; delay should ordinarily be condoned where there is no mala fide conduct and the party has acted with reasonable diligence.

The Court relied on S. Ganesharaju v. S. Narasamma, (2013) 11 SCC 341, which held that limitation rules are not intended to destroy substantive rights and that matters should ordinarily be decided on merits.

Under Order VII Rule 11 CPC, the court must examine the averments in the plaint or counter-claim as a whole and determine whether they disclose a cause of action or are barred by law; the defence, external evidence, and disputed factual matters are irrelevant at that stage.

The Court relied on P.V. Guru Raj Reddy v. P. Neeradha Reddy, (2015) 8 SCC 331, which characterized rejection under Order VII Rule 11 as a drastic threshold power and held that disputed claims must ordinarily be adjudicated at trial.

The Court also applied Section 13 of the Court Fees Act, 1870, as interpreted in Suresh Kumar Chowkse v. State of Madhya Pradesh, AIR 1986 MP 130, to direct refund of the court fee paid in the appeal.

The High Court found the appellants’ explanation for the delay reasonable.

Since the suit had been dismissed for want of prosecution, their belief that the dispute and threat to their title had ended was not unjustified; the subsequent restoration application revived their apprehension and prompted the appeal.

The delay was therefore condoned in the interest of substantial justice.

On the counter-claim, the Court examined the appellants’ pleadings alone, as required under Order VII Rule 11 CPC.

The pleadings specifically alleged that the plaintiff and defendant No.1 had colluded in selling the property to the appellants and appropriating the sale consideration, thereby disclosing a cause of action against the plaintiff as well as defendant No.1.

The relief clause likewise sought relief against both parties, contrary to the Trial Court’s conclusion that the counter-claim was directed only against defendant No.1.

The Trial Court improperly relied upon the plaintiff’s FIR and assessed whether the allegations of collusion were clear, specific, and factually established.

It also treated the absence of pleaded contact between the appellants and the plaintiff, or proof that the plaintiff received the sale consideration, as fatal.

These matters concerned the truth and evidentiary strength of the appellants’ case and could not be determined under Order VII Rule 11 CPC.

Since the plaintiff’s suit had meanwhile been restored and was pending, adjudication of the counter-claim on merits was considered necessary for a complete resolution of the dispute.

It further held that the counter-claim pleaded a cause of action against the plaintiff, claimed relief against both the plaintiff and defendant No.1, and could not be rejected by examining disputed facts or relying upon external material under Order VII Rule 11 CPC.

The Trial Court’s order dated 3 November 2023 was set aside, the plaintiff’s application under Order VII Rule 11 CPC was rejected, and the matter was remitted to the Trial Court for adjudication of the counter-claim on merits.

The appeal was allowed, and the appellants were directed to receive a refund of the court fee paid in the appeal under Section 13 of the Court Fees Act, 1870.