Plaint rejection for undervaluation is impermissible without first providing a prior opportunity to rectify court fees.

The Appellant, a real estate developer, purchased land in Chennai and constructed a commercial IT building

The property was mortgaged to Standard Chartered Bank to secure loans, but the account was later classified as a Non-Performing Asset (NPA)

To settle dues, the Appellant negotiated with the Respondents to sell the property through a structured commercial arrangement

A Memorandum of Agreement (MoA) was drafted by the Respondents’ counsel, providing for a total transaction value of approximately ₹105 crores, including the discharge of bank liabilities and a balance payment of ₹53 crores linked to property leasing

While the Appellant signed the MoA, the Respondents did not, though they proceeded to pay the bank and obtained eight registered sale deeds in favor of their nominees

In 2024, the Appellant filed a suit for mandatory injunction to enforce the MoA/payment of balance or, alternatively, reconveyance of the property

The Respondents filed an application under Order VII Rule 11 of the CPC for rejection of the plaint, citing lack of cause of action and undervaluation

The Trial Court dismissed the application, but the High Court reversed this on revision, holding the MoA was not a concluded contract and the suit was undervalued

The Court primarily applied Order VII Rule 11 of the Code of Civil Procedure (CPC), which mandates the rejection of a plaint if it fails to disclose a cause of action or if the plaintiff fails to correct undervaluation/stamp duty within a court-fixed time

It relied on Dahiben v. Arvindbhai Kalyanji Bhanusali, emphasizing that averments in the plaint must be taken as true and read as a whole alongside relied-upon documents

The Court further applied the principle from T. Arivandandam v. T.V. Satyapal to distinguish between "real" and "merely illusory" causes of action

the statutory safeguard in the Proviso to Order VII Rule 11, which requires the Court to grant time to rectify valuation defects before rejection

The Supreme Court observed that the High Court erred by conducting a "mini-trial" at the threshold stage

Analyzing the WhatsApp communications and the draft MoA, the Court found the Appellant had pleaded a "composite commercial arrangement" where the execution of sale deeds was inextricably linked to post-sale obligations and balance payments

The Court held that the question of whether the unsigned MoA constituted a concluded contract was a triable issue of fact that could not be determined summarily

Regarding court fees, the Court noted that under Order VII Rule 11(b) and (c), rejection is a "two-step process"

The Court must first determine the correct valuation and fix a deadline for payment; rejection is only permissible if the plaintiff fails to comply with that specific direction

The High Court’s outright rejection without granting this mandatory opportunity was held to be a manifest error of law

It held that the plaint disclosed a valid cause of action as it pleaded a sequence of material facts and partial performance of a commercial arrangement

The Court directed the Trial Court to afford the Appellant an opportunity to correct the suit valuation and pay the requisite ad valorem court fees within a fixed time limit

The suit was restored for adjudication on merits