REJECTION OF COMMERCIAL PLAINT DENIED WHERE URGENT INTERIM RELIEF IS CONTEMPLATED FROM PLAINTIFF’S STANDPOINT

The Plaintiffs (Mordani Group), real estate developers, availed various loan facilities from Defendant Nos. 1 and 2 (IIFL Group).

Following defaults, the parties entered into a Framework Agreement dated December 20, 2024, for a composite settlement.

Parallelly, a Profit Sharing Agreement was executed with Defendant No. 3, a nominee developer.

The Plaintiffs alleged that despite acting upon these agreements and transferring projects, Defendant No. 2 issued a possession notice under the SARFAESI Act on February 18, 2025.

The Plaintiffs filed a suit for specific performance of the settlement agreements and sought urgent interim injunctions to restrain the Defendants from enforcing security interests.

The Defendants filed the present Interim Applications seeking rejection of the plaint under Order VII Rule 11 of the CPC.

1. Whether the plaint is liable to be rejected for non-compliance with the mandatory pre-institution mediation under Section 12-A of the Commercial Courts Act, 2015.

2. Whether the suit is barred by Section 34 of the SARFAESI Act and Section 41 of the Specific Relief Act.

3. Whether the plaint discloses a cause of action against Defendant Nos. 2 and 3, who were allegedly not signatories to the Framework Agreement.

Section 12-A of the Commercial Courts Act, 2015, which mandates pre-institution mediation except in suits contemplating "urgent interim relief".

Patil Automation Pvt. Ltd. v. Rakheja Engineers

Yamini Manohar v. T.K.D. Keerthi, which established that "urgency" must be assessed from the plaintiff's standpoint.

Order VII Rule 11 of the CPC regarding the rejection of plaints.

Section 34 of the SARFAESI Act, which bars civil court jurisdiction over matters determined by the DRT.

The 'drastic' nature of rejection was guided by Dahiben v. Arvindbhai Kalyanji Bhanusali.

The court reasoned that the test for Section 12-A is whether urgent interim relief is "contemplable" from the plaintiff’s perspective, rather than whether such relief is ultimately granted.

Examining the plaint holistically, the court found the Plaintiffs’ apprehension of dispossession via SARFAESI action, despite an alleged settlement agreement, constituted a genuine need for urgent intervention.

The court rejected the Defendants' argument that post-filing delays or the actual merits of the interim application should justify rejection, clarifying that procedural time lags in the Registry do not negate the plaintiff's initial plea of urgency.

Regarding Section 34 of SARFAESI, the court noted the suit predominantly sought specific performance of contracts—a relief the DRT cannot grant—making the bar inapplicable at the threshold.

The court held that since the plaint alleged the Defendants had acted upon and benefited from the agreements, the issue of privity of contract (cause of action) was a matter for trial.

The court dismissed the Defendants' applications for rejection of the plaint. It held that no grounds for rejection under Order VII Rule 11 were established, as the bars under the SARFAESI Act and Specific Relief Act were not absolute given the nature of the substantive prayers for specific performance.