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2025 DAILYLAW 883 (CHH)

Shri Salasar Balaji Fero Alloys Private Limited v. Deepak Daga S/o. Late Kedarnath

2025-07-29

Amitendra Kishore Prasad

body2025
ORDER : Amitendra Kishore Prasad, J. 1. Heard Mr. Manoj Paranjpe, learned counsel for the applicant and Mr. Chandresh Shrivastava, learned counsel appearing for non-applicant No.1. 2. By way of this civil revision, the applicant has prayed for following relief:- “It is therefore most humbly prayed that this Hon'ble Court may kindly be pleased to allow the instant revision and the impugned order dated 12.03.2025 passed by Principal District Judge Rajnandgaon, passed in Civil Suit No. 30A/2024, in the matter of "Deepak Daga v. Salasar Balaji & One another" so far as it relates to rejection of the application preferred by the defendant No.1 under Order 7 Rule 11 of Code of Civil Procedure is concerned, may kindly be set aside and the application under Order 7 Rule 11 of Code of Civil Procedure may kindly be allowed and plant may kindly be rejected or the parties may kindly be relegated to the arbitrator.” 3. Brief facts of the case, are that the present civil revision has been filed by the defendant No.1 (Company through its Managing Director) assailing the legality and propriety of the order dated 12.03.2025 passed by the learned Principal District Judge, Rajnandgaon, whereby the trial Court decided two applications— (i) an application under Order 39 Rule 1 & 2 of the Code of Civil Procedure , 1908 (‘CPC’) preferred by the plaintiff, and (ii) an application under Order 7 Rule 11 CPC filed by the present revisionist (defendant No.1) seeking rejection of the plaint. While the plaintiff’s application for temporary injunction was allowed in part, the defendant’s application under Order 7 Rule 11 CPC was rejected. The non-applicant No.1/plaintiff filed a civil suit seeking a decree for declaration and permanent injunction. The relief sought included a declaration that the sale deed dated 22.10.2024 executed in favour of the defendant No.1 with respect to certain lands bearing Khasra Nos. 192/1, 196/9, 192/3, 192/4, measuring a total area of 2.627 hectares situated at village Sivnikhurd, Dongargaon, District Rajnandgaon, is null and void. A consequential relief of injunction was also sought restraining the defendant from interfering with the plaintiff's possession and from executing any further sale deed concerning the said property. 4. 192/1, 196/9, 192/3, 192/4, measuring a total area of 2.627 hectares situated at village Sivnikhurd, Dongargaon, District Rajnandgaon, is null and void. A consequential relief of injunction was also sought restraining the defendant from interfering with the plaintiff's possession and from executing any further sale deed concerning the said property. 4. According to the plaintiff, he and his two brothers are Directors of Vishnu Power and Energy Pvt. Ltd. and Giriraj Solvent Extraction Pvt. Ltd., and due to financial distress and outstanding liabilities with the State Bank of India, a decision was taken to sell the properties of the company. The plaintiff claims that he entered into a transaction with the defendant No.1 for sale of the properties, and a Memorandum of Understanding (MoU) was executed with the Bank, wherein the defendant No.1 agreed to pay the outstanding dues in installments. It is alleged that although most installments were paid, the last installment was obtained by coercion and fraud. The plaintiff further alleges that the documents were signed without reading under pressure, and the original title documents were taken away by the defendant No.1, who later executed registered sale deeds fraudulently, without paying the actual consideration. In response, the defendant No.1 filed an application under Order 7 Rule 11 CPC on 17.12.2024 seeking rejection of the plaint on two primary grounds: (i) the transaction in question is of a commercial nature, involving a commercial dispute between the parties, and therefore, in view of the provisions of the Commercial Courts Act , 2015, the civil suit was not maintainable before the regular civil Court; and (ii) the agreement between the parties contains an arbitration clause (para 19 of the Sale Agreement dated 08.12.2022), and hence, the suit is barred in view of Section 8 of the Arbitration and Conciliation Act , 1996. 5. Despite the pendency of the application under Order 7 Rule 11 CPC, the learned trial Court directed the defendant to file a written statement, which was filed on 04.01.2025 under protest. The plaintiff filed a reply opposing the defendant’s application. Subsequently, the learned trial Court vide impugned order dated 12.03.2025 rejected the application under Order 7 Rule 11 CPC. Hence, the present revision has been filed. 6. The plaintiff filed a reply opposing the defendant’s application. Subsequently, the learned trial Court vide impugned order dated 12.03.2025 rejected the application under Order 7 Rule 11 CPC. Hence, the present revision has been filed. 6. Learned counsel for the applicant/defendant No.1 submits that the impugned order dated 12.03.2025 passed by the learned trial Court rejecting the application under Order 7 Rule 11 CPC is illegal, arbitrary, and passed without due application of mind. It is contended that the trial Court has failed to consider the specific and substantial legal grounds raised in the said application and has overlooked the statutory bar created by the provisions of the Arbitration and Conciliation Act , 1996 as well as the Commercial Courts Act , 2015. It is submitted that the learned trial Court erred in failing to appreciate that the plaint itself reveals the existence of a valid and binding arbitration clause in the agreement to sell dated 08.12.2022. The said clause provides that all disputes, differences, and claims arising out of the agreement shall be resolved by way of arbitration. Therefore, in view of Section 8 of the Arbitration and Conciliation Act , once such an arbitration clause is present and invoked before the first statement on the substance of the dispute is filed, the civil Court is statutorily mandated to refer the matter to arbitration and has no jurisdiction to proceed with the suit. It is further submitted that the plaint should be read meaningfully as a whole and if it discloses that the suit is barred by any law, it must be rejected at the threshold. He also contends that the trial Court has failed to appreciate that the dispute arising out of the transaction in question squarely falls within the definition of “commercial dispute” under Section 2(c) of the Commercial Courts Act , 2015. The transaction involves substantial payment of dues to the bank by the applicant, on behalf of the plaintiff’s companies, which directly impacted their financial stability and commercial viability. The entire transaction was commercial in nature, aimed at protecting business interests and properties of the companies controlled by the plaintiff and his brothers. The transaction involves substantial payment of dues to the bank by the applicant, on behalf of the plaintiff’s companies, which directly impacted their financial stability and commercial viability. The entire transaction was commercial in nature, aimed at protecting business interests and properties of the companies controlled by the plaintiff and his brothers. It is argued that the learned trial Court has failed to consider that once a matter falls within the scope of a commercial dispute and is subject to an arbitration clause, the suit should have been filed either before the appropriate Commercial Court or the parties ought to have been referred to arbitration. The Court has thus acted contrary to the mandate of both the Arbitration and Conciliation Act and the Commercial Courts Act . Learned counsel submits that all preconditions required for invoking Section 8 of the Arbitration and Conciliation Act are fulfilled in the present case, namely: (i) Existence of a valid arbitration agreement; (ii) The suit is between parties to the said agreement; (iii) The subject matter of the suit falls within the scope of the agreement; (Iv) The application under Section 8 was filed before submitting the first statement of the substance of the dispute; and (v) A copy of the arbitration agreement has been furnished along with the application. 7. It is further contended that Section 8 is a legislative mandate and once the preconditions are satisfied, the civil Court is left with no discretion but to refer the matter to arbitration. The trial Court’s failure to do so, despite the facts and legal position being clear, renders the impugned order unsustainable. Learned counsel further argues that the trial Court committed a grave error in directing the applicant to file a written statement before deciding the application under Order 7 Rule 11 CPC, despite the well- established law that such applications are to be decided based solely on the averments in the plaint. This has prejudiced the applicant and defeated the very object of Order 7 Rule 11. Lastly, it is submitted that the learned trial Court has failed to properly analyze the nature of the dispute and the underlying agreement, which is commercial and intertwined with the sale transaction and the agreement to sell, which contains the arbitration clause. This has prejudiced the applicant and defeated the very object of Order 7 Rule 11. Lastly, it is submitted that the learned trial Court has failed to properly analyze the nature of the dispute and the underlying agreement, which is commercial and intertwined with the sale transaction and the agreement to sell, which contains the arbitration clause. Even though the registered sale deed has been executed, the genesis of the dispute lies in the agreement to sell and the associated obligations, thereby attracting the arbitration clause. Accordingly, it is prayed that the impugned order dated 12.03.2025 rejecting the application under Order 7 Rule 11 CPC be set aside, and the plaint be rejected as being barred by law and not maintainable before a civil Court. 8. On the other hand, learned counsel for non-applicant No.1/plaintiff opposes the submissions made on behalf of the applicant and submits that the trial Court has rightly rejected the application under Order 7 Rule 11 CPC. It is submitted that the reliefs sought in the plaint are primarily for declaration and injunction, alleging fraud and coercion in execution of the sale deeds, which are matters requiring detailed adjudication on facts and cannot be summarily dismissed under Order 7 Rule 11 CPC. It is further submitted that the arbitration clause referred to by the applicant cannot be invoked in the present case, as the cause of action is based on allegations of fraud and misrepresentation, which fall outside the scope of the arbitration agreement and the civil Court has jurisdiction to entertain such disputes. Moreover, the mere existence of a commercial transaction does not automatically oust the jurisdiction of the civil Court unless specifically barred by law, therefore, the impugned order does not suffer from any illegality or infirmity and calls for no interference. He has placed reliance in the matter of (Shree Salasar Balaji Ferro Alloys Private Limited v. Deepak Daga) passed by Co-ordinate Bench of this Court vide order dated 12.06.2025 in M.A. No.86 of 2025. 9. I have heard learned counsel for the respective parties and perused the record with utmost circumspection. 10. He has placed reliance in the matter of (Shree Salasar Balaji Ferro Alloys Private Limited v. Deepak Daga) passed by Co-ordinate Bench of this Court vide order dated 12.06.2025 in M.A. No.86 of 2025. 9. I have heard learned counsel for the respective parties and perused the record with utmost circumspection. 10. After hearing learned counsel for the applicant as well as learned counsel for non-applicant No.1 at length, and considering their consensus on the issue, it appears that the core dispute in the present case revolves around the question of jurisdiction of the civil Court, particularly in light of the existence of an arbitration clause in the agreement and the nature of the transaction being commercial, falling within the purview of the Commercial Courts Act , 2015. 11. Both the parties have fairly submitted that the trial Court may be directed to frame a specific issue on the question of jurisdiction and competency of the Court trying the suit and allow the parties to lead evidence confined to that issue. The trial Court shall thereafter adjudicate the jurisdictional question as a preliminary issue. 12. The Hon’ble Supreme Court in Sopan Sukhdeo Sable and others v. Assistant Charity Commissioner and others, reported in (2004) 3 SCC 137 , has held that the question of jurisdiction should be decided as a preliminary issue if it goes to the root of the matter. 13. Further, in Chatterjee Petrochem Company and another v. Haldia Petrochemicals Limited and others, reported in (2014) 14 SCC 574 , the Hon’ble Supreme Court reiterated that where a jurisdictional bar under statute exists (such as under the Arbitration and Conciliation Act or Commercial Courts Act ), the Court must first examine the maintainability of the suit before proceeding on merits. 14. In addition, in Church of Christ Charitable Trust and Educational Charitable Society presented by its Chairman v. Ponniamman Educational Trust represented by its Chairperson/Managing Trustee, reported in (2012) 8 SCC 706 the Hon’ble Supreme Court held that where the Court finds that it lacks jurisdiction, it must return the plaint under Order 7 Rule 10 CPC for presentation before the proper Court. 15. 15. Accordingly, the trial Court is directed to (i) frame a preliminary issue with respect to its jurisdiction to entertain and try the suit, in light of the arbitration clause and the nature of the dispute being commercial; (ii) permit both parties to lead evidence, if required, on the said issue; and (iii) decide the issue of jurisdiction as a preliminary issue before proceeding further with the suit. 16. If the trial Court concludes that it lacks jurisdiction, it shall return the plaint under Order 7 Rule 10 CPC for presentation before the competent forum, in accordance with law. In doing so, the trial Court shall also examine the issue of limitation in light of applicable precedents, to ensure that no prejudice is caused to either party on account of procedural technicalities. 17. However, if the trial Court finds that it has jurisdiction and the suit is within limitation, it shall proceed to try the suit on merits in accordance with law. 18. With the above observations and directions, the civil revision stands disposed of.