2007 (5) TMI 660 - SC - Indian Laws

Challenge the order of the High Court - Maintainability of plaint - suit dismissed for want of cause of action - suits under Order VII Rule 11 of the Code of Civil Procedure - Suits barred by limitation - renewal of an agreement or lease - HELD THAT - In the instant case, the appellant-plaintiff did exercise their option and claimed renewal. The respondents denied their right to claim renewal in express terms and also unequivocally stated that the agreement did not stand renewed as contended by the appellants. In the absence of a document renewing the original agreement for a further period of 5 years and in the absence of any declaration from a court of law that the original agreement stood renewed automatically upon the appellants exercising their option for grant of renewal, as is the case of the appellants, they cannot be granted relief of injunction, as prayed for in the suit, for the simple reason that there is no subsisting agreement evidenced by a written document or declared by a Court. If there is no such agreement, there is no question of enforcing clauses 15 and 20 thereof. The appellants ought to have prayed for a declaration that their agreement stood renewed automatically on exercise of option for renewal and only on that basis they could have sought an injunction restraining the respondents from interfering with their possession and operation. Having not done so, they cannot be permitted to camouflage the real issue and claim an order of injunction without establishing the subsistence of a valid agreement. Thus, suit as well they could have sought a declaration that the agreement stood renewed automatically but such a claim would have been barred by limitation since more than 3 years had elapsed after a categoric denial of their right claiming renewal or automatic renewal by the respondents- defendants. We have found that the real foundation for the suit was that the earlier agreement stood renewed automatically containing the same terms and conditions as in the original agreement including the negative covenants. There is neither a document to prove that the agreement stood renewed nor is there a declaration by a court that the agreement stood renewed automatically on exercise of option for renewal by the appellants. The basis for claiming the relief of injunction, namely, a subsisting renewed agreement did not exist in fact. In its absence, no relief as prayed for in the suit could be granted by the clever device of filing a suit for injunction, without claiming a declaration as to their subsisting rights under a renewed agreement, which is apparently barred by limitation. We are, therefore, satisfied that the Trial Court as well as the High Court were justified in holding that the plaint deserved to be rejected under Order VII Rule 11 CPC since the suit appeared from the statements in the plaint to be barred by the law of limitation. We, therefore, find no merit in these appeals and the same are accordingly dismissed.

Issues Involved:
1. Bar of Limitation.
2. Nature of the Suit (Specific Performance vs. Injunction).
3. Automatic Renewal of Lease.
4. Requirement of Registration for Lease Renewal.
5. Clever Drafting of the Plaint to Circumvent Limitation.

Detailed Analysis:

1. Bar of Limitation:
The core issue was whether the suit filed by the appellants was barred by limitation. The Trial Court and the High Court concluded that the suit was barred by limitation under Article 54 of the Limitation Act, which requires a suit for specific performance of a contract to be filed within three years from the date the plaintiff had notice of the refusal to perform. The refusal was communicated on 29.12.2001, and the suit was filed on 4.10.2005, well beyond the three-year period.

2. Nature of the Suit (Specific Performance vs. Injunction):
The appellants argued that the suit was for perpetual injunction to enforce negative covenants in the agreement, not for specific performance. However, the High Court observed that the suit was essentially for specific performance of the renewal of the agreement dated 23.10.1996. The High Court concluded that the suit for injunction was a camouflage to get over the bar of limitation, as the real issue was the specific performance of the renewal clause, which was time-barred.

3. Automatic Renewal of Lease:
The appellants contended that the lease was automatically renewed upon exercising the option under Clause 2.2 of the agreement. However, the Court held that renewal of a lease requires execution of a fresh document evidencing such renewal. The Court relied on precedents stating that automatic renewal by mere exercise of option is not legally tenable without a formal renewal agreement.

4. Requirement of Registration for Lease Renewal:
The respondents argued that the original agreement and any renewal thereof required compulsory registration under Sections 17 and 49 of the Registration Act. The appellants countered that this issue could not be determined at the stage of an application under Order VII Rule 11 CPC. The Court did not delve deeply into this issue, as the primary ground for rejection was limitation.

5. Clever Drafting of the Plaint to Circumvent Limitation:
The Court emphasized that clever drafting of the plaint to create an illusion of a cause of action cannot defeat the right of the defendant to get the suit dismissed on the ground of limitation. The Court cited precedents to support this view, noting that the real issue was the renewal of the agreement, which was time-barred, and not merely the enforcement of negative covenants.

Conclusion:
The Supreme Court upheld the decisions of the Trial Court and the High Court, concluding that the suit was barred by limitation. The Court found that the real issue was the specific performance of the renewal of the agreement, which was time-barred, and not merely the enforcement of negative covenants. The clever drafting of the plaint to present it as a suit for injunction could not circumvent the limitation bar. The appeals were dismissed with no order as to costs.

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