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2007 (II) OLR (SC) — 613
B. P. SINGH AND H. S. BEDI, JJ.
Hardesh Ores (P) Ltd.... Appellant
Versus
Hede and Company... Respondent
With
Civil Appeal No. 2518 of 2007
(Arising out of SLP (C) No. 640 of 2007)
Sociedade De Fomento Industrial
(P) Ltd.... Appellant
Versus
Hede and Company... Respondent
Civil Appeal No. 2517 of 2007
(Arising out of SLP (C) No. 106 of 2007)
Decided on 15th May, 2007.
Whether a plaint discloses a cause of action is essentially a question of fact, but whether it does or does not must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is whether the averments made in the plaint, if taken to be correct in their entirety, a decree would be passed. The averments made in the plaint as a whole have to be seen to find out whether Clause (d) of Rule 11 of Order 7 is applicable. It is not permissible to cull out a sentence or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or substraction of words or change of its apparent grammatical sense.
2. LEASE - Renewal of - In order to give effect to the renewal of a lease, a document has to be executed evidencing the renewal of the agreement of lease, as the case may be, and there is no concept of automatic renewal of lease by mere exercise of option by the lessee.
3. SPECIFIC RELIEF ACT, 1963 - Secs. 38, 34, 10 and 12 - Mining lease - Agreement - Enforcement of contractual obligation - Need for subsistence of contract/contractual obligation - Maintainability of suit for enforcement of negative covenants in agreement purported to have been renewed - Need for agreement to have been properly renewed or declaration obtained in respect thereof from a Court of law.
4. CONTRACT - Renewal of contract - Requirements for - Nature of renewed agreement - Difference between renewal and extension of existing agreement, explained.
5. CIVIL PROCEDURE CODE, 1908 - Order 7, Rule 11(d) - Matters to be considered at the stage of rejection of plaint - Covenants in agreement sought to be enforced in suit for perpetu¬al injunction - Question raised by defendants as to whether agree¬ment was registerable in application under Order 7, Rule 11 - Maintainability - Held, such question cannot be gone into at such stage.
Key Points: - A plaint can be rejected under Order 7 Rule 11(d) if the suit appears from the statements in the plaint to be barred by any law, including the law of limitation (!) (!) . - The court must read the plaint in its entirety and accept the averments as correct to determine if a cause of action is disclosed or if the suit is barred by law (!) (!) . - There is no concept of automatic renewal of a lease by the mere exercise of an option by the lessee; a document must be executed to evidence the renewal (!) (!) . - A suit for injunction to enforce negative covenants is not maintainable if the underlying agreement is not subsisting and no declaration has been obtained from a court of law regarding its renewal (!) (!) . - The distinction between "extension" and "renewal" is that a fresh deed is required for renewal, whereas an extension allows the existing lease to continue (!) (!) . - Clever drafting of a plaint to camouflage the real issue, such as styling a suit for specific performance as a suit for injunction, cannot defeat the defendant's right to have the suit dismissed if it is barred by limitation (!) (!) (!) . - The cause of action for a suit regarding the renewal of an agreement arises when the right to renewal is denied by the other party (!) (!) . - The court will not permit a party to bypass the limitation period by seeking an end relief (injunction) without first seeking the necessary declaration of their rights under a renewed agreement (!) (!) (!) .
JUDGMENT
B. P. SINGH, J. — Special leave granted.
2. These appeals have been filed by the appellants against the common judgment and order of the High Court of Judicature at Bombay dated 20.10.2006 in First Appeals Nos. 138 and 139 of 2006 whereby the High Court has affirmed the order of the trial Court dismissing the suits filed by the appellants under Order 7 Rule 11 of the Code of Civil Procedure holding that the suits are barred by limitation.
3. The representative facts giving rise to these appeals are taken from the pleadings in suit filed by Hardesh Ores Pvt. Ltd. The appellants herein, namely, Hardesh Ores Pvt. Ltd. in civil appeal arising out of SLP (C) No. 106 of 2007 (for short “Hardesh”) and Sociedade de Fomento Industrial Pvt. Ltd. in civil appeal arising out of SLP (C) No. 640 of 2007 (for short “Fomen¬to”) respectively entered into two agreements with the respondent Hede & Co. (for short “Hede”) on 23.10.1996. The agreement with Hardesh was for extraction of ore from the mine in question whereas the agreement with Fomento was for purchase of minerals extracted from the mine. Both the agreements contained similar terms and conditions. As per Clause 2.1 of the agreement, the agreement though executed on 23.10.1996 was to come into force from 1.1.1997 and was to remain in force for a period of 5 years from such date. Clause 2.2 of the agreement provided that on the expiry of every 5 years the agreement shall stand renewed for further periods of like duration at the sole option of Hardesh on the same terms and conditions as contained in the original agree¬ment. Hardesh was entitled to exercise its option during the entire period of lease in respect of the said mine and renewals thereafter, and until such time as remaining deposits of ore in the said mine could be economically exploited. Clause 2.3 gave the right to Hardesh to terminate the agreement by giving two calendar months’ prior notice in writing to the respondent Hede of its intention to do so. Clause 2.5 of the agreement provided inter alia that in case Hardesh was forced to abandon work in the said mine/land on account of any lawful or legal claim made and/or objection raised by any person including the holder of surface right or on account of any injunction being passed by any Court of law or on account of any fault of the respondent, the agreement shall not stand terminated but the operation thereof shall stand suspended for such time. In the event such a condition/situation continued to exist for a period exceeding six calendar months, Hardesh shall be entitled to terminate the agreement after giving 30 days’ notice in writing. Clause 9.2 of the agreement ensured that the respondent shall not in any manner interfere or obstruct Hardesh from carrying on the work of extraction, raising, loading or delivering the ore and its other functions under and in accordance with the agreement.
4. Clause 15 of the agreement provided that during the subsistence of the agreement, Hardesh shall solely be entitled to extract and deliver the ore from the said mine and the respondent shall not be entitled to authorize or permit any other person for that purpose nor shall the respondent either themselves or through their servants and/or agents, extract, raise, remove, load, transport or deliver the ore from the said mine unless expressly authorized or approved by Hardesh in writing.
5. Under Clause 20 of the agreement the respondent cove¬nanted unto the appellant that during the pendency of the indenture they shall not enter into any agreement, understanding or arrangement with any other party for working the said mine/lease for carrying on any other operation whatsoever in the said mine/lease.
6. The agreement with Fomento is more or less in the same terms though with Fomento it is for the purchase of the iron ore extracted and to be extracted from the said mine.
7. Two suits for injunction were filed by the appellants herein on 4.10.2005. The reliefs claimed in the suit o
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