IMPORTANT POINT
When two companies wanted to enter into agreement for sale and purchase of land, they must enter into a written agreement, but not by way of an oral agreement.

ORDER

T. Amarnath Goud, J.—This Civil Revision Petition is directed against the order dated 14.12.2018 in I.A.No.491 of 2018 in O.S.No.21 of 2009 on the file of the XIV Additional District Judge, Ranga Reddy District (for short, “trial Court”).

2. The brief facts of the case are that the respondent/plaintiff filed O.S.No.21 of 2009 for specific performance basing on oral agreement of sale. The petitioners/defendants filed their written statement, contending that the suit was filed seeking the relief of specific performance of agreement of sale based on alleged oral agreement; that as the respondent/plaintiff as well as the petitioners/defendants are companies and juristic persons with an entity and legal personality, as such, there cannot be any oral agreement between two juristic persons; that the oral contract will not have any value in the eye of law and therefore prayed to dismiss the suit.

3. During the pendency of the said suit, the petitioners/defendants filed I.A.No.491 of 2018 under Order VII Rule 11 (a) read with Section 151 CPC, seeking to reject the plaint, contending that there is no substantial legal cause of action for filing the suit and the entire basis for filing the suit is based on an alleged oral agreement between two companies is also absurd, speculative and bad in law and therefore prayed to reject the plaint.

4. The trial Court, on consideration of the record, declined to accept the plea of the petitioners and dismissed the interlocutory application. Aggrieved thereby, the present CRP is filed.

5. The learned counsel appearing for the petitioners/defendants submitted that the petition filed under Order VII Rule 11 CPC., shall be decided on the basis of the cause of action disclosed in the plaint. He further submitted that the suit filed by the respondent/plaintiff for specific performance of oral agreement of sale against the company, which is a juristic person, is not maintainable and the plaint is liable to be rejected. He further submitted that a plaint can be rejected at any stage (even at the stage of arguments), provided it is shown that there is no disclosure of cause of action and when the suit is barred by any other statute. In support of his arguments, he relied on a decision reported in Raghwendra Sharan Singh V. Ram Prasanna Singh, 2019 AIR (SC) 1430 therefore, he prayed to allow the CRP.

6. Sri S.Niranjan Reddy, learned senior counsel appearing for the respondent/plaintiff, submitted that the petitioners/defendants filed the above IA., when the main suit was coming up for arguments, with an intention to drag on the proceedings in the suit. He further submitted that the contention of the petitioners/defendants that there cannot be an oral agreement between juristic persons cannot be accepted as there is vested power to enter into an oral agreement between both companies under the Companies Act, 2013 (for short, Act of 2013) and there is no cause of action to file the above suit. He further submitted that as per Section 46 (1)(b) of the Companies Act, 1956 (for short, Act of 1956), oral agreement is valid. Section 465(2)(b) of the Act of 2013 did not come in the way to rescue the petitioners. In support of his arguments, he relied on a decision reported in PanchananDhara v. Monmatha Nath Maity, 2 (2006) 5 Supreme Court Cases 340 and therefore, prayed to dismiss the CRP.

7. For better appreciation of the facts of the case, it is necessary to extract the relevant provisions of law: Section 46 of the Companies Act, 1956 reads as under:

“46. Form of contracts:

(1) Contracts on behalf of a company may be made as follows:-

(a) a contract which, if made between private persons, would by law be required to be in writing signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged;

(b) a contract which, if made between private persons, would by law be v