Plaint Can't Be Rejected U/O VII Rule 11 If It Avers Mortgaged Property Is Used For Commerce; Deeper Probe Is For Trial Stage: Calcutta HC - 2025-06-30

Tracking Legal Developments.

Plaint's Averment on Commercial Use of Property is Sufficient at Preliminary Stage, Rules Calcutta High Court

Kolkata: The Calcutta High Court, in a significant ruling on the jurisdiction of Commercial Courts, has held that a plaint cannot be rejected at a preliminary stage under Order VII Rule 11 of the Civil Procedure Code (CPC) if it contains a specific averment that the immovable property in question is used exclusively for trade or commerce. The Division Bench of Justice Arijit Banerjee and Justice Om Narayan Rai emphasized that the truthfulness of such averments is a matter for trial and cannot be grounds for dismissal at the outset.

The bench set aside an order of the Commercial Court at Rajarhat, which had rejected a plaint filed by Everstrong Sales Pvt. Ltd., thereby restoring the suit for further proceedings.

Background of the Case

The case, Everstrong Sales Pvt. Ltd. vs Binod Kumar Mahipal & Ors. , stems from a suit for the recovery of ₹13.20 crores. The plaintiff, Everstrong Sales, had provided a loan of ₹7 crores to the defendants (nos. 1 to 32), secured by a mortgage on their 78.05% undivided share in a property in Baranagar. The plaintiff contended that the loan was for business purposes and the mortgaged property was used "exclusively in trade and commerce," thus classifying the dispute as a "commercial dispute" under the Commercial Courts Act, 2015.

However, defendant no. 41 filed an application under Order VII Rule 11 of the CPC, seeking rejection of the plaint. The Commercial Court agreed, reasoning that the plaintiff had not provided a money-lending license or an RBI certificate, and failed to sufficiently prove the commercial nature of the dispute. The plaint was consequently rejected for not disclosing a complete cause of action maintainable before a Commercial Court.

Arguments Before the High Court

For the Appellant (Everstrong Sales Pvt. Ltd.): Senior Advocate Mr. Abhrajit Mitra argued that the plaint must be read as a whole for deciding a rejection application. He pointed to specific paragraphs in the plaint asserting that the loan was commercial and the mortgaged property was used for trade. He submitted that this was sufficient to bring the suit under Section 2(1)(c)(vii) of the Commercial Courts Act, which covers disputes from agreements on immovable property used in commerce. He further argued that even if the court found it lacked jurisdiction, the correct procedure was to transfer the suit to the appropriate civil court, not reject the plaint outright.

For the Respondent (Defendant No. 41): Senior Advocate Mr. Mainak Bose countered that the plaintiff was not a banker or financier and the transaction was not in its ordinary course of business. He argued that the plaint lacked specific details or documents proving the property's commercial use, asserting it was vacant land. Relying on the Supreme Court's decision in Ambalal Sarabhai Enterprises Limited , he contended that the property's use on the date of the suit is determinative, and the plaint failed to establish this. Therefore, the Commercial Court correctly rejected the plaint due to a lack of subject-matter jurisdiction.

Court's Analysis and Ruling

The High Court meticulously analyzed the scope of Order VII Rule 11 CPC and the definition of "commercial dispute" under the Commercial Courts Act. The bench underscored the settled legal principle that for a rejection application, the court must only consider the averments in the plaint and assume them to be true.

Justice Om Narayan Rai , writing for the bench, observed:

"From a meaningful reading of the plaint in conjunction with the documents annexed therewith it cannot be said with absolute certainty that the plaint is not based on a commercial dispute... The aforementioned paragraphs of the plaint... indicate the existence of a commercial dispute, at least at this stage, when only the averments made in the plaint and the documents annexed thereto are to be considered without reference to the defense case."

The Court made a crucial distinction between the plaintiff's claim of a "commercial loan" and the claim related to the "commercial use of mortgaged property." While finding the former assertion weak on its own, the Court held that the specific averment in the plaint that the mortgaged property "is also... used exclusively in trade and commerce" was sufficient to satisfy the requirements of Section 2(1)(c)(vii) of the Act at the preliminary stage.

The judgment highlighted a pivotal passage:

"We are alive to the fact that Mr. Bose has asserted that the land is a vacant land but then such assertion is an assertion of a defendant in defense to the plaint case which cannot be taken note of for deciding the fate of a plaint under Order VII Rule 11 of the Code... When at the moment, it cannot be said with certainty that the said property is not being used for commercial purpose the plaint cannot be rejected more so when the plaint specifically avers that the property 'is used exclusively in trade and commerce'."

Final Decision and Implications

The High Court concluded that the Commercial Court had erred by delving into the merits and evidence, such as the absence of a money-lending license, which is not a prerequisite for establishing a "commercial dispute" under the Act. The bench held that the defendant's challenge to the factual basis of the plaint's claims could be raised as a preliminary issue at a later stage (under Order XIV Rule 2) after pleadings are complete, but not as a ground for rejecting the plaint at the threshold.

Accordingly, the appeal was allowed, the Commercial Court's order was set aside, and the suit was restored to its file for trial. This judgment reaffirms the limited scope of inquiry under Order VII Rule 11 and clarifies that a plaintiff's clear pleading can save a suit from preliminary dismissal, pushing factual disputes to the trial stage where they can be decided on evidence.