Delhi High Court
Din Dayal Agrawal Huf vs Capriso Finance Ltd on 25 June, 2025
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 19th February, 2025.
Pronounced on: 25th June, 2025
+ CM(M) 2008/2024 & CM APPL. 12962/2024
DIN DAYAL AGRAWAL HUF .....Petitioner
Through: Ms. Manpreet Kaur and Ms.
Jaya Goyal, Advocates.
versus
CAPRISO FINANCE LTD .....Respondent
Through: Mr. Gaurav Pachauri, Adv.
CORAM:-
HON'BLE MR. JUSTICE RAVINDER DUDEJA
JUDGMENT
RAVINDER DUDEJA, J.
1. This is a petition under Article 227 of the Constitution of India
read with Section 151 Code of Civil Procedure, 1908 [“CPC“],
seeking to set aside the order dated 19.01.2024 passed by the learned
District Judge, Commercial Courts-01, Tis Hazari Courts in CS
(Comm) No. 2242/2022, whereby the petitioner’s application under
Order VII Rule 11 CPC was dismissed and right to file the written
statement was closed.
2. The petitioner availed a loan of Rs. 35,00,000/- from the
respondent and entered into a Loan Agreement dated 18.03.2019,
pledging 13,113 fully paid-up equity shares of M/s Trishul Dream
Homes Ltd. Subsequently, the respondent filed a recovery suit bearing
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CS (Comm) No. 2242/2022 on 22.09.2022 before the Commercial
Court at Tis Hazari, without filing a valid board resolution against the
petitioner herein, inasmuch as, the board resolution filed by the
respondent-company is qua M/s Trishul Dream Homes Ltd. and not
qua the petitioner. The application under Order VI Rule 17 CPC was
allowed on 22.10.2022 and suit was treated as an ordinary suit upon
the counsel’s statement. The petitioner filed an application under
Order VII Rule 11 CPC for rejection of plaint raising the objection that
plaintiff failed to disclose that as per clause 10 of the Loan Agreement,
if the dispute arises between the parties, the same shall be referred to
the sole arbitrator and arbitrator shall be appointed jointly by both the
parties and hence in view of the said clause, the Court was not having
the jurisdiction to entertain the suit.
3. During pendency of the suit before the trial Court, respondent
had realised that board resolution filed along with plaint was not valid
as by way of said board resolution, Authorised Representative
[“AR”]/Director, Mr. Pradeep Kumar Jain was authorised to take legal
action against M/s Trishul Dream Homes Ltd. instead of the present
petitioner, Mr. Din Dayal Agrawal-HUF. In view of the defect in
authority letter of the AR, respondent filed an application seeking
permission to place board resolution dated 27.09.2023, which ratified
the board resolution dated 03.04.2020 in favour of Mr. Pradeep Kumar
Jain, Director of the plaintiff-company.
4. The learned trial Court granted permission to the respondent to
place the board resolution dated 27.09.2023 on record and dismissed
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the petitioner’s application under Order VII Rule 11 CPC by order
dated 19.01.2024 and also closed the petitioner’s right to file the
written statement.
5. Learned counsel appearing for the petitioner has submitted that
the impugned order dated 19.01.2024, passed by the learned District
Judge suffers from serious legal infirmities. It has been submitted that
suit bearing CS (Comm) No. 2242/2022 was filed without valid board
resolution, authorising the alleged AR of the respondent-company to
institute the proceedings against the petitioner. The board resolution
filed subsequently is dated 27.09.2023, which is admittedly after the
date of filing of suit i.e. 22.09.2022. Furthermore, it has been pointed
out that initial board resolution placed on record pertains to M/s
Trishul Dream Homes Ltd. and not to the petitioner-HUF, which is a
separate legal entity. It has been submitted that this renders the board
resolution unauthorised and order passed by the learned trial Court is
without proper appreciation of facts and law.
6. It has been further submitted that clause 10 of the Loan
Agreement dated 18.03.2019 clearly stipulates the mandatory dispute
resolution clause, requiring the parties to first attempt resolution
through discussion and negotiation, failing which the matter must be
referred to arbitration. Learned counsel appearing for the petitioner
has argued that no such attempt at negotiation was made by the
respondent-company and the institution of civil suit was in clear
contravention of agreed dispute resolution mechanism. Furthermore,
the petitioner’s Karta, Mr. Din Dayal Agrawal has been in judicial
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custody since 18.11.2023 and the present proceedings are being
pursued by his wife, who is managing the household and legal affairs
under compelling circumstances. It has been submitted that order
closing the right of the petitioner to file the written statement and
dismissal of application under Order VII Rule 11 CPC has been passed
in a mechanical manner.
7. Per contra, referring to Order XXIX CPC, it has been contended
by the learned counsel appearing for the respondent that suits by or
against the corporation may be signed or verified by the
Signatory/Director or Principal Officer, capable of deposing to the
facts. Reliance was placed on United Bank of India v. Naresh Kumar
& Ors (1996) 6 SCC 660, Mahanagar Telephone Ltd. v. Suman
Sharma RFA 277/2001 decided on 06.12.2010, and Palm View
Investment Overview v. Ravi Arya 2023 BHC 3790, to argue that
procedural defects such as a defective board resolution are not fatal
and can be cured. It has been emphasized that the learned trial Court
rightly exercised its discretion under Order VI Rule 14 CPC, in line
with the provisions of CPC by permitting rectification of a curable
technical defect such as lack of proper authorization, especially when
no prejudice was caused to the petitioner. Moreover, the objection
regarding the defective board resolution was not even raised in the
petitioner’s Order VII Rule 11 CPC application and was raised only
during arguments, making it an afterthought and, therefore, liable to
be disregarded.
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8. Furthermore, it was submitted that the arbitration clause in
question is not binding, as it merely indicates a possibility of
arbitration subject to future agreement, rather than mandating
arbitration. Reliance was placed on Jagdish Chandra vs. Ramesh
Chandra (2007) 5 SCR, where the use of terms such as “may” or
conditional phrases like “if the parties so determine” was held to lack
the mandatory intent to arbitrate. Reference was also made to M/s
Linde Heavy Truck Division Ltd. v. Container Corporation of India
Ltd., CS(OS) 23/2012 dated 16.10.2012, where the use of the word
“may” be interpreted as optional and not binding. In the present case,
the phrase “in furtherance” only refers to seat and language and not to
mandatory arbitration. It was further pointed out that the petitioner,
being a director of M/s Trishul Dream Homes Ltd. was authorized to
act, and that a fresh Board Resolution dated 27.09.2023 was submitted
to cure the defect. Learned counsel for the respondent submitted that
the suit was properly instituted under Order XXIX CPC and the
objection appears to be an afterthought following the dismissal of the
application under order VII Rule 11 CPC.
9. The Court has considered the rival submissions made by the
learned counsel for the parties. The Supreme Court in Booz Allen and
Hamilton Inc. v. SBI Home Finance Limited and ors. 2011 5 SCC
532 held as under:-
“19. Where a suit is filed by one of the parties to an arbitration
agreement against the other parties to the arbitration agreement,
and if the defendants file an application under Section 8 statingCM(M) 2008/2024 Page 5 of 14
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that the parties should be referred to arbitration, the court (judicial
authority) will have to decide:
(i) whether there is an arbitration agreement among the parties;
(it) whether all the parties to the suit are parties to the arbitration
agreement;
(iii) whether the disputes which are the subject-matter of the suit
fall within the scope of arbitration agreement;
(iv) whether the defendant had applied under Section 8 of the Act
before submitting his first statement on the substance of the
dispute; and
(v) whether the reliefs sought in the suit are those that can be
adjudicated and granted in an arbitration.”
10. Section 8 of the Arbitration and Conciliation Act, 1996 [“the
Act”] mandates that a judicial authority must refer parties to
arbitration if a valid arbitration agreement exists and an application is
made before submitting the first statement on the substance of the
dispute, accompanied by the original or certified copy of the
agreement, even as arbitration proceedings may continue
independently, which reads as under:-
“8. POWER TO REFER PARTIES TO ARBITRATION WHERE
THERE IS AN ARBITRATION AGREEMENT.
– [(1) A judicial authority, before which an action is brought
in a matter which is the subject of an arbitration agreement
shall, if a party to the arbitration agreement or any person
claiming through or under him, so applies not later than the
date of submitting his first statement on the substance of the
dispute, then, notwithstanding any judgment, decree or order
of the Supreme Court or any Court, refer the parties to
arbitration unless it finds that prima facie no valid arbitration
agreement exists.] [Substituted by Act No. 3 of 2016 dated
31.12.2015.]
(2)The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original
arbitration agreement or a duly certified copy
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agreement or a certified copy thereof is not available with the
party applying for reference to arbitration under sub-section
(1), and the said agreement or certified copy is retained by the
other party to that agreement, then, the party so applying
shall file such application along with a copy of the arbitration
agreement and a petition praying the Court to call upon the
other party to produce the original arbitration agreement or
its duly certified copy before that Court.] [Inserted by Act No.
3 of 2016 dated 31.12.2015.]
(3) Notwithstanding that an application has been made under
sub-section (1) and that the issue is pending before the
judicial authority, an arbitration may be commenced or
continued and an arbitral award made.”
11. In Rashtriya Ispat Nigam Ltd. and Anr. vs. Verma Transport
Company 2006 7 SCC 275, the Supreme Court held that Section 8 of
the Act confers power on the judicial authority. It must refer the
dispute which is the subject matter of arbitration agreement if an
action is pending before him, subject to fulfillment of the conditions
precedent. The said power, however, shall be exercised if the party so
applies not later than when submitting his first statement on the
substance of the dispute.
12. Admittedly, in the present case, no application has been filed
under Section 8 of the Act. Only application filed by the petitioner is
under Order VII Rule 11 CPC, just highlighting the existence of
arbitration clause in the Loan Agreement and stating that the plaint is
liable to be rejected as it does not disclose any cause of action. The
Court shall now proceed to consider the legal provision and legal
position of Order VII Rule 11 CPC to find out if the suit discloses any
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cause of action or is barred by any law. Order VII Rule 11 CPC reads
as under:-
“Rejection of plaint.
The plaint shall be rejected in the following cases-
(a) where it does not disclose a cause of action;
(b) where the relief claimed is undervalued, and the plaintiff, on
being required by the Court to correct the valuation within a time
to be fixed by the Court, fails to do so;
(c) where the relief claimed is properly valued, but the plaint is
returned upon paper insufficiently stamped, and the plaintiff, on
being required by the Court to supply the requisite stamp-paper
within a time to be fixed by the Court, fails to do so;
(d) where the suit appears from the statement in the plaint to be
barred by any law:
Provided that the time fixed by the Court for the correction of the
valuation or supplying of the requisite stamp-paper shall not be
extended unless the Court, for reasons to be recorded, is satisfied
that the plaintiff was prevented by any cause of an exceptional
nature form correcting the valuation or supplying the requisite
stamp-paper, as the case may be, within the time fixed by the Court
and that refusal to extend such time would cause grave injustice to
the plaintiff.”
13. It is apparent from bare language of Order VII Rule 11 CPC
that where the plaint does not disclose a cause of action, the relief
claimed is undervalued and not corrected within the time allowed by
the Court, insufficiently stamped and not ratified within the time
specified by the Court, barred by any law, fails to file required copies
and the plaintiff fails to comply with the provisions of Order VII Rule
9 CPC, the Court has no other option except to reject the same. The
power under Order VII Rule 11 CPC can be exercised at any stage of
the suit.
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14. Instead of filing the application under Section 8 of the Act,
petitioner merely filed an application under Order VII Rule 11 CPC,
just highlighting the existence of arbitration clause in the Loan
Agreement. The application under Section 8 of the Act is an
application that should be made in a proper manner and at a proper
time. Application should be accompanied by original arbitration
agreement or certified copy thereto under Section 8(2) of the Act. The
application which was filed by the petitioner was not under Section 8
of the Act. It was only an application under Order VII Rule 11 CPC
for rejection of plaint on the ground that arbitration clause bars the
suit. An application under Order VII Rule 11 CPC cannot be
considered as a composite application under Section 8 of the Act as
well. Section 8 of the Act only empowers the Court to refer the parties
to arbitration but does not give the Court an option to reject the plaint.
As per Order VII Rule 11 CPC, the Court has the power to reject the
plaint only if there is bar to the suit because of any law. Section 8 of
the Act does not create any bar to the Civil Courts. It merely provides
an alternative to the defendant against whom civil suit is initiated, to
submit to the jurisdiction of the Civil Court or file an appropriate
application under Section 8 of the Act for referring the parties to
arbitration. The power conferred by Section 8 of the Act cannot be
considered as a bar to the civil suit to entertain the application under
Order VII Rule 11 CPC. Dealing with a somewhat similar situation,
the High Court of Andhra Pradesh in the case of Chundru Visalakshi
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v. Chunduru Rajendra Prasad, 2022 SCC OnLine AP 888, held as
under:-
“52. We find that in M. Shankara Reddy (supra), the
Coordinate Bench of this Court held that Section 8 of the
Act, 1996 cannot be considered as bar to the civil suit to
entertain application under Order 7 Rule 11 CPC. On the
other hand, in Syed Irfan Sulaiman (supra), a Coordinate
Bench of this Court held that once the suit was barred in
terms of Section 8 of the Act, 1996, Order 7 Rule 11(d) CPC
applied. In M. Shankara Reddy (supra), there was no
application under Section 8 of the Arbitration and
Conciliation Act, 1996 and the only application was under
Order 7 Rule 11 CPC, whereas in Syed Irfan Sulaiman
(supra), besides an application under Order 7 Rule 11 CPC
an application under Section 8 of the Act, 1996 was also
filed. Considering the Hon’ble Apex Court judgment in
Rashtriya Ispat Nigam Ltd. (supra) that power under
Section 8 of the Arbitration and Conciliation Act shall be
exercised if a party so applies, In Our view, the exercise of
power under Section 8 of the Arbitration and Conciliation
Act is dependent upon a party applying under Section 8 of
the Act, 1996 to refer the parties to the arbitration.
53. In view of the aforesaid, we are of the considered view
that;
i. If an application is filed under Section 8 of the Act, 1996,
the Court on being satisfied with the pre-conditions shall
refer the parties to the arbitration and shall reject the plaint
under Order 7 Rule 11(d) CPC as barred by law; But,
ii. If no application is filed as per Section 8 of the Act, 1996,
and there is no prayer to refer the parties to arbitration, the
existence of the arbitration clause would not be a ground to
reject the plaint under Order 7 Rule 11 CPC.”
15. Since in the present case, no application was filed by the
petitioner under Section 8 of the Act and no prayer was made to refer
the matter to the arbitration, mere existence of arbitration clause
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would not constitute a ground to reject the plaint. Thus, Court below
did not commit any illegality in not rejecting the plaint on the plea of
the petitioner that there was an arbitration clause.
16. The Court shall now deal with the other contention of the
petitioner, which revolves around absence of valid board resolution at
the time filing of the suit. The board resolution dated 03.04.2020
which was filed with the plaint was with respect to M/s Trishul Dream
Homes Ltd., which according to the petitioner was inadvertently
mentioned in the board resolution out of confusion as Mr. Din Dayal
Agrawal, who is Karta of the petitioner is also the director of M/s
Trishul Dream Homes Ltd. In order to rectify the said defect,
respondent placed on record fresh board resolution dated 27.09.2023,
ratifying the board resolution dated 03.04.2020, passed in favour of
Mr. Pradeep Kumar Jain, Director of respondent-company, authorising
him to pursue legal action against the petitioner on behalf of
respondent-company. On a reading of Order VI Rule 14 CPC along
with Order XXIX Rule 1 CPC, it would appear that in the absence of
any formal letter of authority or Power of Attorney being executed, the
person referred to in Rule 1 of Order XXIX CPC, can by virtue of his
office, which he holds, sign and verify the pleading on behalf of the
company. In addition thereto and dehors Order XXIX Rule 1 CPC , as
the company is a juristic entity, it can duly authorise any person to
sign the plaint or written statement on its behalf and this would be
required as a sufficient compliance with the provision of Order VI
Rule 14 CPC. Even if there is no board resolution, where the pleadings
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have been signed by one of its officers, corporation can ratify the said
action by its officers in signing the pleadings.
17. The suit in the present case has been signed by the Director of
the respondent-company, merely because of the irregularity of the
board resolution, the substantive rights of the respondent-company
will not have any adverse effect and such irregularity can be cured at
any stage of the suit. The mistake in the board resolution filed with the
plaint is only a procedural irregularity and, therefore, the same cannot
be made a ground to reject the suit, more so when such defect is
rectified by subsequent board resolution ratifying the act of filing of
suit by the Director of the respondent-company. The respondent
cannot be non-suited for a technical reason which does not go to the
root of the matter. The Supreme Court in the case of United Bank of
India v. Naresh Kumar and Ors., (supra) has clarified that a company
can cure the defect of authorization by ratification at a later stage. The
subsequent filing of the board resolution dated 27.09.2023 thus
effectively cures any initial procedural irregularity, and the trial court
rightly exercised its discretion in allowing the same.
18. Lastly, the Court will deal with the challenge to the order dated
19.01.2024, by which the right of the petitioner to file the written
statement was closed. The case was initially filed as a commercial suit
but later, the same was treated as an ordinary suit. In commercial suits
governed by the Commercial Courts Act, 2015, the timeline for filing
the written statement is mandatory and non-extendable beyond 120
days from the date of service of summons. In terms of Order VIII Rule
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1 CPC, as amended by Section 16 of the Commercial Courts Act,
2015, the written statement must be filed within 30 days from the date
of service of summons and the Court cannot allow filing beyond 120
days from the date of service of summons.
19. Since the present matter was being treated as an ordinary suit,
un-amended Order VIII Rule 1 CPC would be applicable, wherein no
consequence for not complying with shorter timeline of 90 days has
been provided. In Kailash vs Nanhku & Ors. 2005 4 SCC 480, it has
been held that 90 days period for ordinary suit is directory and not
mandatory. That being so, the Court may permit delay in filing the
written statement, if sufficient cause is shown.
20. Petitioner has not listed any cause, much less sufficient cause
for not filing the written statement within the prescribed period,
particularly when it did not invoke Section 8 of the Act. Pendency of
the application for rejection under Order VII Rule 11 CPC cannot be
made ruse for retrieving the lost opportunity to file the written
statement. Once the period prescribed for filing the written statement
lapses, even though the provision being directory, the defendant needs
to furnish satisfactory explanation for granting him extension of time
for filing of written statement, which in the present case, petitioner
failed to do, so much so that he did not even file an application before
the trial Court for condoning the delay in filing the written statement.
21. In view of above facts and circumstances, there is no manifest
illegality or perversity in the impugned order dated 19.01.2024 passed
by the learned trial Court.
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22. Accordingly, the present petition along with pending
application(s), if any, stand dismissed.
RAVINDER DUDEJA, J.
25th June, 2025
Vd
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