Krishan Chawla vs Sanjeev Jain And Ors

The present appeal assails the Order dated 15.12.2025 (hereinafter referred to as the “impugned order”) passed by the learned District Judge (Commercial) (Digital-07), South-East District, Saket Courts, New Delhi (hereinafter referred to as the “Commercial Court”)  in  C.S.  (COMM)  No.  993/2025. By  the  impugned  order,  the suit filed by the Appellant seeking reliefs of declaration and injunction was  dismissed  as  withdrawn  simplicitor without  liberty to file a fresh suit.

Briefly stated, the Appellant instituted a commercial suit on 01.12.2025  seeking, inter alia, a declaration  that certain  cash  receipts relied upon by Defendant No. 1 were false and fabricated, along with consequential  injunctive  reliefs  restraining  their  use  and  enforcement of alleged rights arising from an agreement dated 01.02.2022 (executed  on  01.08.2022). Along with  the  plaint,  the  Appellant filed an application seeking exemption from pre-institution mediation under Section 12A of the Act and an application under Order XXXIX Rules 1 and 2 CPC for interim relief.

The  matter  was  first  taken  up  on  03.12.2025,  when  arguments were heard on the application for interim relief. The Commercial Court rejected the said application, inter alia, on account of non- compliance with Section 12A of the Commercial Courts Act, 2015 (hereinafter referred to as “the Act”) and observing certain other defects like non-payment of adequate court fees, failure of plaintiff to show bona fide behind statement made in the plaint reflecting no cause of action. The detailed order was uploaded on 10.12.2025.

In view of the observations made by the Commercial Court regarding  compliance  with  Section  12A  of  the  Act  and  other  defects, the  Appellant sought  withdrawal of the suit  with  liberty to  file afresh after curing the defects. On 15.12.2025, such a request was made.

However,  the  Commercial  Court  declined  to  grant  such  liberty and treated the withdrawal as simpliciter, while further observing that the plea of withdrawal is reflection of conformity that the plaint disclosed no genuine cause of action and directing that a decree of dismissal be drawn.

Aggrieved thereby, the present appeal has been filed.

We have heard the learned counsels for the parties and perused the material placed on record.

Learned counsel for the Appellant submits that the grievance of the  appellant  is  two-fold.  Firstly,  that  the  Commercial  Court  erred  in refusing to grant liberty to withdraw the suit with permission to institute  a fresh  suit  after  complying  with  the  mandatory  requirement of pre-institution mediation under Section 12A of the Act and curing other procedural defects, thereby effectively foreclosing the Appellant’s remedy at the threshold. Secondly, that the Commercial Court  exceeded  its  jurisdiction  by  recording  observation  which  were somewhat conclusive findings on the merits, at the pre-summoning stage, contrary to  the settled scope of Order VII Rule 11 CPC, which mandates that only the averments in the plaint be considered, and further rendered observations inconsistent with its own earlier order dated 03.12.2025, wherein it had observed that the issues required adjudication at trial.

Per contra, learned counsel for Respondent Nos. 1 to 3 supported the impugned order, contending that the Commercial Court rightly examined the maintainability of the suit at the threshold and correctly observed that the plaint disclosed no genuine cause of action.

It is submitted that non-compliance with Section 12A of the Act and deficiency in court fees justified such observation having the effect of rejection of the plaint, and that the request for withdrawal was not bona fide but an attempt to avoid an impending rejection under Order VII Rule 11 CPC. It was further submitted that the observation  recorded  by  the  Commercial  Court  were  not  mechanical but  were  also  based  the  observations  made  in  the  earlier  order  dated 03.12.2025, wherein the Court had already indicated serious deficiencies in the suit.

Learned counsel for Respondent No. 4 stated that he has no objection to the appeal being allowed and liberty being granted to the appellant to file a fresh suit.

The  principal  question  that  arises  for  consideration  is,  whether in the facts of the present case, the Commercial Court was justified in refusing to grant liberty to the Appellant to withdraw the suit with permission to institute a fresh suit under Order XXIII Rule 1(3) CPC, and  in  proceeding  to  record  observations  touching upon  the  merits of the dispute at the pre-summoning stage.

Order XXIII Rule 1(3) of the CPC: -

“ORDER XXIII

Withdrawal and Adjustment of Suits

Withdrawal of suit or abandonment of part of claim–

…

(3) Where the Court is satisfied—

(a)  that  a suit  must  fail  by reason  of  some formal defect, or

(b)  that  there  are  sufficient grounds  for  allowing the plaintiff to institute a fresh suit for the subject- matter of a suit or part of a claim,

it may, on such terms as it thinks fit, grant the plaintiff  permission to  withdraw  from  such  suit  or such part of the claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of the claim.”

(Emphasis Supplied)

Order XXIII of the CPC is circumscribed by the requirement that the Court must be satisfied that the suit suffers from a “formal defect” or that there exist “sufficient grounds” warranting such liberty. The Supreme Court in V. Rajendran v. Annasamy Pandian, (2017) 5 SCC 63, has held that “formal defect” must be given a liberal interpretation and includes defects of a procedural nature, such as insufficient  court  fee,  improper  valuation,  want  of  notice,  misjoinder of parties, or failure to disclose a cause of action. The relevant portion is reproduced herein below-

“10. In K.S. Bhoopathy v. Kokila [K.S. Bhoopathy v. Kokila, (2000) 5 SCC 458] , it has been held that it is the duty of the Court to be satisfied about the existence of “formal defect” or “sufficient grounds”  before  granting  permission  to  withdraw the suit with liberty to file a fresh suit under the same cause of action. Though, liberty may lie with the plaintiff in a suit to withdraw the suit at any time after the institution of suit on establishing the“formal defect” or “sufficient grounds”, such right cannot be considered to be so absolute as to permit or encourage abuse of process of court. The fact that the plaintiff is entitled to abandon or withdraw  the  suit  or  part  of  the  claim  by  itself,  is no licence to the plaintiff to claim or to do so to the detriment of legitimate right of the defendant. When an application is filed under  Order 23  Rule 1(3) CPC, the Court must be satisfied about the “formal defect” or “sufficient grounds”. “Formal defect” is a defect of form prescribed by the rules of procedure such as, want of notice under Section 80 CPC, improper valuation of the suit, insufficient court fee, confusion regarding identification of the suit property, misjoinder of parties, failure to disclose a cause of action, etc.“Formal defect” must be given a liberal meaning which connotes various kinds of defects not affecting the merits of the plea raised by either of the parties.”

(Emphasis Supplied)

In the present  case, the defects noted by the Commercial  Court in its order dated 03.12.2025, namely deficiency in court fees, non- compliance  with  procedural  requirements,  and  absence  of  supporting documents, are procedural in nature and fall within the ambit of“formal  defects”  as  contemplated  under  Order  XXIII  Rule  1(3)  CPC. Such defects are inherently curable.

The suit was at a pre-summoning stage, and no vested right had accrued in favour of the defendants. In such circumstances, an opportunity to cure procedural defects ought ordinarily to be granted.

The Commercial Court, however, declined liberty while observing  that  the  plea  of  withdrawal  is  reflection  of  conformity  that the plaint disclosed no genuine cause of action. This reflects a conflation of distinct jurisdictions, as the scope under Order VII Rule 11 CPC is limited to examining the plaint on a meaningful reading of its averments, without entering into merits as held by the Supreme Court in Popat and Kotecha Property v. State Bank of India Staff Association, (2005) 7 SCC 510, and Dahiben v. Arvindbhai Kalyanji Bhanusali, (2020) 7 SCC 366. Further, in T. Arivandandam  v. T.V. Satyapal, (1977) 4 SCC 467, it has been held that the power to reject a plaint is a drastic power, which must be exercised only  where  the plaint, on a meaningful reading, not a formal, does not disclose a clear right to sue and is manifestly vexatious and meritless, in the sense that it does not disclose a clear right to sue.

The Court, at this stage, cannot adjudicate disputed questions of fact, or record  conclusive findings  on the merits or even observations of such nature.

In the present case, the Commercial Court travelled beyond this limited inquiry by recording observations regarding lack of bona fides and absence of a genuine cause of action, which were not warranted at the pre-summoning stage.

In  absence  of  an  actual  rejection  of  the  plaint  under  Order  VII Rule 11 CPC, the Commercial Court could not have indirectly  non- suited  the  Appellant  by  denying  liberty  under  Order  XXIII  Rule  1(3) CPC.

The refusal to grant liberty, in the facts of the present case, has the effect of attracting the bar under Order XXIII Rule 1(4) CPC, thereby  foreclosing  the  Appellant’s  remedy  despite  the  defects  being curable, which is unduly harsh. Procedural law is intended to facilitate adjudication  on  merits  and  not  to  foreclose  remedies  at  the  threshold on curable defects.

This Court is, therefore, of the considered view that the Commercial  Court  failed to  exercise its  discretion  in  accordance with settled principles of law. The refusal to grant liberty and the observations on merits are unsustainable.

Accordingly, the impugned Order dated 15.12.2025 and also the observations therein on merits of the case are set aside. The appeal is allowed, and the Appellant is granted permission to withdraw the suit with liberty to institute a fresh suit in accordance with law.

It is clarified that nothing contained in this judgment shall be construed as an expression on the merits of the case.

The appeal, along with all pending applications, stands disposed of in the above terms.