DELHI HIGH COURT REITERATES THE ESTABLISHED PRINCIPLE THAT “FRAUD NULLIFIES ALL ACTIONS, WHETHER IN REM OR IN PERSONAM”

A double-Judge Bench of the High Court of Delhi comprising of Justice Rekha Palli and Justice Saurabh Banerjee passed a Judgement dated 11-12-2024 in the matter of North Delhi Municipal Corporation vs. M/s Veera Builders thr its Partner & Ors, RFA(OS) 85/2016 and held that the Trial Court was correct in dismissing the Suit at the threshold under Order 7 Rule 11 of the Code of Civil Procedure 1908  (CPC) (Rejection of Plaint), as the Plaint revealed no subsisting cause of action and was manifestly frivolous and vexatious.

FACTS:

That the Regular First Appeal mentioned above was filed before the High Court of Delhi (High Court) by one, North Delhi Municipal Corporation (Appellant) against one M/s Veera Builders through its Partner & Ors (Respondents), challenged the Order dated 07.07.2015 passed by the learned Single Judge in CS (OS) No. 1349 (Trial Court), wherein the Trial Court dismissed the Suit filed by the Appellant-Plaintiff, which sought a declaration and possession of the plot bearing Nos. C-8/1 to C-8/5 (Property), Rana Pratap Bagh, measuring 4,000 square yards, because the Suit lacked any cause of action and was therefore deemed baseless and frivolous.

 In 1950, Sardar Jasbeer Singh and Sardar Hardayal Singh, owners of land in Mahaldar Khan Garden, entered into agreements with M/s DLF Universal Ltd. for developing and selling plots. The developed land became Rana Pratap Bagh, including plots C-8/1 to C-8/5. In 1962, initial building plans were sanctioned, recognizing the Respondents’ ownership. Over the decades, multiple building plans were approved, and the Respondents constructed on the Property.

Litigation began when the Appellant, North Delhi Municipal Corporation, rejected a building plan in 1992, citing the area as reserved. Subsequent legal actions affirmed the Respondents’ ownership and rights. In 2015, the Appellant filed a Suit seeking a declaration of ownership and possession, alleging fraudulent transfers. The learned Single Judge dismissed the Suit as baseless, citing long-standing possession and ownership rights of the Respondents, upheld through prior judgments and administrative approvals. 

TRIAL COURT:

The initial building plan for the Suit Property was sanctioned in 1962 after accepting the Respondents’ proof of ownership, and a subsequent plan was also sanctioned in 2010.

The Respondents had been in possession of the Suit Property since 1962, with no objections raised by the original developers, M/s DLF Universal Ltd., regarding their ownership or construction activities.

The Appellant’s claim of ownership was barred by the principle of constructive res judicata, given the long-standing possession and administrative approvals favouring the Respondents.

The Suit filed by the Appellant lacked any cause of action and was frivolous and baseless, particularly as the Appellants themselves had sanctioned the Respondents’ building plans.

The Appellant failed to substantiate allegations of fraud, as the Property was transferred to the Respondents for valid consideration.

ISSUES:

1.  Whether the Appellant, could claim ownership of the Suit Property based on its classification as “reserved land” in the layout plan, despite the Respondents’ possession and acknowledged ownership since 1962.

2. Whether the Appellant’s claims were barred by the principle of constructive res judicata, given prior judgments and decisions that had recognized the Respondents’ rights and dismissed similar claims by the Appellant.

3. Whether the Appellant had provided sufficient evidence to support its claim that the transfer of the Suit Property to the Respondents was fraudulent and whether fraud could vitiate the Respondents’ title and possession.

4. Whether the Suit filed by the Appellant had a valid and subsisting cause of action, or whether it was frivolous and barred by limitation due to the prolonged possession and administrative recognition of the Respondents’ ownership.

5. Whether the Appellant’s claim that the Property was reserved for community purposes could override the Respondents’ long-standing legal possession and ownership rights, particularly in the context of public interest.

6. Whether the Trial Court was justified in dismissing the Appellant’s Suit at the threshold under Order 7 Rule 11 of the CPC without issuing summons, based on the lack of a cause of action.

HIGH COURT:

The Appellant, North Delhi Municipal Corporation, had admitted the Respondents’ possession and ownership of the Suit Property since 1962, as evidenced by the sanction of building plans on multiple occasions, including in 2010.

The Appellant’s claim of ownership, based on the Suit Property being a “reserved area” in the layout plan, was untenable after decades of acknowledged possession and construction by the Respondents.

The Property had been in the Respondents’ possession for over 60 years, and the Appellant could not claim ownership after such a significant lapse of time, especially when it had taken no action during this period.

The principle of constructive res judicata barred the Appellant’s claims, as the issues raised had already been adjudicated in prior litigation.

The Appellant failed to provide any substantive evidence of fraud, relying only on vague allegations, which did not meet the legal threshold to invalidate the Respondents’ ownership rights.

The Trial Court was correct in dismissing the suit at the threshold under Order 7 Rule 11 of the CPC, as the plaint revealed no subsisting cause of action and was manifestly frivolous and vexatious.

 CONCLUSION:

The Court upheld the Trial Court’s decision to dismiss the Suit in limine under Order 7 Rule 11 of the CPC. Further, the Court emphasized that frivolous and vexatious claims should not be allowed to waste judicial time.

The Appellant’s claims were barred by the principle of constructive res judicata. Issues regarding ownership and possession had already been adjudicated in prior legal proceedings, and the Appellant could not re-litigate the same matters.

The Appellant’s allegations of fraud were vague and unsubstantiated. There was no evidence to show that the transfer of the Suit Property to the Respondents was fraudulent or illegal.

The Appellant’s argument that the Property was reserved for community purposes was dismissed. The Court observed that such a claim could not displace the Respondents’ long-standing legal possession and ownership rights.

 

Sakshi Raghuvanshi

Senior Legal Associate

The Indian Lawyer

 

Editor’s comments:

This matter has been decided in favour of the Respondents who have been in possession since 1962 on the principle of constructive res judicata that is a matter which might or ought to have been raised in an earlier proceeding not raised will operate as constructive res judicata. In a famous Judgment passed by a Special Bench of three Judges in State of Uttar Pradesh vs. Nawab Hussain, 1977 SCC  (2) 806 the Court was of the opinion that ‘the doctrine of res-judicata is based on two theories: (i) the finality and conclusiveness of judicial decisions for the final termination of disputes in the general interest of the community as a matter of public policy,  and (ii)  the interest of the individual that he should be protected from the multiplication of litigation’. The Court further held  ‘(a) In certain cases, the same set of facts may give rise to two or more causes of action.  In such cases, res judicata  is not confined to the issues which the  Court  is actually asked to decide but covers issues or  facts  which are so clearly part of the subject matter of the litigation and  so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to  be started in respect of them.  This rule has sometimes been referred to as constructive res-judicata which  is  an aspect or amplification of the general principle’.  The Apex Court has in the same case opined that if the doctrine of constructive res-judicata was not applied to writ proceedings, it would be open to a party to take one proceeding after another and urge new grounds every time, which was plainly inconsistent with considerations of public policy. The principle of constructive res-judicata was, therefore, held applicable to writ petitions as well.

 

Sushila Ram Varma

Advocate and Chief Consultant

The Indian Lawyer