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CASE NO.: Appeal (civil)  2517 of 2007

PETITIONER: Hardesh Ores Pvt. Ltd

RESPONDENT: M/s. Hede and Company

DATE OF JUDGMENT: 15/05/2007

BENCH: B.P. SINGH & HARJIT SINGH BEDI

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 2517 OF 2007 (Arising out of SLP(C) No. 106  of 2007) WITH CIVIL APPEAL NO. 2518 OF 2007 (Arising out of SLP(C) No. 640  of 2007) Sociedade de Fomento Industrial Pvt. Ltd.               \005    Appellant         Versus M/s. Hede and Company                                   \005    Respondent  

B.P. SINGH, J.

1.      Special Leave granted.   

2.      These appeals have been filed by the appellants against the  common judgment and order of the High Court of Judicature at Bombay  dated 20.10.2006 in First Appeal Nos. 138 and 139 of 2006 whereby the  High Court has affirmed the order of the Trial Court dismissing the suits  filed by the appellants under Order VII Rule 11 of the Code of Civil  Procedure holding that the suits are barred by limitation.

3.      The representative facts giving rise to these appeals are taken from  the pleadings in suit filed by Hardesh Ores Pvt. Ltd.  The appellants  herein, namely, Hardesh Ores Pvt. Ltd. in civil appeal arising out of  SLP(C) No. 106/2007 (for short ’Hardesh’) and Sociedade de Fomento  Industrial Pvt. Ltd. in civil appeal arising out of SLP(C) No. 640/2007  (for short ’Fomento’) respectively entered into two agreements with the  respondent Hede & Co. (for short ’Hede’) on 23.10.1996.  The agreement  with Hardesh was for extraction of ore from the mine in question  whereas the agreement with Fomento was for purchase of minerals  extracted from the mine.   Both the agreements contained similar terms  and conditions.  As per Clause 2.1 of the Agreement, the agreement  though executed on 23.10.1996 was to come into force from 1.1.1997  and was to remain in force for a period of 5 years from such date.   Clause 2.2 of the agreement provided that on the expiry of every 5 years  the agreement shall stand renewed for further periods of like duration at  the sole option of Hardesh on the same terms and conditions as  contained in the original agreement.  Hardesh was entitled to exercise its  option during the entire period of lease in respect of the said mine and  renewals thereafter, and until such time as remaining deposits of ore in  the said mine could be economically exploited.  Clause 2.3 gave the  right to Hardesh to terminate the agreement by giving two calendar  months prior notice in writing to the respondent-Hede of its intention to  do so.  Clause 2.5 of the agreement provided inter alia that in case  Hardesh was forced to abandon work in the said mine/land on account of  any lawful or legal claim made and/or objection raised by any person  including the holder of surface right or on account of any injunction  being passed by any Court of Law or on account of any fault of the

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respondent, the agreement shall not stand terminated but the operation  thereof shall stand suspended for such time.  In the event such a  condition/situation continued to exist for a period exceeding six calendar  months, Hardesh shall be entitled to terminate the agreement after giving  30 days notice in writing.  Clause 9.2 of the agreement ensured that the  respondent shall not in any manner interfere or obstruct Hardesh from  carrying on the work of extraction, raising, loading or delivering the ore  and its other functions under and in accordance with the agreement.           Clause 15 of the agreement provided that during the subsistence of  the agreement, Hardesh shall solely be entitled to extract and deliver the  ore from the said mine and the respondent shall not be entitled to  authorise or permit any other person for that purpose nor shall the  respondent either themselves or through their servants and/or agents,  extract, raise, remove, load, transport or deliver the ore from the said  mine unless expressly authorised or approved by Hardesh in writing.   

Under Clause 20 of the agreement the respondent covenanted unto  the appellant that during the pendency of the indenture they shall not  enter into any agreement, understanding or  arrangement with any other  party for working the said mine/lease for carrying on any other operation  whatsoever in the said mine/lease.   

       The agreement with Fomento is more or less in the same terms  though with Fomento it is for the purchase of the iron ore extracted and  to be extracted from the said mine.   

4.      Two suits for injunction were filed by the appellants herein on  4.10.2005.  The reliefs claimed in the suit of Hardesh were as follows:- (i)     The defendants their agents or representatives be  restrained from in any manner stopping and/or obstructing  the Plaintiff from entering upon the said mine and/or  carrying on the work of extraction, raising, loading and/or  delivering the ore from the said mine to Fomento and/or  from doing any activities ancillary thereto which the  Plaintiff is empowered to do under the 23.10.1996  Extraction Agreement.

(ii)    The Defendants their agents or representatives be  restrained from entering into the mine and doing any work  for extracting, raising, removing, loading, transporting,  selling or delivering to any other persons iron ore from the  said mine either by themselves or through their servants  and/or agents.

(iii)   The Defendants their agents or representatives be  restrained from entering into any contract/agreements  and/or understanding with third parties for prospecting  and/or extracting and/or raising any iron ore from the said  mine or selling the ore from the said mine to any third  party.

(iv)    That the Defendant be directed to give effect to the  negative covenant contained in clause 15 and 20 of the  Extraction Agreement dated 23.10.1996.  

5.      In the plaint reference was made to the agreements that were  entered into between the parties.  It was also stated that there were  privately owned lands comprised within the said mine and no consent had  been obtained from the surface right owners by the respondent and the  same was to be obtained subsequently, which necessitated the  incorporation of Clause 2.5 in the agreement.  The agreement was to  commence from January 01, 1997 but on 12.12.1996 in view of an order  of the Supreme Court dated 12.12.1996 prohibiting mining operations in  the authorised area, mining operations could not be commenced.  In view  of the situation that arose on account of the order of Supreme Court

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which necessitated permission being sought from the Central Government  for commencing mining operations, as also in view of the fact that the  consent of the surface right owners had not been obtained, on the  proposal of the respondent, the appellants exercising their right under  Clause 15 of the agreement authorised the respondent to carry on  extraction operation in the pits already opened.  It is the case of the  appellant that appellant had taken possession of the mine immediately  after coming into effect of the contract on 1.1.1997.  The respondent  extracted the ore from the mine already opened pursuant to the  authorisation given as per Clause 15 of the Agreement.  This arrangement  was of a temporary nature.  Some obstruction was raised by the surface  right owners in January, 1998 which was reported to the respondent.  The  respondent promised to sort out the problem with the surface right owners  by getting their consent in writing.  It is admitted in the plaint that  although the said agreements were to come into force on 1.1.1997 no  mining operations could be commenced in view of the order of the  Supreme court dated 12.12.1996.   

6.      The case of the appellant in the plaint is that the extraction  agreement was initially for a period of five years from 1.1.1997 with a  right of renewal at the option of the appellant on the same  terms and  conditions. In view of the original period of 5 years coming to an end on  31.12.2001, in terms of clause 2.2 of the agreement appellant Hardesh  exercised its option to renew the said agreement for further period of 5  years.  This was conveyed to the respondent vide letter date 4.12.2001  which was received by it on 7.12.2001.  According to the appellant with  the exercise of option by appellant Hardesh the agreement stood renewed  upto 31.12.2006.  However, the appellant Hardesh received a letter dated  29.12.2001 from the respondent alleging that the plaintiff-appellant was  not entitled to exercise the option for renewal.  The letter dated 4.12.2001  annexed to the plaint has been marked as Exh. 41 and its reply dated  31.12.2001 has been marked as Exh. 43.    

7.      The appellant came to learn that the respondent was conducting the  extraction in the private area where the surface rights were held by  Salgaonkar sisters.  This led the appellant to believe that the problem may  have been sorted out with the surface right owners, namely, Salgaonkar  sisters.  If that was so, it was incumbent upon the respondent to inform  the appellant so that the appellant could undertake the extraction work  itself.  The appellant had also come to learn that the first stage clearance  had been granted in respect of the said mine on 17.10.2003 by the  Ministry of Environment and Forest under the Forest Conservation Act,  1980 but the second stage clearance was yet to be obtained without which  it was not possible to commence work.

8.      In this background the appellant issued a notice dated 27.4.2005 to  the respondent requesting them to furnish to the appellant within 15 days  of the receipt of the notice the documents evidencing the consent obtained  from Salgaonkar sisters.  The notice also stated as follows :-  

"Kindly note that if no documents as aforesaid are furnished  to us within a period of 15 days from the receipt of this  notice, or if no reply is received from you we shall presume  that such consent has been obtained since you are doing the  extraction in the area of the captioned mining lease wherein  surface rights are held by Salgaonkar sisters, pursuant to the  authorization granted to you, in terms of clause 15 of the  Extraction Agreement dated 23.10.1996."

9.      The said letter was annexed as Exh. 48.  The respondent failed to  furnish the documents, as requested, and, therefore the appellant issued  notice dated 17.5.2005 withdrawing the authorization granted by the  appellant under clause 15 of the Extraction Agreement and called upon  the respondent to resist from doing any extraction or selling ore to any

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party within 30 days of service of notice failing which the appellant  asserted its right to enter into the mine to give effect to the agreement.   The respondent replied by its letter dated 24.6.2005 refusing to comply  with the demand contained in the notice.  The appellant asserted that in  view of Clauses 15 and 20 of the agreement the appellant had exclusive  right to carry on extraction and not the respondent.  It was also stated in  the plaint that there were valid, subsisting and binding agreements  between the plaintiffs (Hardesh and Fomento) and the defendant- respondent and that Hardesh and Fomento were at all material times and  even today ready and willing to perform the terms of the agreement.  It  was asserted that the plaintiffs-appellants had performed their obligations  under the agreements. The Extraction Agreement was specifically  enforceable and the appellant had performed its obligations and were  willing to fully carry out its obligations as per the said agreement.  In the  circumstances, it was submitted that the appellant was entitled to an order  of preventive injunction and as also temporary injunction in the manner  prayed for in the suit.           It is the case of the appellant-plaintiff that the cause of action arose  to the plaintiff with the expiry of notice period dated 17.5.2005.  On such  pleas the prayers which have been extracted in earlier part of the  judgment were made in the suit.

10.     An application was filed on behalf of the respondent under Order  VII Rule 11 of the Code of Civil Procedure submitting that there was  absence of cause of action and also the plaint was barred by limitation.   Subsequently, the plea of absence of cause of action was given up and  only the plea of bar of limitation under the Limitation Act was pressed.  It  was submitted that Article 54 of the Limitation Act applied and that a suit  for specific performance of the contract should have been filed within 3  years from the date the appellant-plaintiff had notice that the renewal of  the agreement was refused by the respondent.  In the instant case the  refusal was communicated on 29.12.2001 and, therefore, the suit should  have been filed within 3 years thereafter.       

11.     The Trial Court by its order of 23.2.2006 allowed the application  and dismissed the suit as barred by limitation.  It observed that from a  mere perusal of the pleadings contained in paragraphs 47 to 51 of the  plaint it appeared that the appellant had asserted that the agreements were  specifically enforceable.  A reading of the plaint established that the  foundation of the appellant’s suit was for specific performance  of the  renewal of the agreement dated 23.10.1996, the cause of action for which  arose on 29.12.2001 when they received reply of the respondent denying  that the agreement stood renewed.  Since the suit was filed much after the  expiry of 3 years from that date, it was hopelessly barred by limitation.

12.     Aggrieved by the order of the Trial Court the appellants preferred  two appeals before the High Court which have been dismissed by the  impugned order.  Before the High Court it was urged that in deciding an  application under Order VII Rule 11 of the CPC the contentions raised in  defence or submissions advanced by the respondent-defendant about their  case need not be considered and the matter must be decided on the basis  of averments in the plaint and the documents annexed with the plaint.   The Trial Court had fallen into an error when it referred to the defence of  the defendant to determine as to whether the plaint was liable to be  rejected as barred by limitation.  It also noticed the submission urged on  behalf of the appellant that the question of limitation was a mixed  question of law and fact and, therefore, such a question could be  adjudicated only in the trial.   13.     On the other hand the appellants contended that the case was  squarely covered by the ratio laid down by this Court in the case of N.V.  Srinivasa Murthy and Others Vs. Mariyamma (Dead) by Proposed Lrs.  and Others  : (2005) 5 SCC 548.  By the device of clever drafting of the  plaint the question of limitation was sought to be got over by  camouflaging the real issue in the suit and making it appear as if it was  merely a suit for perpetual injunction.  

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14.     The High Court after appreciating the averments contained in the  plaint observed that this was not merely a suit for perpetual injunction  insisting upon performance of the negative covenants as contained in  Clauses 15 and 20 of the agreement.  The plaint clearly showed that the  plaintiff’s suit was in effect a suit for specific performance of the renewal  of the agreement dated 23.10.1996.  The cause of action for such a suit  arose on 29.12.2001 when the respondent by its letter refuted the claim of  the appellants for renewal w.e.f. 1.1.2001 for a period of 5 years.  After  considering the judgment of this Court in Srinivasa Murthy’s case (supra)  the High Court concluded that the ratio laid down therein was squarely  applicable to the instant case.  It recorded a finding that the suit for  injunction simplicitor was nothing but a camouflage to get over the bar of  limitation, which, in fact, showed that specific performance was implicit  in the pleadings contained in the plaint itself.  The suit though styled as  ’suit for injunction’ was, in fact, a suit for specific performance for the  renewal of the agreement dated 23.10.1996 for which the cause of action  had arisen on 29.12.2001.  It negatived the contention urged on behalf of  the appellants relying on the judgment of this Court in 2006 (5) SCC, 638  Ramesh B. Desai holding that in the instant case without going to the  pleadings and the documents filed on behalf of the defence, the plaint  itself and the documents annexed therewith showed that in fact it was a  suit for specific performance of the agreement between the parties which  appeared to be barred by the law of limitation.  Accordingly it dismissed  the appeals preferred by the appellants.      

15.     Mr. Soli J. Sorabjee, learned senior counsel appearing on behalf of  the appellants in Civil Appeal arising out of SLP(C) No. 106/2007  submitted that in dealing with an application under Order VII Rule 11 the  court must go by the averments in the plaint.  The plaint must be read as a  whole.  The mere use of words like "readiness" and "willingness" to  perform the agreement by themselves do not make it a case of specific  performance of agreement.  Those averments in the instant case were  necessary for enforcing the negative covenants contained in Clauses 15  and  20 of the agreement.  He, therefore, submitted that the trial court was  entirely wrong in construing the instant suit as a suit for specific  performance of the agreement, whereas it was essentially a suit for  perpetual injunction seeking enforcement of the negative covenants  contained in the agreement in Clauses 15 and 20 thereof.  He further  submitted that the question of limitation was a mixed question of law and  fact and could be decided only in the suit.  

16.     Mr. R.F. Nariman, learned senior counsel appearing on behalf of  the appellant in civil appeal arising out of SLP(C) No. 640/2007  submitted that clause 2.2 of the agreement provided for a renewal every 5  years at the option of the lessee till the mine was exhausted.  The use of  the words "stand renewed", "further periods" and "sole option of  Hardesh" were indicative of the fact that there was automatic renewal of  the lease once the option was exercised by Hardesh and such renewals  took place as and when options were exercised in future till such time as  the mine got exhausted.  He submitted that there were inbuilt provisions  of pricing in the agreement itself which were dependent on export price.   There was an inbuilt mechanism for escalation of price which supported  his contention that the lease stood renewed from time to time on option  being exercised by Hardesh.  He also submitted that the subject matter of  the lease was divided into two parts.  So far as the forest land was  concerned the cause of action had not even arisen and, therefore, there  was no question of dismissing the entire suit.  He drew our attention to  clause 2.5 of the agreement and contended that the aforesaid clause  provided for suspension of the agreement and not its termination in the  eventualities enumerated in that clause.  According to him Article 54 of  the Limitation Act was not at all applicable and, if at all, Article 113 may  apply since there was no specific article prescribing a period of limitation  for the enforcement of positive or negative covenants.  The article was  elastic enough to include a case where the party unequivocally threatened

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the plaintiff’s right and the same need not be the first threat.  Referring to  Article 58, he submitted that the limitation is to be computed from the  date when the right to sue first accrued whereas under Article 113 the  threat giving rise to the cause of action need not be the first threat.  In the  instant case the defendant had started mining in the area including the  land which were in dispute on account of the fact that the surface right  owners had not given them permission to do so.  It was in these  circumstances that the respondent was called upon to disclose the  documents, if any, evidencing grant of permission by the surface right  owners.  He relied upon a decision of this Court reported in Union of  India and Others Vs. West Coast Paper Mills Ltd. and another : 2004 (2)  SCC 747 highlighting the difference between Article 58 and Article 113  of the Limitation Act.  He further submitted that Srinivasa Murthy’s case  (supra) was misapplied since the fact situation in the instant case was  different from that in Srinivasa Murthy’s case.  The High Court fell into  an error in looking at the defence of the respondent to come to the  conclusion that the suit was barred since there was no valid renewal.  Mr.  Nariman, however, did not dispute that reference to "law" in Order VII  Rule 11 of the CPC included a law relating to limitation such as the  Limitation Act.   

17.     Mr. Mukul Rohtagi, learned senior counsel appearing for the  respondent in civil appeal arising out of SLP(C) No. 106/2007 submitted  that the High Court was fully justified in coming to the conclusion that  the clever drafting of the plaint purporting to be a suit for injunction was  merely to camouflage the real issue.  He did not dispute that the plaint  must be read as a whole and one must look to the substance rather than  the form.  He submitted that the appellant’s case that there was automatic  renewal after the original term expired on mere exercise of option by the  appellant was not legally tenable.  According to him the renewal of a  mining lease must be evidenced by the execution of a deed evidencing  renewal, or a fresh mining lease, and such a document must incorporate  the negative covenants as were sought to be enforced.  According to him  if the submission urged on behalf of the appellants is to be accepted, by  mere exercise of option and without execution of an actual agreement, a  renewed agreement comes into existence with the same negative  covenants which gave a right to the appellant to enforce the newly born  negative covenants.  According to him where an option is to be exercised  by the lessee, he must insist upon the execution of an actual physical  agreement evidencing renewal of the original term.  If the promisor  refused to execute such a document, the appellants should have sought the  assistance of the Court and ought to have moved the Court claiming a  relief against the promisor for execution of a document evidencing  renewal of the lease.  That should have been done within a period of 3  years from the date on which the promisor rejected the claim of the  appellant that the lease stood renewed by mere exercise of option by it.  If  no suit is filed and no agreement executed by the parties, there can be no  question of a fresh agreement coming into existence and consequently no  question of enforcement of a negative covenant in such a non-existent  agreement.  He further submitted that the 1996 agreement was a lease for  a period exceeding 11 months and, therefore, required compulsory  registration in view of the provisions of Sections 17 and 49 of the  Registration Act.  It, therefore, cannot be read as evidence in the suit and  consequently no rights under such an agreement can be claimed.  He  further submitted that even renewal of such a lease required registration.   According to him the appellants were trying to side step something which  was imperative and which had necessarily to be asked for in the suit,  which had not been asked for.  Therefore, applying the principle laid  down in Srinivasa Murthy’s case (supra) the suit must fail because the  appellants should have asked for a declaration under Order II Rule 2 to  the effect that the agreement stood renewed and the respondent’s denial  was unlawful.  Rather than doing that, the appellants have sought only the  end relief which could not be asked for without first asking for a  declaration that the lease deed stood renewed on mere exercise of option  without the execution of an indenture evidencing renewal of the lease.  

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Only in such a renewed lease a negative covenant could have been  incorporated which could have been enforced.  Since such an agreement  never came into existence and a suit for declaration stood barred by time,  the appellant cannot get over the limitation and seek the remedy of  injunction by way of enforcement of the negative covenants  in an  agreement which never came into existence. In sum and substance he  submitted that without first getting a renewed lease deed executed in  physical form or getting a declaration from a Court of Law that lease  stood renewed as contended by them, the appellant cannot seek a relief by  way of injunction by filing a suit for enforcement of negative covenants.   He further submitted that the appropriate Article which applied in the  facts of this case was Article 54.  Since the respondent denied the fact that  the lease stood automatically renewed, the limitation commenced from  that day and, therefore,  a suit for declaration and/or specific performance  was barred after 3 years from the date of refusal, i.e., 29.12.2001.   Articles 58 and 113 did not apply to the facts of this case.   

18.     Mr. Ranjeet Kumar, learned senior counsel appearing on behalf of  the respondent in civil appeal arising out of SLP(C) No. 640/2007 relied  upon judgments in State of U.P. and Others Vs. Lalji Tandon (Dead)  Through Lrs. : (2004) 1 SCC 1 and Provash Chandra Dalui and another   Vs. Biswanath Banerjee and another : 1989 (Supp.1) SCC 47 and  contended that there was a vital distinction between extension of a lease  and renewal of a lease.  The law is well settled that in case of renewal a  fresh agreement has to be executed.  He also relied upon decision of this  Court in M.C. Mehta Vs. Union of India and Others :  (2004) 12 SCC 188  to contend that even renewal of a lease amounted to a fresh grant of lease.   He also contended that the plaint itself disclosed that the appellant- plaintiff had never worked the mine and it was the respondent-defendant  who was working the mine.  

19.     Replying to the submissions urged on behalf of the respondents,  Mr. Sorabjee, appearing for the appellants submitted that the question as  to whether the agreement was really a mining lease or a mere agreement,  and whether it required registration, has to be gone into in the suit and  this question cannot be urged in an application under Order 7 Rule 11  CPC.  At this stage whatever is stated in the plaint must be accepted.  The  question of registration may arise when the document is produced and  objected to by the respondent.  In any event, even if the document  requires registration, that cannot be a ground for rejecting the plaint on  the ground that the suit is barred by limitation.  Moreover, since the  respondents have given up the plea of absence of cause of action, this  matter cannot be investigated at this stage.  He reiterated his submission  that under clause 2.2 of the agreement read with clause 18, by exercise of  option claiming renewal, the agreement ipso facto stands renewed and  there is no need to get a fresh agreement executed.   

20.     We may observe at the threshold that the question as to whether the  agreement required registration is not a question which can be gone into  at this stage particularly in view of the fact that the plaint has been  rejected on the ground of limitation.

21.     The language of Order VII Rule 11 CPC is quite clear and  unambiguous.  The plaint can be rejected on the ground of limitation only  where the suit appears from the statement in the plaint to be barred by any  law.  Mr. Nariman did not dispute that "law" within the meaning of  clause (d) of Order VII Rule 11 must include the law of limitation as well.   It is well settled that whether a plaint discloses a cause of action is  essentially a question of fact, but whether it does or does not must be  found out from reading the plaint itself.  For the said purpose the  averments made in the plaint in their entirety must be held to be correct.   The test is whether the averments made in the plaint if taken to be correct  in their entirety a decree would be passed.  The averments made in the  plaint as a whole have to be seen to find out whether clause (d) of Rule 11  of Order VII is applicable.  It is not permissible to cull out a sentence or a

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passage and to read it out of the context in isolation.  Although it is the  substance and not merely the form that has to be looked into, the pleading  has to be construed as it stands without addition or subtraction of words  or change of its apparent grammatical sense.  As observed earlier, the  language of clause (d) is quite clear but if any authority is required, one  may usefully refer to the judgments of this court in Liverpool & London  S.P. & I Association Ltd.  Vs.  M.V. Sea Success I and another : (2004) 9  SCC 512 and Popat and Kotecha Property  Vs.  State Bank of India Staff  Association : (2005) 7 SCC 510.

22.     We shall therefore proceed on the basis of averments contained in  the plaint and the documents annexed to it.  

23.     In the instant case it cannot be disputed that the agreement was  acted upon as stated in the plaint itself.  It is averred in the plaint that  possession of the mine was taken in terms of the agreement by the  appellant-plaintiff.  The appellant-plaintiff also exercised its right under  the agreement and in terms of clause 15 thereof authorized the  respondent-defendant to carry on mining operations in the pits already  opened up. Apart from these the mere fact that the appellant sought  renewal of the lease which was denied by the respondent, is sufficient  proof of the fact that the agreement had been acted upon by the appellant.

24.     The next averment in the plaint which is relevant is paragraph 23  thereof wherein the appellant-plaintiff stated that since the original period  of 5 years was to end on 31.12.2001 in terms of clause 2.2 of the  agreement, the appellant-plaintiff exercised its option to renew the said  agreement for further period of 5 years which was conveyed to the  respondent vide its letter dated 4.12.2001 and which was received by the  respondent-defendant on 7.12.2001.  In the same paragraph it is stated  that the extraction agreement entered into between the plaintiff-appellant  and the defendant-respondent was operative and stood renewed upto  31.12.2006.  A copy of the letter dated 4.12.2001 has been annexed to the  plaint and marked as Exh. 41.  The plaintiff-appellant further goes on to  say that it received the reply from the defendant-respondent dated  29.12.2001 alleging that the plaintiff-appellant was not entitled to  exercise the option of renewal.  The said letter has been annexed to the  plaint and marked as Exh. 43.  A mere perusal of the letter dated  4.12.2001 addressed by the appellant to the respondent is enought to  satisfy the Court that in terms of clause 2.2 of the agreement the appellant  exercised its option to renew the captioned agreement for a further period  of 5 years commencing from 1.1.2002 on the same terms and conditions  as contained in the original agreement.  The letter clearly states that after  31.12.2001 the captioned agreement will stand renewed for the period  1.1.2002 to 31.12.2006.  To this the respondent-defendant replied by its  letter dated 29.12.2001, the relevant part whereof reads as follows :-

"We do not agree with your contention in your letter dated  4/12/1997 that the Agreement in reference stands renewed as  alleged from 1/1/2001 to 31/12/2006 or for any other period  whatsoever."     

It is thus apparent that the appellant-plaintiff exercised its right under the  agreement to claim a renewal of the term of the lease and the respondent- defendant refuted that claim and denied the assertion that the agreement  stood renewed as alleged from 1.1.2001 to 31.12.2006 or for any other  period whatsoever.  In view of the correspondence exchanged between  the parties, clearly a cause of action accrued to the appellant-plaintiff  since its right of renewal as a matter of course claimed by it was denied  by the respondent-defendant.  Whether the denial was justified or not is  another matter.  In the facts and circumstances of the case, a right accrued  to the appellant-plaintiff to sue the respondent-defendant and to get a  declaration that the agreement stood automatically renewed for a further  period of 5 years.  It is the admitted position that the appellant-plaintiff  did not pursue the matter further and never sought relief from any court of

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law of competent jurisdiction for a declaration that the lease stood  renewed automatically upon the appellant-plaintiff exercising its option  under the agreement.  It was contended on behalf of the respondent- defendant that there is no question of automatic renewal of an agreement  or lease by mere exercise of the option which the appellant-plaintiff may  claim under the agreement.  The respondent contends that renewal of an  agreement or lease requires execution of another document evidencing  such renewal and, in its absence, it cannot be argued that the agreement or  lease stood automatically renewed.  It was also urged relying upon the  decision of this Court in the case of Ambika Querries  Vs.  State of  Gujarat : 1987 (1) SCC 213 that the grant of renewal is a fresh grant and  must be consistent with law.  The respondents relied on the decision of  this Court in Provash Chandra Dalui and another Vs. Biswanath  Banerjee and Another : 1989 (Supp. 1) SCC, 487 wherein this Court  considered the difference between "extension" and "renewal" of a lease.   This Court observed thus :-

"14.    It is pertinent to note that the word used is ’extension’  and not ’renewal’.  To extend means to enlarge, expand,  lengthen, prolong, to carry out further than its original limit.   Extension, according to Black’s Law Dictionary, means  enlargement of the main body; addition to something  smaller than that to which it is attached; to lengthen or  prolong.  Thus extension ordinarily implies the continued  existence of something to be extended.  The distinction  between ’extension’ and ’renewal’ is chiefly that in the case  of renewal, a new lease is required, while in the case of  extension the same lease continues in force during additional  period by the performance of the stipulated act."

The same view was reiterated by this Court in the case of State of U.P.  and Others Vs. Lalji Tandon (Dead) through lrs. : (2004) 1 SCC 1  wherein it was observed as under :-

"There is a difference between an extension of lease in  accordance with the covenant in that regard contained in the  principal lease and renewal of lease, again in accordance  with the covenant for renewal contained in the original  lease.  In the case of extension it is not necessary to have a  fresh deed of lease executed, as the extension of lease for the  term agreed upon shall be a necessary consequence of the  clause for extension.  However, option for renewal  consistently with the covenant for renewal has to be  exercised consistently with the terms thereof and, if  exercised, a fresh deed of lease shall have to be executed  between the parties.  Failing the execution of a fresh deed of  lease, another lease for a fixed term shall not come into  existence though the principal lease in spite of the expiry of  the term thereof may continue by holding over for year by  year or month by month, as the case may be."

25.     Having regard to these decisions we must hold that in order to give  effect to the renewal of a lease, a document has to be executed evidencing  the renewal of the agreement or lease, as the case may be, and there is no  concept of automatic renewal of lease by mere exercise of option by the  lessee.  It is, therefore, not possible to accept the submission urged on  behalf of the appellants-plaintiffs that by mere exercise of option claiming   renewal, the lease stood renewed automatically and there was no need for  executing a document evidencing renewal of the lease.

26.     We shall now advert to some of the facts stated in the plaint itself.   The case of the appellant-plaintiff is that since it was not possible to  commence mining operation after taking possession of the mine, in  exercise of its right under clause 15 of the agreement, it permitted the

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respondent to carry on mining operations confined to the pits already  opened up.  Its case was that under its permission the respondents were  carrying on limited mining operation.  The appellants were awaiting  permission of the Central Government under the Forest Conservation Act  as also consent of the surface right holders permitting them to carry on  mining operations.  When the original term of the lease expired, they  exercised their option to get the lease renewed for a further period of 5  years but the respondents refuted their claim and denied the fact that the  lease stood renewed automatically.  The option was exercised by the  appellant and refuted by the respondent in December, 2001.  Thereafter  nothing much appears to have happened and during this period the  respondent carried on mining operations.  It was only on 15.5.2005 that  the appellant Hardesh wrote to the respondent stating that they had been  permitted to extract ore from the broken pits in the forest area under  Clause 15 of the Extraction Agreement.  The appellant also permitted the  respondent to sell the ore to others like Dempo or Chowgules since  Fomento was not interested in purchasing the low grade ore.  The  communication also referred to the option exercised by the appellant for  renewal for a period of 5 years from 1.1.2002 to which the respondent  replied saying that they were not entitled to exercise any option.  The  letter then goes on to say that the appellants were led to believe that the  respondent had obtained the consent from the surface right owners of the  privately owned land within the mining area about which no information  had been given to the appellants.  Therefore, by letter dated 27.4.2005 the  respondent were called upon to furnish the documents evidencing consent  given by the surface right owners.  It was further stated that if no  documents, as aforesaid, were furnished within  a period of 15 days from  the date of receipt of this notice or if no reply was received, the appellants  shall presume that such consent had been obtained since the respondents  were doing the extraction in the area of the captioned mining lease.  Since   no documents were furnished pursuant to notice dated 27.4.2005, the  appellants assumed that such consent had been obtained.  It, therefore,  withdrew the permission given to the respondents under Clause 15 of the  Extraction Agreement so that the appellants could make preparation to  start the extraction work.  The last paragraph of this letter reads as under:-

"We, therefore, give you notice to desist from doing any  extraction of ore or doing work of any type in the above  mine on the expiry of 30 days from the receipt of this notice  failing which we would have no other alternative than to  approach the court to get appropriate relief, including  specific performance against you."

It is not necessary to refer to the correspondence exchanged thereafter.   The suits came to be filed on August 04, 2005 in which a prayer for  injunction was made with a view to enforce the negative covenants  contained in clauses 15 and 20 of the agreement.   

27.     The respondent sought rejection of the plaint by filing  application  under Order VII Rule 11 CPC contending that the suit was barred by  limitation on the face of it.  It was contended before the High Court as  also before us that the plaint has been cleverly drafted to give it the  appearance of a simple suit for injunction to enforce the terms of Clauses  15 and 20 of the agreement which incorporated negative covenants  prohibiting mining operation by anyone else except the appellant- Hardesh, or without its permission. It was submitted before us that the  law is well settled that the dexterity of the draftsman whereby the real  cause of action is camouflaged in a plaint cleverly drafted cannot defeat  the right of the defendant to get the suit dismissed on the ground of  limitation if on the facts, as stated in the plaint, the suit is shown to be  barred by limitation.  In T. Arivandandam  Vs.  T.V. Satyapal and another  1977 (4) SCC 467 this Court observed as under :-

"We have not the slightest hesitation in condemning the  petitioner for gross abuse of the process of the court

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repeatedly and unrepentently resorted to.  From the  statement of the facts found in the judgment of the High   Court, it is perfectly plain that the suit now pending before  the First Munsif’s Court, Bangalore, is a flagrant misuse of  the mercies of the law in receiving plaints.  The learned  Munsif must remember that if on a meaningful - not formal-  reading of the plaint  it is manifestly vexatious, and  meritless, in the sense of not disclosing a clear right to sue,  he should exercise his power under Order VII Rule 11,  C.P.C., taking care to see that the ground mentioned therein  is fulfilled.  And, if clever drafting has created the illusion of  a cause of action, nip it in the bud at the first hearing by  examining the party searchingly under Order X , C.P.C. An  activist Judge is the answer to irresponsible law suits." In I.T.C. Limited  Vs. Debts Recovery Appellate Tribunal and  Others : 1998(2) SCC 70 this Court noticed the judgment in Arvin and  observed  as under :-

"16.    The question is whether a real cause of action has  been set out in the plaint or something purely illusory has  been stated with a view to get out of Order 7 Rule 11 CPC.   Clever drafting creating illusions of cause of action are not  permitted in law and a clear right to sue should be shown in  the plaint. "  

28.     The respondent strongly relied on the decision of this Court in  Srinivasa Murthy’s case (supra). That was a case where the plaintiffs  alleged in the plaint that their father had incurred some debts and had  therefore borrowed a sum of Rs.2000 from the predecessor in title of the  defendants.  Only by way of security for the loan advanced, a registered  sale deed had been executed on 5.5.1953 with a contemporaneous oral  agreement that on return of the borrowed sum with interest payable  thereon @ 6% per annum a registered reconveyance deed shall thereafter  be executed in favour of the borrower.  The case of the plaintiff was that  despite the registered sale deed, the plaintiff continued to be in possession  of the suit lands. The receipt was obtained on 25.3.1987 from the  defendants and the original registered sale deed dated 5.5.1953 was  returned to the first plaintiff with an oral promise by the defendants to  execute the registered document in favour of the plaintiff/borrower.  On  reading of all the averments of the plaint, it appeared that the cause of  action for obtaining a registered reconveyance deed from the defendants  in favour of the plaintiff first arose on 25.3.1987 when the entire loan  amount was alleged to have been paid and an oral promise was given by  the defendants to reconvey the suit lands.  In the mutation proceedings an  order was passed in favour of the defendants and the said order was  confirmed in appeal by order of the Assistant Commissioner dated  28.4.1994.  The cause of action is said to have arisen when the appellate  authority confirmed the order of the lower authority directing mutation of  the names of the defendants and then again in the first week of July, 1995  when the defendants were alleged to have made an attempt to interfere  with the plaintiff’s possession and enjoyment of the suit lands.  The suit  was filed on 26.8.1996 in which the reliefs claimed were, (a) declaration  that the plaintiffs are absolute owners of the suit lands and (b) permanent  injunction restraining the defendants from wrongfully entering the  scheduled property and from interfering with the peaceful possession and  enjoyment of scheduled lands.   

29.     This Court after examining the pleadings observed that the  foundation of the suit was that the registered sale deed dated 5.5.1953 was  in fact only a loan transaction executed to secure the amount borrowed  from the plaintiffs’ predecessor.  The amount borrowed was alleged to  have been fully paid back on 25.3.1987 and in acknowledgment thereof  a  formal receipt was obtained.  At the same time there was an alleged oral  agreement by the defendants to reconvey the property to the plaintiffs by  registered deed.  This Court held that on the basis of the averments

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contained in the plaint relief of declaring the registered sale deed dated  5.5.1953 to be a loan transaction and second relief of specific  performance of oral agreement of recoveyance of property by registered  document ought to have been claimed in the suit.  A suit merely for  declaration that the plaintiffs are absolute owners of the suit lands could  not have been claimed without seeking a declaration that the registered  sale deed dated 5.5.1953 was a loan transaction and not a real sale.  The  cause of action for seeking such a declaration and for reconveyance deed  according to the plaintiffs own averments arose on 25.3.1987 when the  plaintiff is claimed to have obtained the entire loan amount and obtained a  promise from the defendants to reconvey the property.  The mutation  proceedings did not furnish any independent or fresh cause of action to  seek a declaration of the sale deed of 5.5.1953 to be merely a loan  transaction.  The foundation of the suit was clearly the registered sale  deed of 1953 which is alleged to be a loan transaction and the alleged oral  agreement of reconveyance of the property on return of borrowed  amount.  This Court went on to observe,  

"14.    After examining the pleadings of the plaint as  discussed above, we are clearly of the opinion that by clever  drafting of the plaint the civil suit which is hopelessly barred  for seeking avoidance of registered sale deed of 5.5.1993,  has been instituted by taking recourse to orders passed in  mutation proceedings by the Revenue Court.

15.     Civil Suit No. 557 of 1990 was pending when the  present suit was filed.  In the present suit, the relief  indirectly claimed is of declaring the sale deed of 5.5.1993  to be not really a sale deed but a loan transaction.  Relief of  reconveyance of property under alleged oral agreement on  return of loan has been deliberately omitted from the relief  clause.  In our view, the present plaint is liable to rejection,  if not on the ground that it does not disclose "cause of  action", on the ground that from the averments in the plaint,  the suit is apparently barred by law within the meaning of  clause (d) of Order 7 Rule 11 of the Code of Civil  Procedure."

30.     Relying upon these decisions it was contended before us that  though the suit is for grant of injunction, real foundation of the suit is that  there exists an agreement containing negative covenants which can be  enforced by the appellant-plaintiff.  The relief is sought on the assumption  that there is an existing agreement containing negative covenants in  clauses 15 and 20 thereof, as they were in the original agreement.   Counsel submitted that even the negative covenants in clauses 15 and 20  of the agreement presuppose the subsistence of the agreement and,  therefore, unless the appellant-plaintiff satisfy the Court that there is a  subsisting agreement, they cannot seek any relief from the Court to  enforce the negative covenants contained therein.   

31.     On the other hand, it is the case of the appellant-plaintiff that on  mere exercise of option by the appellant-plaintiff claiming renewal the  agreement got renewed automatically.

32.     We are of the view that the respondent is right in contending that  enforcement of the negative covenants presupposes the existence of a  subsisting agreement.  As noticed earlier, the law is well settled that the  renewal of an agreement or lease requires execution of a document in  accordance with law evidencing the renewal.  The grant of renewal is also  a fresh grant.  In the instant case, the appellant-plaintiff did exercise their  option and claimed renewal.  The respondents denied their right to claim  renewal in express terms and also unequivocally stated that the agreement  did not stand renewed as contended by the appellants.  Having regard to  these facts it must be held that a cause of action accrued to the appellant- plaintiff when their right of renewal was denied by the respondents.  This

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happened in December, 2001 and, therefore, within three years from that  date they ought to have taken appropriate proceedings to get their right of  renewal declared and enforced by a court of law and/or to get a  declaration that the agreement stood renewed for a further period of 5  years upon the appellants’ exercising their option to claim renewal under  the original agreement.  The appellants-plaintiffs have failed to do so.   However, the plaint proceeds on the assumption that the original  agreement stood renewed including the negative covenants contained in  clauses 15 and 20 of the original agreement which authorised only the  appellants to extract ore from the mine with an obligation cast on the  respondents-defendants not to interfere with the enjoyment of their rights  under the agreement.  In the facts of this case, in the suit prayer for  injunction based on negative covenants  could not be asked for unless it  was first established that the agreement continued to subsist.  The use of  the words "During the subsistence of this agreement" in clause 15, and  "during the pendency of this indenture" in clause 20 of the agreement is  significant.  In the absence of a document renewing the original  agreement for a further period of 5 years and in the absence of any  declaration from a court of law that the original agreement stood renewed  automatically upon the appellants exercising their option for grant of  renewal, as is the case of the appellants, they cannot be granted relief of  injunction, as prayed for in the suit, for the simple reason that there is no  subsisting agreement evidenced by a written document or declared by a  Court. If there is no such agreement, there is no question of enforcing  clauses 15 and 20 thereof.  The appellants ought to have prayed for a  declaration that their agreement stood renewed automatically on exercise  of option for renewal and only on that basis they could have sought an  injunction restraining the respondents from interfering with their  possession and operation.  Having not done so, they cannot be permitted  to camouflage the real issue and claim an order of injunction without  establishing the subsistence of a valid agreement.  In the instant suit as  well they could have sought a declaration that the agreement stood  renewed automatically but such a claim would have been barred by  limitation since more than 3 years had elapsed after a categoric denial of  their right claiming renewal or automatic renewal by the respondents- defendants.   

33.     Mr. Nariman contended that this case was governed not by Article  58 of the Limitation Act but, if at all, by Article 113 thereof because there  is no specific article provided for enforcement of positive or negative  covenants.  We shall assume that he is right in contending that Article 113  may apply where enforcement of a positive or negative covenant is  sought in a suit for injunction.  However, in this case we have found that  the real foundation for the suit was that the earlier agreement stood  renewed automatically containing the same terms and conditions as in the  original agreement including the negative covenants.  There is neither a  document to prove that the agreement stood renewed nor is there a  declaration by a court that the agreement stood renewed automatically on  exercise of option for renewal by the appellants.  The basis for claiming  the relief of injunction, namely, a subsisting renewed agreement did not  exist in fact.  In its absence, no relief as prayed for in the suit could be  granted by the clever device of filing a suit for injunction, without  claiming a declaration as to their subsisting rights under a renewed  agreement, which is apparently barred by limitation.   

34.     We are, therefore, satisfied that the Trial Court as well as the High  Court were justified in holding that the plaint deserved to be rejected  under Order VII Rule 11 CPC since the suit appeared from the statements  in the plaint to be barred by the law of limitation.  We, therefore, find no  merit in these appeals and the same are accordingly dismissed.  No order  as to costs.