Plaint rejected: a plaintiff who sued for the money cannot later sue to cancel the same agreements

A Division Bench of Justices Sabyasachi Bhattacharyya and Sandip Kumar De applied Order II Rule 2(3) and the doctrine of election, and set aside the transfer to the Commercial Division.

Plaintiffs who alleged fraud in two share purchase agreements, then chose to sue for money by enforcing those very agreements, cannot afterwards file a second suit to have them cancelled on the same allegation of fraud. A Division Bench of Justice Sabyasachi Bhattacharyya and Justice Sandip Kumar De rejected the plaint of the later suit as barred by Order II Rule 2(3) of the Code of Civil Procedure and by the doctrine of election, and as vexatious and harassive. In the same judgment the Bench allowed a second appeal and set aside the Single Judge's order transferring the suit to the Commercial Division, holding that a share purchase agreement is not the shareholders' agreement that the Commercial Courts Act speaks of.

Two suits on the same two agreements

Both appeals arose out of one order of a Single Judge dated 5 March 2021 in C.S. No. 250 of 2015. By that order the Single Judge dismissed G.A. No. 2 of 2015, in which the first and second defendants had sought dismissal of the suit or, alternatively, rejection of the plaint on the ground of the bar under Order II Rule 2; and he directed the suit to be transferred under Section 15 of the Commercial Courts Act, 2015 to the Commercial Division of the High Court. A.P.O. No. 84 of 2021 attacked the first part of that order and A.P.O. No. 85 of 2021 the second.

The agreements in question were entered into on 16 May 2012 and 10 April 2013. The plaintiffs' complaint was that they had been procured by deceit and compulsion. Having that complaint available to them, the plaintiffs filed Money Suit No. 101 of 2015, in which they pleaded the fraud but sought specific performance of the agreements in the form of a money decree. C.S. No. 250 of 2015, the suit now before the court, asks for cancellation of the same agreements on the same alleged fraud.

The appellants pointed to the plaint of the current suit, which refers to both earlier suits and records that a copy of the plaint of the money suit had been served on them. They took the Bench to specified paragraphs of the money suit plaint where the fraud was pleaded and where the cause of action appears, and argued that a composite reading shows the relief of cancellation was available when the money suit was filed. The plaintiffs had instead waived it, sought performance of the agreements as a money claim, and taken no leave under Order II Rule 2 in the money suit.

The appellants' route into the earlier plaint deserves a note of its own, because it is the gateway to everything else. An application under Order VII Rule 11 is confined to the plaint and the documents relied on in it. Here the plaint of the current suit does the work itself: it refers to the two earlier suits, a suit for specific performance and the money suit, and avers that a copy of the plaint of the money suit was served on the defendants. Because the later plaint incorporates the earlier one in that way, the Bench held the court could look into the averments of the earlier plaint without stepping outside Order VII Rule 11 and without treating anything as evidence. From paragraph 36 onwards the current plaint then reiterates the very events of fraud expressly pleaded in the money suit.

A share purchase agreement is not a shareholders' agreement

The transfer question was argued first and turned on a single word in the statute. Section 2(1)(c)(xii) of the Commercial Courts Act brings a shareholders' agreement within the definition of a commercial dispute. This suit concerns a share purchase agreement.

The appellants relied on Bhaskar Naidu vs. Aravind Yadav, (2025) SCC OnLine Kar 5, a judgment of a Single Judge of the Karnataka High Court, for the distinction between the two instruments. Against them the plaintiffs cited Vodafone International Holdings vs. Union of India, (2012) 6 SCC 613, but the appellants' answer was that Vodafone defines what constitutes a shareholders' agreement without laying down any point of distinction between that and a share purchase agreement. With clause (xii) not attracted, the submission ran, the Single Judge had erred in law in sending the suit to the Commercial Division.

The Bench accepted it. A.P.O. No. 85 of 2021 was allowed on contest and the portion of the 5 March 2021 order directing transfer to the Commercial Division was set aside.

What S. Valliammai did and did not decide

On the Order II Rule 2 question the plaintiffs had a recent Supreme Court decision to meet: S. Valliammai and Others vs. S. Ramanathan and Another, 2026 SCC OnLine SC 603, which had held that the bar under Order II Rule 2 could not be taken as a bar of law under Order VII Rule 11(d). Much of the judgment is spent showing why that holding does not travel to this case, and the distinction is one every pleader arguing a rejection application should know.

In S. Valliammai the High Court had rejected a plaint after a conjoint reading of two plaints, drawing conclusions about what the plaintiff knew, about a power of attorney and about when the second suit had been filed. The Supreme Court's objection, as this Bench read it, was that the High Court had travelled beyond the scope of Order VII Rule 11 and appreciated the materials annexed to the plaint as if they were evidence. The premise of the conclusion was therefore the overreach, not a rule that Order II Rule 2 can never support rejection.

Here, the Bench held, a plain and meaningful reading of the plaint of the subsequent suit is enough to attract the bar, with no further evidence or appreciation of facts required. That plaint itself refers to the earlier money suit and to the plaint filed in it. Set that against the cause of action and the reliefs in the present suit and it is apparent on the face of the record that the plaintiffs had relinquished the relief of cancellation despite pleading the self-same ground of fraud, and had chosen instead to seek specific performance of those agreements in the garb of a monetary relief.

S. Valliammai had itself referred to State Bank of India v. Gracure Pharmaceuticals Ltd., (2014) 3 SCC 595, where an earlier suit filed in March 2003 and a later one in May 2003 disclosed no fresh cause of action in between, so the plaintiff could not split the cause of action by filing separate suits.

Sub-rule (3), and where the different-evidence test belongs

The Bench then drew a distinction inside Order II Rule 2 itself, and this is the most portable part of the judgment. In Cuddalore Powergen Corporation Ltd. vs. Chemplast Cuddalore Vinyls Limited and Another, (2025) SCC OnLine SC 82, the Supreme Court had summed up several contexts in which Order II Rule 2 is considered, among them a test drawn from English law asking whether the evidence needed to support the two claims is different.

That test, the Bench held, is available in respect of sub-rules (1) and (2) only, and not sub-rule (3). Evidence may have to be looked at to see whether it differs between two claims, but that inquiry is attracted only where several claims could have been made on the same cause of action and were relinquished. Sub-rule (3) operates differently, and on the pleadings here it operated on its own terms.

The finding of fact was simple. From the plaint of the current suit itself, the specific fraud pleaded as the cause of action for cancellation was also pleaded, and was available to the plaintiff as a ground, when the earlier money suit was filed — as the plaint of that earlier suit discloses.

The doctrine of election, and twenty-eight transferees

Having found the bar attracted, the Bench added a second and independent ground. The plaintiffs had categorically opted for one relief in the earlier suit. They are therefore precluded, not only by Order II Rule 2(3) but also by the doctrine of election, from performing a volte face and seeking the diametrically opposite relief of cancellation — a relief fully available to them when the money suit was filed, which they not only relinquished but exchanged for the opposite course of recovering money by performance of the self-same agreements.

One attempt to escape the bar deserved separate treatment. The current suit had impleaded twenty-eight transferees of the shares of the third defendant company, on the footing that the transfer in their favour was itself the deception complained of, and the plaintiffs relied on their presence to say the two suits were not the same. The Bench held that impleadment cannot be a determinant of whether Order II Rule 2 applies. On the allegations in both plaints those transferees are beneficiaries of the alleged fraud and would be bound by the outcome of the suit as against the transferors. The cause of action in both suits is primarily against the appellants, and the fate of the transferees' shares follows from that. Adding them was merely incidental and consequential.

Order

Both appeals were allowed on contest. A.P.O. No. 85 of 2021 succeeded on the transfer, setting aside that part of the order of 5 March 2021 by which the suit was sent to the Commercial Division. A.P.O. No. 84 of 2021 succeeded on the bar, setting aside the part of the order by which I.A. G.A. No. 2 of 2015 in C.S. No. 250 of 2015 had been rejected, and allowing that application by rejecting the plaint of the suit as barred by Order II Rule 2(3) of the Code and by the doctrine of election, and as vexatious and harassive. G.A. No. 2 of 2026 filed in connection with the first appeal stood disposed of. There was no order as to costs, and separate decrees were directed to be drawn up in each appeal.