M/s. Marg Limited v. Sushil Lalwani & Ors. 2026 INSC 402

The appellant, a real estate development company, owned a commercial IT building in Chennai known as Digital Zone-I. Due to financial difficulties, the appellant’s loan account with Standard Chartered Bank was classified as a Non-Performing Asset (NPA). In early 2023, the appellant entered into a fresh settlement with the bank for ₹32.50 crores and simultaneously negotiated a deal with the respondents.

The parties negotiated a Memorandum of Agreement (MoA) via WhatsApp, which structured a transaction worth approximately ₹105 crores. Under this arrangement, the property would be sold via eight separate sale deeds for ₹58.60 crores (with ₹32.50 crores going directly to the Bank to clear the debt), while a balance consideration of ₹53 crores was allegedly payable contingent upon post-sale leasing performance.

The appellant signed the MoA, but the respondents did not. However, the sale deeds were executed and registered in April 2023. In June 2024, the appellant filed a suit seeking a mandatory injunction to compel the respondents to execute the MoA and pay the balance ₹53 crores, or alternatively, to reconvey the property. The respondents sought to have the suit dismissed (rejection of plaint) under Order VII Rule 11 of the Code of Civil Procedure (CPC), arguing there was no cause of action and that the suit was undervalued. The High Court agreed with the respondents and rejected the plaint.

Cause of Action: Under Order VII Rule 11, a court must assume the facts pleaded in the plaint are true and determine if they disclose a “right to sue”. The appellant specifically pleaded that the transaction was a “composite commercial arrangement” where the sale deeds were only one part, and the ₹53 crore balance was a reciprocal obligation under the MoA.

Prohibition of Mini-Trials: The Supreme Court held that the High Court erred by conducting a “mini-trial” to decide whether an unsigned MoA was a concluded contract. Such questions of enforceability and validity are matters for a full trial, not for summary rejection at the start of litigation.

Procedural Safeguards for Court Fees: Regarding the undervaluation of the suit, the Court noted that rejection of a plaint under Order VII Rule 11(b) or (c) is not automatic. The law requires the court to first determine the correct valuation and then grant the plaintiff an opportunity to cure the defect by paying the deficit fee. The High Court failed to provide this opportunity, which the Supreme Court termed a “manifest error of law”.