Rajasthan High Court ruled that an oral agreement between companies cannot be the sole basis to reject a plaint under Section 21 of the Limitation Act.
Rajasthan HC: Oral Agreement Between Companies Not Ground to Reject Plaint
The Rajasthan High Court held that a plaint cannot be rejected solely on the ground that an agreement between companies was oral, observing that Section 21 of the Limitation Act, 1963 does not categorically bar oral contracts between corporate entities. The court emphasized that disputes over signing authority and authenticity must be resolved at trial, not at the threshold.
The case arose when a company filed a suit for recovery based on an alleged oral agreement. The defendant argued that the absence of a written contract invalidated the claim and justified rejection of the plaint. The trial court initially agreed, but the High Court intervened, noting that corporate capacity to enter oral agreements is not extinguished merely because Section 21 encourages written documentation.
“The plea of unauthorized signing is a matter of evidence, not a ground for summary rejection.”
This decision protects corporate litigants from procedural dismissals where factual disputes exist. Lawyers should assert that allegations of unauthorized signing or informality require full trial adjudication. The ruling supports access to justice by preventing premature dismissal based on documentary formalities alone.
