Dear Munna bhai,
You see refusal and rejection are almost same but there is a basic difference in application in the Canadian immigration. Here you go:
A rejection can be because the application was not complete and you met the requirements, so you could re-submit. Whereas if your application was complete and it was refused, because it didn't meet the requirements.
In your friend's case, his application was either complete or not but was returned due to CAP reached, not rejected or refused. In this case, s/he should not tick YES .
This is totally from my personal view, you can also write to Qorax, PMM, LEON, Dr. Hasib, Ahsan1289 to be more sure.