Commercial consultancy agreement treated as a commercial relationship, justifying stay of suit and barring further trial court action

A consultancy agreement for promoting aircraft sales was held to be a commercial relationship, because the consultant was engaged to assist in concluding sales, provide commercial and managerial support, and be paid by reference to sales. The term "commercial" under the Foreign Awards (Recognition and Enforcement) Act, 1961 was given a broad, liberal construction, so the suit was properly stayed under Section 3. Once the suit was stayed, the trial court had no jurisdiction to proceed with amendment or impleadment applications in that suit, and the order allowing them was set aside.

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Issues: (i) Whether a consultancy agreement for promoting sale of aircraft constituted a commercial relationship so as to attract a stay of the suit under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. (ii) Whether, once the suit had been stayed, the trial court could proceed with the amendment application and impleadment of a party.

Issue (i): Whether a consultancy agreement for promoting sale of aircraft constituted a commercial relationship so as to attract a stay of the suit under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961.

Analysis: The agreement required the consultant to actively assist in promoting and concluding sales of aircraft in India, to provide commercial and managerial assistance, and to act as an independent contractor for compensation linked to sales. The expression "commercial" in the Act was required to receive a broad and liberal construction, having regard to the object of facilitating international trade through arbitration. Relationships of a commercial nature include consulting and commercial agency, and the consultancy arrangement here was integral to a commercial aircraft sale transaction.

Conclusion: The consultancy arrangement was commercial in nature, the parties stood in a commercial relationship, and the stay of the suit under Section 3 was justified.

Issue (ii): Whether, once the suit had been stayed, the trial court could proceed with the amendment application and impleadment of a party.

Analysis: After the appellate court ordered stay of the suit, the trial court had no authority to proceed further in respect of the suit. An amendment application in the stayed suit could not be entertained, and the impleadment of a party did not alter the fact that the main relief was against the defendant whose suit had been stayed.

Conclusion: The trial court lacked jurisdiction to proceed with the amendment application, and the order allowing amendment and impleadment was set aside.

Final Conclusion: The special leave petitions failed, and the High Court's orders sustaining the stay of the suit and setting aside the amendment order remained undisturbed.

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