2019 (10) TMI 1601 - SC - Indian Laws

Immovable property must be actually used in trade or commerce to qualify as commercial dispute under Section 2(1)(c)

Ambalal Sarabhai Enterprises Ltd. Versus K.S. Infraspace LLP & Anr.

The SC held that for a dispute to qualify as commercial under the Commercial Courts Act, 2015, immovable property must be actually used in trade or ... Maintainability of suit - commercial dispute within the meaning of Section 2(1)(c) of the Commercial Courts Act, 2015 - whether the transaction between the parties herein which is the subject matter of the suit could be considered as a “commercial dispute” so as to enable the Commercial Court to entertain the suit? - HELD THAT:- Commercial Divisions are to be set up in High Courts that are already having ordinary original civil jurisdiction having one or more Benches consisting of a Single Judge having experience in dealing with commercial disputes for exercising powers under the Act. As per Section 7(1) and the proviso thereto, Commercial Division will hear and dispose of all suits and applications relating to commercial disputes of a specified value, that lie in a court not inferior to district court and filed in a High Court having ordinary original civil jurisdiction and also those cases transferred to High Court under Section 22(4) of the Designs Act, 2000 or under Section 104 of the Patents Act, 1970. The object and purpose of Commercial Courts Act is to ensure that the Commercial Courts, Commercial Appellate Courts, Commercial Division and Commercial Appellate Division of the High Courts and also to ensure that the commercial cases are disposed of expeditiously, fairly and at reasonable cost to the litigant - Section 13 deals with appeals from decrees of Commercial Courts and Commercial Divisions. As per Section 14 of the Act, the Commercial Appellate Court and the Commercial Appellate Division shall endeavour to dispose of appeals filed before it within a period of six months from the date of filing of such appeal. Conclusion - For a dispute to qualify as a 'commercial dispute' under the Commercial Courts Act, the immovable property must be 'actually used' in trade or commerce. Application disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the transaction between the parties qualifies as a 'commercial dispute' under Section 2(1)(c)(vii) of the Commercial Courts Act, 2015, thereby granting jurisdiction to the Commercial Court.Whether the immovable property involved in the dispute is 'used exclusively in trade or commerce' as required by the Act.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Qualification as a 'Commercial Dispute'Relevant legal framework and precedents: Section 2(1)(c)(vii) of the Commercial Courts Act, 2015 defines a 'commercial dispute' as one arising out of agreements relating to immovable property used exclusively in trade or commerce. The court also referenced decisions from various High Courts, including the Gujarat High Court's decision in Vasu Healthcare Private Limited and the Delhi High Court's decision in Jagmohan Behl.Court's interpretation and reasoning: The court emphasized the necessity of the immovable property being 'actually used' or 'being used' in trade or commerce at the time of the agreement to qualify as a commercial dispute. The interpretation was strict, aligning with the purpose of the Commercial Courts Act to expedite genuine commercial disputes.Key evidence and findings: The court examined the Memorandum of Understanding, the Deed of Conveyance, and the Mortgage Deed. It found no evidence that the property was used exclusively in trade or commerce at the relevant times.Application of law to facts: The court applied the definition of 'commercial dispute' and found that the lack of evidence regarding the property's use in trade or commerce meant the dispute did not qualify under the Act.Treatment of competing arguments: The appellant argued for a broader interpretation, suggesting the property was intended for trade or commerce. The respondents countered that the property was not used for such purposes at the relevant time. The court sided with the respondents, emphasizing the need for actual use.Conclusions: The court concluded that the dispute did not qualify as a commercial dispute under the Act, as the property was not used exclusively in trade or commerce.Issue 2: Use of Immovable Property in Trade or CommerceRelevant legal framework and precedents: The court referenced the Commercial Courts Act, 2015, and emphasized the interpretation of 'used exclusively in trade or commerce' as requiring actual use.Court's interpretation and reasoning: The court interpreted 'used' to mean 'actually used' or 'being used,' rejecting broader interpretations such as 'likely to be used.'Key evidence and findings: The court found no evidence in the plaint or the agreements that the property was used for trade or commerce.Application of law to facts: The court applied the strict interpretation of 'used' and found the property did not meet this criterion.Treatment of competing arguments: The appellant's argument for a broader interpretation was rejected in favor of a strict interpretation consistent with the Act's purpose.Conclusions: The court concluded that the property was not used exclusively in trade or commerce, thus the dispute did not fall within the jurisdiction of the Commercial Court.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The word 'used' denotes 'actually used' and it cannot be said to be either 'ready for use' or 'likely to be used'; or 'to be used'.'Core principles established: The judgment reinforces the principle that for a dispute to qualify as a 'commercial dispute' under the Commercial Courts Act, the immovable property must be 'actually used' in trade or commerce.Final determinations on each issue: The court determined that the dispute did not qualify as a commercial dispute and directed the plaint to be returned to the appropriate court with jurisdiction.In conclusion, the Supreme Court upheld the High Court's decision that the dispute did not fall within the jurisdiction of the Commercial Court as defined by the Commercial Courts Act, 2015. The strict interpretation of 'used exclusively in trade or commerce' was pivotal in reaching this decision, emphasizing the need for actual use at the time of the agreement. The court's decision underscores the importance of adhering to the legislative intent behind the Commercial Courts Act, which aims to expedite genuine commercial disputes.