Suit under Share Purchase Agreement not a commercial dispute; plaint to be returned under Order VII Rule 10 CPC

HC held that the dispute arose from a Share Purchase Agreement between a shareholder of a private company and a non-shareholder purchaser, and not from a Shareholders' Agreement or any other commercial dispute as defined under the Commercial Courts Act. The suit, being essentially for recovery of money under the Share Purchase Agreement, did not qualify as a "commercial dispute" triable by the Commercial Court. Consequently, the Commercial Court lacked jurisdiction. The HC ruled that the trial court erred in rejecting the defendant's application under Order VII Rule 10 CPC. The impugned order of the Commercial Court was set aside and the petition was allowed, directing return of the plaint.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a money recovery suit based on a Share Purchase Agreement between a shareholder and a third party purchaser constitutes a "commercial dispute" under Section 2(1)(c)(xii) of the Commercial Courts Act, 2015, so as to fall within the jurisdiction of the Commercial Court.

1.2 Whether the plaint in such a suit ought to be returned under Order VII Rule 10 of the Code of Civil Procedure, 1908, for presentation before the regular civil court.

---

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Characterisation of the dispute under Section 2(1)(c)(xii) of the Commercial Courts Act, 2015

Legal framework

2.1 The judgment considers the definition of "commercial dispute" under Section 2(1)(c) of the Commercial Courts Act, 2015, particularly clause (xii) which refers to "shareholders agreements".

Interpretation and reasoning

2.2 The Court records that the petitioner is a shareholder of a private company and the respondent is a third party who agreed to purchase the petitioner's shares. The agreement dated 09.10.2020 (Annexure-B) is the basis of the suit for recovery of money.

2.3 Relying on a legal dictionary, the Court notes that a "Shareholder Agreement" is defined as a contract between a firm and the shareholders governing internal affairs of the firm, dispute resolution mechanisms, and consequences of events such as bankruptcy, resignation, discharge, retirement, or incapacity of a shareholder.

2.4 Referring to LexisNexis, the Court notes that a "Share Purchase Agreement" is an agreement recording terms by which a buyer agrees to purchase from the seller shares in the capital of a target company, specifying payment of the purchase price and transfer of title in the sale shares, either on execution or upon completion subject to conditions.

2.5 On comparison of these definitions, the Court concludes that the agreement dated 09.10.2020 is a "Share Purchase Agreement" concerning transfer of shares between a shareholder and a third party, and not a "Shareholder Agreement" concerning internal affairs of the company and its shareholders.

2.6 The Court observes that clause (xii) of Section 2(1)(c) specifically mentions "shareholders agreements" and does not refer to disputes arising from share purchase agreements.

2.7 The Court therefore reasons that a dispute arising out of a Share Purchase Agreement, as in the present suit for recovery of money, does not fall within the scope of "commercial dispute" under Section 2(1)(c)(xii) of the Commercial Courts Act, 2015.

Conclusions

2.8 The suit founded on the Share Purchase Agreement dated 09.10.2020 is not a "commercial dispute" under Section 2(1)(c)(xii) of the Commercial Courts Act, 2015.

2.9 Consequently, the Commercial Court does not have jurisdiction to entertain the suit.

---

Issue 2 - Return of plaint under Order VII Rule 10 CPC and remand to proper court

Legal framework

2.10 The judgment proceeds on the basis of Order VII Rule 10 of the Code of Civil Procedure, 1908, which provides for return of plaint where the court has no jurisdiction to entertain the suit.

Interpretation and reasoning

2.11 The defendant had applied under Order VII Rule 10 CPC before the Commercial Court, contending lack of jurisdiction as the dispute did not qualify as a commercial dispute; that application was rejected by the Commercial Court.

2.12 Having held that the dispute is not a "commercial dispute" under the Commercial Courts Act, the Court finds that the Commercial Court erred in rejecting the application under Order VII Rule 10 CPC.

2.13 The Court further notes that the matter falls within the jurisdiction of the Principal City Civil and Sessions Judge, Bengaluru, and therefore must be dealt with by the regular civil court.

Conclusions

2.14 The order of the Commercial Court rejecting the application under Order VII Rule 10 CPC is set aside.

2.15 The writ petition is allowed and the matter is remitted to the Principal City Civil and Sessions Judge, Bengaluru, for re-allotment of the case to an appropriate regular court in accordance with law.

2.16 All pending applications stand disposed of consequent upon disposal of the main matter.

---