TaxTMI 
TaxTMI 
2024 (5) TMI 1642
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.... No. 143/2023 titled as "Aditya Mertia v. M/s Ekanek Networks Pvt. Ltd.", upon holding that the suit instituted by the respondent/plaintiff is not a "commercial dispute" within the scope and meaning of section 2(1)(c)(xviii) of the Commercial Courts Act, 2015 [CC Ac]. FACTUAL BACKGROUND: 2. Briefly stated, the present revision petition arises out of a civil suit filed by the respondent/plaintiff Mr. Aditya Mertia in 2023 against the petitioner/defendant company seeking recovery of arrears of salary and damages to the tune of Rs. 93,05,617/- along with interest @18% per annum plus the income tax liability on the recoverable amount. 3. Upon perusal of the plaint, the following facts and circumstances have come up for consideration before this court: a) Respondent/plaintiff was employed as VP-Engineering of the petitioner/defendant company vide Appointment Letter cum Employment Agreement dated 13.08.2021 at a salary of USD 1,50,000/- per annum as well as Employees Stock Options (ESOP) worth INR 24,00,000/- The respondent/plaintiff's place of joining was supposed to be Abu Dhabi, UAE but due to logistical issues, the respondent/plaintiff joined the petitioner/defe....
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....r/defendant company filed an application under Order VII Rule 11 of the CPC before the learned trial court for dismissal of suit, firstly on the ground that the trial in a regular civil court is barred by the CC Act and secondly on the ground of lack of territorial jurisdiction. IMPUGNED ORDER DATED 21.12.2023: 6. Based on the pleadings and oral arguments advanced by the rival parties, the learned Trial Court dismissed the application under Order VII Rule 11 of the CPC filed by the petitioner/defendant. The grounds for dismissal of suit raised by the petitioner/defendant were rejected by the learned Trial Court on the basis of the following reasoning: a) As regards the issue of lack of territorial jurisdiction, on the basis of the registered office address of the petitioner/defendant company as found in its foundational documents (MoA and AoA) as well as in the official government record (MCA master data), it was held that the present suit falls under the territorial jurisdiction of the ld. Trial court and thus, not liable to be dismissed on such ground. b) As regards the issue of lack of subject-matter jurisdiction, relying upon the decision of the Karnatak....
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....loyment contract constitutes a 'contract of service' between the employer and the employee, and it is vehemently urged that the expression "agreement for provision of service" under Section 2(1)(c)(xviii) of CC Act shall cover a case of 'contract of service' as well. Per contra, Learned Counsel for the respondent/plaintiff has vehemently opposed the plea taken by the learned counsel for the petitioner/defendant and has submitted that a pure "contract of service" between an employer and employee cannot be governed by Section 2(1)(c)(xviii) of CC Act. 9. Ld. Counsel for the petitioner/defendant further argued that the relationship between the parties was commercial and contractual in nature insofar as the respondent/plaintiff was also making profits out of it as much as the defendant company. However, this contention was challenged by the Learned Counsel for the respondent/plaintiff who submitted that the alleged "profits" that the respondent/plaintiff was entitled to under the Employment Contract were strictly in the nature of "salary" payable for the work done in the defendant company and related employment benefits that cannot be held to be in pari passu with co....
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....NT AGREEMENT: a. Non-Compete: You agree that during the term of your employment and for a further period of 12 calendar months after separation from the Company, for whatever reasons, you shall not carry on or engage in directly or indirectly in any business which competes directly or indirectly with any or all the business pursued by the Company in any territory, whether in India or overseas, at the relevant point of time or proposed to be pursued by the Company in the immediate future, in respect of which proposal you were aware of or likely to be aware of considering the nature of your duties ("Restricted Business"), other than through the Company. b. Non-Solicitation of Customers: You agree that during the term of your employment and for a further period of 24 (twenty four) calendar months after separation from the Company, for whatever reasons, you shall not directly or indirectly, Irrespective of whether the relationship between the Company and a customer was originally established in whole or in part through your efforts; (i) solicit any Restricted Business from any customer; (ii) persuade any existing or prospective customer to cease doing Restricted Busin....
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....written notice or two (2) months' basic salary in lieu thereof. However, considering that during the course of your employment with the Company, you shall be privy to or shall otherwise have access to sensitive and confidential information of the Company, which may include products' related information for existing or conceived products, business plans, information related to existing and planned projects, vendors and partners' related information and other valuable information of the Company or you may be or needed to be engaged in a project that needs to be completed or for the needs of other business reasons/requirements, in the event you choose to terminate your employment with the Company, the Company shall have the right to refuse acceptance of two (2) months' basic salary in lieu of notice period and (i) require you to continue to serve the Company during the notice period or any part thereof, OR (ii) for the duration of the notice period or any part thereof, require that you do not perform any official duties or attend office and return all assets provided by the Company, provided however that during such notice period or part thereof, you shall not take up ....
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....tion or on a honorary basis) and shall devote your whole time, attention and abilities exclusively to the performance of your duties and shall faithfully serve the Company and use your best endeavor to promote the interest and business thereof. In the event of above, the company shall be entitled to take appropriate action. b. You shall be governed by the service rules and regulations of the Company, as amended by the Management, from time to time including the code of conduct, the terms of which are hereby incorporated by reference. You shall sincerely abide by and carry out operational instructions/procedures as contained in the Company s guidelines and other administrative instructions as may be issued by the Management from time to time c. The work product generated by you while performing the services during the term of your employment, including all electronic data, papers, worksheets, logs, records, reports, documents, training material and other materials developed or prepared by you, shall be the sole and exclusive property of the Company, and you shall be deemed to have generated such work product as 'work for hire'. Without limiting the generali....
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....ights under this Agreement within a period of one (1) year from the date the assignment becomes effective. d. You will be responsible for the safe custody of all documents, manuals and kits and other property belonging to the Company that may be entrusted to and/ or placed in your possession by virtue of and/ or during the course of your employment with the Company. e. Being a managerial cadre employee you will be responsible for the overall smooth and effective functioning of the department / establishment / office / staff / employees under your charge and will be directly responsible for the successful and timely completion of any job / work assigned to you or any person working under your control and supervision and/or within the department / establishment/office of which you are for the time being holding the charge. You would adhere to the norms of office discipline You would also be responsible to ensure proper and effective adherence to the norms of office discipline including working hours, systems and procedures by the staff / employees working under your supervision and/or in the department/ office / establishment under your charge. Reporting time will b....
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..... You will be entitled to leave, holidays and other service benefits as per the rules of the management as framed from time to time and applicable to the managerial cadre employees in the office/establishment/department in which you are for the time being posted 9. RETIREMENT: a. You shall retire on the attainment of 58 years unless specially required by the Company in writing to continue in service beyond this age. Your employment shall stand terminated on the last working day of the month of your retirement for which no notice shall be required. 10. CONTINUATION OF EMPLOYMENT: a. It is understood that this employment is being offered to you on the basis of the particulars submitted by you with the Company at the time of recruitment process. However, if at any time it should emerge that the particulars furnished by you are false/incorrect or if any material or relevant information has been suppressed or concealed this appointment will be considered ineffective and irregular and would be liable to be terminated by the management forthwith without notice. This will be without prejudice to the right of the management to take disciplinary action aga....
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....ot be used interchangeably with the term 'Profession' which normally would involve some branch of learning or science. Profession as such would require knowledge of an advanced type in a given field of learning or science, or learning gained by a prolonged course of specialized study. As per Black's Law Dictionary, 11th Edition, "Profession" means "a vocation requiring advanced education and training; especially one of the three traditional Professions- Law, Medicine and the Ministry." "Professional" means "someone who belongs to a learned profession or whose occupation requires a high level of training and proficiency." x x x 18. In view of the above, a "Profession" would require advanced education and training in some branch of learning or science. The nature of work is also skilled and specialised one, substantial part of which would be mental rather than manual. Therefore, having regard to the nature of work of a professional, which requires high level of education, training and proficiency and which involves skilled and specialized kind of mental work, operating in the specialized spheres, where achieving success would depend upon many other factors bey....
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.... reference to the underlying facts in any given case. This Court in Dharangadhra Chemical Works Ltd. vs. State of Saurashtra and Others10, recognized this position of law and held that "the correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer". In the words of Fletcher Moulton, L.J. at P.549 in Simmons v. Heath Laundry Company [(1924) 1 KB 762] which were cited with approval in Dharangadhra Chemcial Works Ltd. (supra): "In my opinion it is impossible to lay down any rule of law distinguishing the one from the other. It is a question of fact to be decided by all the circumstances of the case. The greater the amount of direct control exercised over the person rendering the services by the person contracting for them the stronger the grounds for holding it to be a contract of service, and similarly the greater the degree of independence of such control the greater the probability that the services rendered are of the nature of professional services and that the contract is not one of service." (Underlined portion emphasized) 16. It was thus held that the....
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....tion does; a business whose work involves something for customers but not producing goods; the work that such a service does. Used as a verb, it means to examine and, if necessary, repair a car machine etc. As per the Online Cambridge Dictionary the word 'service', used as a noun in case of dealing with customers means the act of dealing with customers in a shop, restaurant or a hotel by taking their orders, showing or selling them goods etc .; and used as a noun in case of a work, the ac that someone does or time someone spends working for an organization. It also means the particular skills that someone has and can offer to others. The word 'service' is also used in case of Armed Forces so as to connote working in such organization and in context of a religious ceremony it is providing service to the almighty or to the devotees. 20. The crux of the matter is that the expression "provision of services" in Section 2(1)(c)(xviii) of the CC Act is used disjunctively from the expression "sale of goods" but the overall theme and its purport is that it would mean to be a 'provision of services' when used in the commercial sense. At this juncture it would be ap....
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....ict interpretation as in the case of taxing statutes would not be appropriate in the instant case where the issue relates to jurisdiction. In that regard, the learned senior advocate has referred to the statement of objects and reasons with which the Commercial Courts Act, 2015 is enacted so as to provide speedy disposal of high value commercial disputes so as to create the positive image to the investors world about the independent and responsive Indian Legal System. Hence, he contends that a purposive interpretation be made. It is contended that a wider purport and meaning is to be assigned while entertaining the suit and considering the dispute to be a commercial dispute. Having taken note of the submission we feel that the very purpose for which the CC Act of 2015 has been enacted would be defeated if every other suit merely because it is filed before the Commercial Court is entertained. This is for the reason that the suits which are not actually relating to commercial dispute but being filed merely because of the high value and with the intention of seeking early disposal would only clog the system and block the way for the genuine commercial disputes which may have to be ent....
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....ve and the amendments inserted to Civil Procedure Code by the Schedule is to ensure speedy resolution of the commercial disputes in a time bound manner. The intent of the legislature seems to be to have a procedure which expedites the disposal of commercial disputes and thus creates a positive environment for investment and development and make India an attractive place to do business. 21. A perusal of the Statement of Objects and Reasons of the Commercial Courts Act, 2015 and the various amendments to Civil Procedure Code and insertion of new rules to the Code applicable to suits of commercial disputes show that it has been enacted for the purpose of providing an early disposal of high value commercial disputes. A purposive interpretation of the Objects and Reasons and various amendments to Civil Procedure Code leaves no room for doubt that the provisions of the Act require to be strictly construed. If the provisions are given a liberal interpretation, the object behind constitution of Commercial Division of Courts, viz. putting the matter on fast track and speedy resolution of commercial disputes, will be defeated. If we take a closer look at the Statement of Objects and....
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....ercial dispute if it falls under any of the sub-clauses of Section 2(1)(c) of the Act. [4] The purpose for which the Act of 2015 has been enacted would be defeated if every other suit merely because it is filed before the Commercial Court is entertained. 39. There is no doubt that the word "or" is a disjunctive that marks an alternative which generally corresponds to the word "either". Where general words follow the designation of particular things, or classes of persons or subjects, the general words will usually be construed to include only those persons or things of the same class or general nature as those specifically enumerated. This is the rule known as "ejusdem generis", and it is founded upon the idea that if the legislature intended the general words to be used in an unrestricted sense, the particular classes would not have been mentioned. It is, specially applicable to the penal statutes. But under no circumstances, and regardless of the type of the statute involved, must the rule be used where the language of the statute under consideration is plain and there is no uncertainty. Its use is permissible only as an aid to the Court in its attempt to ....
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....terms of Section 14^[1] of the Specific Relief Act, 1963, whereas commercial disputes would constitute such category of matters where the respective obligations or the contract could be specifically enforced. 22. In view of the aforesaid backdrop, reliance by the learned Trial Court on the case of Sanjay Kumar (supra) cannot be faulted. It was a case where the respondent company employed the petitioner initially under an employment agreement and later on, he was designated as partner with a minor share in the firm. It appears that owing to certain omissions and commissions on the part of the petitioner, an inquiry was initiated against him, upon which the petitioner filed a Commercial Arbitration Application under Section 9 of the Arbitration and Conciliation Act, 1996, which came to be dismissed by the learned Commercial Court on the ground that the dispute raised was not a commercial dispute. The facts in the above noted case were similar to the present one inasmuch as services of the petitioner were terminated by the respondent company and the suit instituted under the provisions of CC Act was held to be not maintainable. It was held as under :- "16. If every E....
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.... has purchased the same for developing the said land and in that view the land is one which is used for trade and commerce. The learned Senior Advocate for the respondents on the other hand has contended to the contrary that the appellant had ceased to function for the past several years and the company being defunct, the land involved was not being used for trade or commerce and even though Respondent 1 has sought for change of land use and to develop the land, the same would be subject to such change of land use that would be granted and the use to which it would be put in future. Hence it is contended that as on the date of transaction the land is not being used for trade or commerce and a suit at present would not be maintainable before the Commercial Court. 8. Though such rival contentions are put forth by the learned Senior Advocate on either side, these aspects cannot be dealt with in abstract. Instead the nature of the dispute and the jurisdiction to try the same is to be reflected in the suit itself since in a civil suit the pleadings, namely, averments in the plaint would at the outset be relevant to confer jurisdiction. Hence before adverting to the other aspect....
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....icate that the same was being used in trade or commerce due to which the jurisdiction of Commercial Court is invoked. Without such basic pleadings in the plaint, any explanations sought to be put forth subsequently would only lead to a situation that if an objection is raised, in every suit a consideration would be required based on extraneous material even to ascertain as to whether the intended transaction between the parties was of such nature that it is to be construed as a commercial dispute. 10. Be that as it may, the learned Senior Advocates on both sides have sought to rely on the legal position decided by the various High Courts in the absence of the pronouncement of this Court. The learned Senior Advocate in that regard have referred to the various decisions on the same point. However, we do not find it appropriate to refer to each of them and over burden this order since we notice that the High Court in fact has referred to various decisions while deciding the instant case and has thereafter arrived at its conclusion. The discussion as made by the High Court with reference to the various decisions is also justified. In that view, we would refer to the decision o....
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....ial Court it was never the case on behalf of the original plaintiff that the case would fall within Section 2(c)(vii) of the learned Commercial Court. Despite the above we have considered on merits whether even considering Section 2(c)(vii) of the Commercial Courts Act, the dispute between the parties can be said to be "commercial dispute" within the definition of Section 2(c) of the Commercial Courts Act or not? Considering Section 2(c)(vii), "commercial dispute" means a dispute arising out of the agreements relating to immovable property used exclusively in trade or commerce. As observed hereinabove, at the time of filing of the suit and even so pleaded in the plaint, the immovable property/plots the agreements between the parties cannot be said to be agreements relating to immovable property used exclusively in trade or commerce. As per the agreement between the party after getting the plots on lease from the GIDC, the same was required to be thereafter developed by the original Defendant 1 and after providing all infrastructural facilities and sub-plotting it, the same is required to be given to other persons like the original plaintiff. It is the case on behalf of the original....
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....he issue relating to exclusive land use, though in the different context has laid emphasis on the present user of the land either for agriculture or non-agriculture purpose being relevant. In that regard, the decision relied on by the learned Senior Advocate for the respondent in Federation of A.P. Chambers of Commerce & Industry v. State of A.P. [Federation of A.P. Chambers of Commerce & Industry v. State of A.P., (2000) 6 SCC 550] is noticed, wherein it is observed as under: (SCC pp. 552-53, paras 6 & 9) "6. Section 3 of the said Act speaks of "land is used for any industrial purpose", "land is used for any commercial purpose" and "land is used for any other non- agricultural purpose". The emphasis is on the words "is used". For the purposes of levy of assessment on non- agricultural lands at the rate specified in the Schedule for land used for industrial purposes, therefore, there has to be a finding as a fact that the land is in fact in praesenti in use for an industrial purpose. The same would apply to a commercial purpose or any other non-agricultural purpose. * * * 9. We are in no doubt whatever, therefore, that it is only land which is actually in use for an ind....
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....n any event be entertained in the ordinary civil courts wherein the remedy has always existed. 14. In that view it is also necessary to carefully examine and entertain only disputes which actually answers the definition "commercial disputes" as provided under the Act. In the instant case, as already taken note a b c d e f g h This is a True Court Copy^TM of the judgment as appearing on the Court website. MANU/KA/1206/2023 : Downloaded from www.manupatra.com Printed on : 27 May 2024 Printed for : WBNUJS Library and Information Centre 30 neither the agreement between the parties refers to the nature of the immovable property being exclusively used for trade or commerce as on the date of the agreement nor is there any pleading to that effect in the plaint. Further the very relief sought in the suit is for execution of the mortgage deed which is in the nature of specific performance of the terms of Memorandum of Understanding without reference to nature of the use of the immovable property in trade or commerce as on the date of the suit. Therefore, if all these aspects are kept in view, we are of the opinion that in the present facts the High Court was justified in its conclus....