TaxTMI 
TaxTMI 
2025 (3) TMI 1560
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....t itself, therefore, the other grounds enumerated in the instant application are not considered at present. 2. Mr. Dhruba Ghosh, learned senior counsel appearing on behalf of defendant no.1 contends, that the averments made in the plaint would clearly signify that the present suit does not fall within the ambit of "commercial dispute". He further submits, without prejudice, that even if the case set up by the plaintiff is accepted as it is, at best, it would be an ordinary civil suit for recovery of a loan amount. 3. According to him, a "commercial dispute" under Section 2(1)(c)(i) of the Act of 2015 pertains to transactions typically involving merchants, financiers, and traders, often characterized by mercantile documents. He emphasises that the Bombay High Court, in Rolta (P) Ltd. v. Varanium Cloud Ltd., [2024 SCC OnLine Bom 3518] held that the nature of a dispute should be determined based on the substance of the case rather than procedural technicalities; and that commercial disputes must necessarily involve commercial transactions. In support of this contention, learned senior counsel relies on a decision of the High Court at Calcutta in the matter of Ladymoon Towers (P)....
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....of terms in commercial documents. 6. Learned counsel alternatively submits that if the Court finds that the instant suit is not maintainable as a commercial suit, it can be directed to be re-registered as an ordinary civil suit, as was done in Kailash Devi Khanna v. DD Global Capital Ltd.[2019 SCC OnLine Del 9954]. 7. In rejoinder submissions, Mr. Dhruba Ghosh, learned senior counsel appearing on behalf of defendant no.1, submits that the definition of "commercial dispute" under Section 2(1)(c) of the Act of 2015 should not be stretched to an extent to include all financial transactions, regardless of their actual purpose. He emphasizes that the objective of the Act of 2015 must be considered while interpreting the scope of a "commercial dispute". 8. He further contends that a careful reading of the decision in Amanpreet Kohli reveals that the determining factor was not merely the presence of interest in a friendly loan rather, the case involved various mercantile documents, an element of interest, and the nature of the parties' business, all of which were considered in drawing the conclusion. He submits that the decision in Amanpreet Kohli is clearly distinguishable n....
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.... an abuse of the process of the court, in the sense that it is a bogus and irresponsible litigation, the jurisdiction under Order 7 Rule 11 of the Code can be exercised. *** 20 .... Rule 11 of Order 7 lays down an independent remedy made available to the defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. The law ostensibly does not contemplate at any stage when the objections can be raised, and also does not say in express terms about the filing of a written statement. Instead, the word "shall" is used, clearly implying thereby that it casts a duty on the court to perform its obligations in rejecting the plaint when the same is hit by any of the infirmities provided in the four clauses of Rule 11, even without intervention of the defendant. In any event, rejection of the plaint under Rule 11 does not preclude the plaintiffs from presenting a fresh plaint in terms of Rule 13." 12. Furthermore, in Hardesh Ores (P) Ltd. v. Hede & Co. [(2007) 5 SCC 614] the Supreme Court further held that it is not permissible to cull out a sentence or a passage and to read it in isolation. It is the substance an....
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.... of this remedy is to be kept in mind, that is to curb abusive or fruitless litigation which is bound to meet a dead fate. At the same time, once the conditions stipulated in the provision are found to exist in a given case, the Court must exercise the power of rejection, which is discernible from the use of the word "shall". 16. The very factum of the continuation of this suit as a commercial suit is challenged, therefore, it is incumbent upon the Court to address this aspect, which clearly falls within the scope of Order VII Rule 11 of the CPC. Unveiling the Legal Contours of the Object and Scope of Act of 2015 17. Before analyzing the definition of a "commercial dispute" under the Act of 2015, it is essential to understand the circumstances that led to its enactment. The 253rd Report of the Law Commission of India, presented on 29.01.2015, outlines the sequence of events that resulted in the drafting of the Act of 2015. The need for Commercial Divisions in High Courts was driven by the economic policy changes post-1991 and the international perception that the Indian judicial system was plagued by delays. This perception discouraged domestic and foreign investors from c....
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.... 20. Recently, this Court in the case of M/s. Levitate Mobile Technologies Pvt. Ltd. v. M/s. Standard Charted Bank Pvt. Ltd [2025 SCC OnLine Del 818], also had an occasion to consider the scope and ambit of the Act of 2015 and observed as under :- "23. A comprehensive reading of the Statement of Objects and Reasons, along with the insights from the Law Commission's 188th and 253rd Reports, provides significant clarity on the rationale behind the enactment of the Act. The Parliament's intention was to overhaul the commercial dispute resolution framework by distinguishing it from other civil disputes, thereby achieving its core goal i.e., the expeditious disposal of commercial disputes in India, keeping in view the larger picture of preserving and boosting the economy of the country. The aim and objective of the Act of 2015 clearly reflect the intent of the Parliament for speedy disposal of high value commercial disputes while setting up an independent mechanism for their early resolution. " 21. Thus, the Act of 2015 was enacted to ensure an efficient and definite dispute resolution mechanism to aid the development of trade and commerce. The legislation is also ai....
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....ncluding outsourcing services and financial services; (xiv) mercantile agency and mercantile usage; (xv) partnership agreements; (xvi) technology development agreements; (xvii) intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits; (xviii) agreements for sale of goods or provision of services; (xix) exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum; (xx) insurance and re-insurance; (xxi) contracts of agency relating to any of the above; and (xxii) such other commercial disputes as may be notified by the Central Government. Explanation .- A commercial dispute shall not cease to be a commercial dispute merely because- (a) it also involves action for recovery of immovable property or for realisation of monies out of immovable property given as security or involves any other relief pertaining to immovable property; (b) one of the contracting parties is the State....
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....ot 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 entertained by the Commercial Courts as intended by the lawmakers. In commercial disputes as defined a special procedure is provided for a class of litigation and a strict procedure will have to be followed to entertain only that class of litigation in that jurisdiction. If the same is strictly interpreted it is not as if those excluded will be non-suited without any remedy. The excluded class of litigation will in 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 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 plain....
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....ommercial engagements. In both these cases, the Courts ruled that disputes arising from personal loans, even if advanced for business purposes, do not qualify as "commercial dispute" under the definition provided in Section 2(1)(c) of the Act of 2015. 28. On a plain reading of Section 2(1)(c)(i) of the Act of 2015 juxtaposed with the judicial pronouncements discussed above, it is crystal clear that the qualification attached in Section 2(1)(c)(i) is not that of "ordinary transaction" as it clearly means that not all ordinary transactions would come under the purview of the "commercial dispute", rather only those ordinary transactions that concern merchants, bankers, financiers and traders, and relate to mercantile documents, would come under the purview of the "commercial dispute". Having said so, it would be apposite to note that sub-clause (i) is primarily composed of two elements - firstly, "ordinary transactions" between merchants, bankers, financiers and traders; secondly, such transactions must be based upon mercantile documents. It further clarifies that any issue regarding the interpretation or enforcement of such mercantile documents executed between merchants, bankers,....
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....mmercial paper" itself forms the basis of a commercial dispute, it becomes essential to analyze how a mercantile document must fit within the definition of "commercial paper" to qualify as part of a commercial dispute. By defining "commercial paper", the scope of mercantile documents and their significance in determining the nature of commercial disputes under the Act of 2015 can be better understood. 33. The "commercial paper" is also defined in the Black's Law Dictionary as an instrument other than cash for the payment of money and includes negotiable instruments of a particular kind, in the following manner: "commercial paper": 1. An instrument, other than cash, for the payment of money. "commercial paper" - typically existing in the form of a draft (such as a check) or a note (such as a certificate of deposit) - is governed by Article 3 of the UCC. But even though the UCC uses the term "commercial paper" when referring to negotiable instruments of a particular kind (drafts, checks, certificates of deposit, and notes as defined by Article 3), the term long predates the UCC as a business and legal term in common use. Before the UCC, it was generally viewed ....
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....rd "documents" and thus, the mere presence of a document evidencing the transaction is not enough unless the document qualifies as a mercantile document in the sense discussed above. 35. After undertaking a brief sojourn through the settled position of law surrounding Order VII Rule 11 of the CPC and analyzing the object and scope of the Act of 2015, this Court shall now proceed to examine the arguments advanced on behalf of the parties herein and apply the relevant legal principles to the facts of the instant case. 36. The principal argument raised by defendant no.1 is with respect to the non-maintainability of the suit under Section 2(1)(c)(i) of the Act of 2015. 37. In the aforesaid context, if the pleadings made in the civil suit are perused, the same would indicate that on 19.12.1997, the plaintiff's deceased brother Late Mr. Mohinder Kapur, purportedly advanced a loan of Rs. 16,50,000/- out of his own funds to defendant no.1 at an agreed interest rate of 12% per annum, intended for statutory payment to the L&DO to obtain a "No Objection Certificate". The facts would further indicate that no fixed timeline was set for repayment, and defendant no. 1 was to repay th....
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.... In paragraph 20 of the said decision, this Court held that the loan transaction was not a mere friendly loan but was, in fact, supported by proper documentation, including a loan agreement, a promissory note, a receipt, and post-dated cheques for repayment. The Court further observed that when a transaction occurs between two merchants engaged in trade, the dispute falls within the definition of a "commercial dispute" under Section 2(1)(c)(i) of the Act of 2015. 42. If the decision in Amanpreet Kohli is considered in the right perspective, it would be seen that what weighed with the Court in arriving at the conclusion, was the execution of "mercantile documents" and the nature of the work being performed by the parties to the suit. The ratio of the decision establishes that when two merchants execute "mercantile documents" and extend a friendly loan with an embedded interest element, duly supported by formal mercantile documents, such a transaction would fall within the definition of a "commercial dispute". However, this decision cannot be interpreted to mean that by default every friendly loan qua any parties carrying an interest element, even if not supported by mercantile do....
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....ts, including those based on bills of exchange, hundies, and promissory notes, where the plaintiff seeks to recover a debt or liquidated demand in money payable by the defendant, with or without interest. It also applies to claims arising from a written contract or an enactment where the sum sought to be recovered is a fixed amount or a debt (other than a penalty) and to suits based on guarantees where the claim against the principal is in respect of a debt or liquidated demand. Additionally, it includes suits for the recovery of receivables instituted by an assignee of a receivable. 47. The institution, procedure, and other related aspects are prescribed in detail under Order XXXVII. The provisions of the Act of 2015 do not entirely override or render the general provisions of Order XXXVII obsolete. Instead, the Act of 2015 provides for the resolution of disputes of a specific category. As a result, a large number of cases will continue to fall under Order XXXVII, whereas disputes classified as "commercial disputes" under the Act of 2015, will be adjudicated under its framework. 48. Considering the case in hand, the present suit is not based on any transaction involving merc....