Monday, 30 September 2019

Whether it is mandatory for court to hear other side prior to transfer of proceeding to Commercial court?

From the aforesaid proposition which has been laid down even from the bare reading of the plaint itself, what has been prayed for is the alleged transaction which has taken place and, there was no issue related to a commercial dispute and, therefore, simply because a transaction of immovable property is questioned the same ipso facto would not constitute commercial dispute and as such the conclusion which has been arrived at by the Court below is found to be perverse, contrary to the provisions of law itself. Hence, such apparent error committed in exercising discretion/jurisdiction deserves to be corrected in considered opinion of the Court.

11. Additionally, the Court is also of the view that at least it was obligatory on the part of the learned Judge to put this fact of issue involving commercial dispute to the parties to the proceedings. Even if no actual hearing is to be given to the parties as stipulated in one of the decisions of this Court since by virtue of Section 15 of the Act automatically the proceedings shall have to be transferred but to arrive at that conclusion it was obligatory on the part of the learned Judge to satisfy himself so succinctly on the basis of averments that dispute of the plaint falls with the purview of Commercial Court Act. It appears that while passing an order of transfer, the learned Judge has committed a serious error in exercising jurisdiction in sending the matter to commercial Court without having satisfied himself about the controversy where it falls within the definition of commercial dispute or not. Valuation of the property is not a sole yardstick to transfer the proceeding to the commercial Court. Hence, this value which has been taken note of is no doubt relevant but that itself is not sufficient enough to transfer the suit to the commercial Court. The requirement of satisfying the issue where it falls within the definition of Section 2(1)(C) of the Act or not ought to have been examined before passing the brief order. Be that as it may, it further appears that what has been exercised by the Court below is a power of transfer. Here is the case in which there is no pleading at all that the property in question is exclusively being used for the commercial purpose and there is also no assertion that it is likely to be used for the exclusive commercial purpose. And as such basic element of commercial dispute is completely missing from the pleading and in that context essentially the learned Judge though not supposed to exercise the power of transfer, still a specific order of transfer is made which prima facie appears to be not within the domain of the learned trial Judge. Essentially, the power of transfer lies with the High Court and District Court by virtue of Section 24 of the CPC and a bare reading of it clearly stipulates that while passing the order of transfer the learned Judge is not invested with the jurisdiction. Hence, ex facie, the order in question suffers from non-application of mind. Hence, the impugned order is not sustainable in the eyes of law.

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

Special Civil Application No. 1236 of 2019

Decided On: 05.04.2019

 Uday Autolink Pvt. Ltd. Vs. Govindji Becharji Thakor

Hon'ble Judges/Coram:
A.J. Shastri, J.

Citation: AIR 2019 Guj 130


1. The present petition under Articles 226 and 227 of the Constitution of India is filed for the purpose of challenging the legality and validity of an order dated 1.1.2019 passed below Exh. 1 in Special Civil Suit No. 240 of 2016 by the learned Principal Senior Civil Judge, Ahmedabad (Rural).

2. The background of the facts of present case is that the petitioner - original plaintiff had instituted a Special Civil Suit No. 240/2016 against the present respondent - defendant for seeking a decree of specific performance as well as declaration and seeking cancellation of sale deed and consequently for permanent injunction. The original defendant after receiving the summons from the trial Court had illegally transferred the suit property to defendant No. 4 one Hitesh Indubhai Bharwad and though defendants were served with the summons, nobody had filed their respective Written Statement opposing the suit. On account of such, the trial Court passed an order to decide the ex parte against respondent No. 4 (New purchaser) and at the stage of hearing of interim injunction, surprisingly, in suo motu exercise of jurisdiction though not available, the learned trial Judge came to the conclusion that dispute arising in the suit proceedings is a commercial dispute and as such, has passed an order on 1.1.2019 ordering the suit to be transferred to the Commercial Court and it is this order which is made the subject matter of present petition under Articles 226 and 227 of the Constitution of India.

3. The Court on 23.1.2019 was pleased to issue notice for final disposal, returnable on 30.1.2019 and with this background, the present petition has come up for consideration before this Court.

4. Mr. Mehul S. Shah, learned Senior Advocate appearing with Mr. Jigar P. Raval, learned advocate for the petitioner has vehemently contended that the impugned order passed by the learned Judge is without jurisdiction. Hence, on this count alone, the impugned order is required to be set aside. It has been further contended that the suit proceedings basically is filed for the purpose of multiple relief's i.e. for specific performance, for seeking declaration as well as for setting aside the sale transaction and for seeking permanent injunction and it has been pointed out by referring to cause of action as well as prayer clause, a contention is raised that this dispute entangled in the proceedings cannot be said to be a commercial dispute within the meaning of Section 2(1)(C) of Commercial Courts Act and as such since the dispute arising is not falling within the purview of definition of commercial dispute, the learned Judge could not have exercised the jurisdiction. It has been further contended that even otherwise the learned Judge who passed an order had assumed the jurisdiction which otherwise is not available by any Statute since the power of transfer are not assigned to the learned trial Judge who passed the impugned order as such, the order in question is absolutely without jurisdiction. Hence, the same is not fulfilling the test of legality. It has been further contended that here is a case in which even either party has not made any application for seeking transfer to Commercial Court. On the contrary, the defendant has chosen not to file any Written Statement and as such instead of hearing injunction application an order of- transfer is passed which is not at all legal or valid in any form. Hence, the impugned order being not sustainable in the eye of law, deserves to be set aside.

5. To substantiate his submission, learned counsel has relied upon two decisions of Division Bench of this Court which are reported in 2017(0) AIJEL HC 237874 and 2017 ADEL HC 237873 and by referring these two decisions, a contention is raised that this impugned order is quite in conflict with settled proposition of law propounded by Division Bench in aforesaid decisions. Hence, in no case the impugned order is sustainable in the eyes of law.

6. To meet with the submission made by learned advocate for the petitioner, Mr. T.B. Karia, learned advocate for the opponent has vehemently contended that there appears to be no wrong on the part of the learned Judge to pass the order impugned in the petition. In fact, the order in question has reflected an application of mind and even otherwise power is always been with the learned trial Judge to transfer the suit if it is found that the Court has no jurisdiction. Point of jurisdiction is to be determined by the learned Judge even on his own. Hence, there appears to be no material irregularity in exercising discretion. He has further contended that in a decision reported in 2018(3) GLR 2318, again the Division Bench has observed that by virtue of the commercial Courts, Commercial Division & Commercial Appellate Division of the High Courts Act, 2015 whenever there is a works contract having some value above a particular amount, the dispute deserves to be dealt with by the Commercial Court and as such, the High Court has observed that the condition precedent mentioned in Section 15 of the Commercial Court Act it is satisfied pending suit shall automatically stand transferred to the Commercial Court and as such for that purpose, there is no necessity of granting any opportunity of hearing to the parties concerned and as such order in question is perfectly justified in the eyes of law. Hence, no interference deserves to be made in respectful submission of learned advocate Mr. Karia. No other submissions are made.

7. In view of the aforesaid contention as a part of rejoinder, it is submitted that judgment which was dealt with by the Division Bench of this Court, the facts and circumstances are altogether different as mentioned above and it is settled position of law that if there is a slight change in the background of fact or one additional circumstance would make a world of difference in applying the principle of precedent and as such when the background of facts on hand is quite different from whatever prevailing on hand in aforesaid decision, this Court is of the opinion that the decisions cited by the learned advocate for the respondent is of no avail to the respondent.

8. Having heard the learned advocates for the parties and having gone through material on record, it clearly transpires that the impugned order which has been passed is the result of exercise of jurisdiction. Neither the party has submitted any application for seeking transfer of a suit. Now, in the context of this, when the learned advocate has taken on its own to decide an issue a reference ought to have been made to a meaning of Commercial dispute, simply because, a property found to be a commercial property by itself would not constitute a commercial dispute. Section 2(1)(c) defines the Commercial dispute which reads as under:-

2(1)(c) Commercial dispute means a dispute arising out of

(i) ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;

(ii) export or import of merchandise or services;

(iii) issues relating to admiralty and maritime law;

(iv) transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same;

(v) carriage of goods;

(vi) construction and infrastructure contracts, including tenders;

(vii) agreements relating to immovable property used exclusively in trade or commerce;

(viii) franchising agreements;

(ix) distribution and licensing agreements;

(x) management and consultancy agreements;

(xi) joint venture agreements;

(xii) shareholders agreements;

(xiii) subscription and investment agreements pertaining to the services industry including 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 semi-conductor 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 reinsurance;

(xxi) contracts of agency relating to any of the above; and

(xxii) such other commercial disputes as may be notified by the Central Government.

9. Now, in the context of aforesaid definition, if the present controversy to be examined from the plaint itself, it is clear that the present suit i.e. Special Civil Suit No. 240/2016 is with respect to a property situated on final plot No. 35/2/1 and for which the alleging transaction has taken place. The cause of the suit as well as the relief clause would make it clear that what has been prayed for in the suit proceedings is a relief of specific performance of a contract as well as for setting aside a sale transaction and for seeking a permanent injunction. Now, in this context from the averments of the suit itself where it generates a commercial dispute or not is not clearly visible and for that purpose, the observations which have been made by the Division Bench of this Court is of assistance which has analyzed the term 'commercial dispute' it has been propounded that commercial dispute means a dispute arising out of agreement relating to immovable property used exclusively in trade and commerce and simply because the property in question allegedly to be a commercial property, the dispute related to it itself would not constitute the commercial dispute and, therefore, apparently the order which has been passed is quite contrary to the proposition of law laid down by this Court which has analyzed the term commercial dispute. Following observations contained from paragraph Nos. 7.3 to 7.6 since relevant to the issue are quoted hereinafter:

[7.3] Therefore, if the dispute falls within any of the clause 2(1)(c) the dispute can be said to be "commercial dispute" for which the Commercial Court would have jurisdiction. It is required to be noted that before the learned Commercial Court the original plaintiff relied upon section 2(1)(c)(i), 2(1)(c)(ii) and 2(1)(c)(xx) of the Commercial Courts Act only. Learned Counsel appearing on behalf of the original plaintiff has candidly admitted and/or conceded that the case shall not fall within clause 2(1)(c)(i); 2(1)(c)(ii) or 2(1)(c)(xx) of the Commercial Courts Act. It is required to be noted that before the learned Commercial Court it was never the case on behalf of the original plaintiff that case would fall within section 2(1)(c)(vii) of the learned Commercial Court. Despite the above we have considered on merits whether even considering section 2(1)(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(1)(c) of the Commercial Courts Act or not? Considering section 2(1)(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 No. 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 plaintiff that as the original defendant No. 1 has failed to provide any infrastructural facilities and develop the plots and therefore, a civil suit for specific performance of the agreement has been filed. There are other alternative prayers also. Therefore, it cannot be said that the agreement is as such relating to immovable property used exclusively in trade or commerce. It is the case on behalf of the original plaintiff that as in clause (vii) of section 2(1)(c), the phraseology used is not "actually used" or "being used" and therefore, even if at present the plot is not used and even if it is likely to be used even in future, in that case also, section 2(1)(c) (vii) shall be applicable and therefore, the Commercial Court would have jurisdiction. The aforesaid has no substance. As per the cardinal principle of law while interpreting a particular statute or the provision, the literal and strict interpretation has to be applied. It may be noted that important words used in the relevant provisions are "immovable property used exclusively in trade or commerce". If the submission on behalf of the original plaintiff is accepted in that case it would be adding something in the statute which is not there in the statute, which is not permissible. On plain reading of the relevant clause it is clear that the expression "used" must mean "actually used" or "being used". If the intention of the legislature was to expand the scope, in that case the phraseology used would have been different as for example, "likely to be used" or "to be used". 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". Similar view has been taken by the Bombay High Court (Nagpur Bench) in the case of Dineshkumar Gulabchand Agrawal (MANU/MH/1557/2003 : 2004 (267) ITR 768 (Bom)) (supra) and it is observed and held that the word "used" denotes "actually used" and not merely "ready for use". It is reported that SLP against the said decision has been dismissed by the Hon'ble Supreme Court.

[7.4] Even the submission on behalf of the original plaintiff that as the plots are given to original defendant No. 1 for developing and establishing Biotech Park which ultimately is to be used for trade or commerce and therefore, section 2(1)(c)(vii) shall be applicable, the aforesaid has no substance and cannot be accepted. Merely because the ultimate use might be for the purpose of trade or commerce and that too after developing and establishing Biotech Park after providing of infrastructural facilities, section 2(1)(c)(vii) shall not be applicable, more particularly with respect to the agreement/contract between the original plaintiff and the original defendant No. 1. It cannot be said that the agreement between the original plaintiff and the original defendant No. 1 is the agreement relating to immovable property used exclusively in trade or commerce.

[7.5] Identical question came to be considered by the Division Bench of this Court and after considering the relevant provisions of the Commercial Courts Act more particularly section 2(1)(c) of the Commercial Courts Act, in para 5.5 after considering section 2(1)(c)(vii) of the Commercial Courts Act, it is observed that merely because the immovable property is going to be used exclusively in trade or commerce, the dispute would not become commercial dispute as defined under Section 2(1)(c) of the Commercial Courts Act. It is further observed and held in the said decision that if contention on behalf of the applicant that as immovable property, which is the subject matter of the suit, is going to be used exclusively for trade and commerce, the same would become commercial dispute as per section 2(1)(c) and therefore the same is to be transferred to the concerned Commercial Court having jurisdiction is accepted, in that case, the object and purpose of establishment of Commercial Courts under the Commercial Courts Act would be frustrated. That thereafter in paras 5.6 to 5.8, the Division Bench has observed and held as under:

"[5.6] The object and purpose of establishment of Commercial Courts, Commercial Divisions and Commercial Appellate Divisions of the High Court is to ensure that the cases involved in commercial disputes are disposed of expeditiously, fairly and at reasonable cost to the litigant. The Commercial Courts, Commercial Divisions and Commercial Appellate divisions of the High Courts are intended to serve as a pilot project in the larger goal of reforming the civil justice system in India. As per the recommendations made by the Law Commission on the basis of which the Commercial Courts have been established, the Commercial Courts more particularly will benefit the litigant, other potential litigants (especially those engaged in trade and commerce) shall also be advantaged by the reduction in backlog caused by the quick disposal of the commercial disputes, which in turn, will further economic growth, increase foreign investment, and make India an attractive place to do business.

[5.7] From the 188th report of the Law Commission it appears that the constitution of Commercial Divisions Courts were necessitated due to inordinate delays, and the need to ensure the fast disposal of high value commercial disputes to provide assurance to domestic and foreign investors. It has been aimed to give a clear assurance to investors that high value commercial suits would directly go before the Commercial Division/Commercial Courts/Commercial Appellate Courts, which would follow fast track procedures.

[5.8] Thus, considering the aim, object and purpose of the enactment of the Commercial Courts Act noted hereinabove, the submission on behalf of the appellant that the dispute in the present suit, which as observed hereinabove, cannot be said to be the commercial dispute within the definition of Section 2(1)(c) of the Commercial Courts Act, is required to be transferred to the Commercial Division, Vadodara cannot be accepted. If such a suit which is as such arising out of the probate proceedings and/or is dispute with the respect to the property are transferred to the Commercial Division/Commercial Court, there shall not be any difference between the Regular Civil Courts and the Commercial Division/Commercial Courts and therefore, if all such suits are transferred to the Commercial Division/Commercial Courts, the object and purpose of the establishment of the Commercial Division/Commercial Courts shall be frustrated."

[7.6] Considering the aforesaid facts and circumstances and the dispute between the parties for specific performance of the agreement between the original plaintiff and original defendant No. 1 and the relief's sought and the language and phraseology "exclusively in trade or commerce" used in section 2(1)(c)(vii) of the Commercial Courts Act, it cannot be said that the dispute between the original plaintiff and original defendant No. 1 can be said to be "commercial dispute" within the definition of section 2(1)(c) of the Commercial Courts Act, for which the Commercial Court would have jurisdiction. The learned Commercial Court has rightly allowed the application Exh. 17 and has rightly returned the plaint to the original plaintiff to present it before appropriate Court by observing that as the dispute between the original plaintiff and defendants cannot be said to be "commercial dispute" within the definition of section 2(1)(c) of the Commercial Courts Act and therefore, the suit before the Commercial Court shall not be maintainable. We are in complete agreement with the view taken by the learned Commercial Court.

10. From the aforesaid proposition which has been laid down even from the bare reading of the plaint itself, what has been prayed for is the alleged transaction which has taken place and, there was no issue related to a commercial dispute and, therefore, simply because a transaction of immovable property is questioned the same ipso facto would not constitute commercial dispute and as such the conclusion which has been arrived at by the Court below is found to be perverse, contrary to the provisions of law itself. Hence, such apparent error committed in exercising discretion/jurisdiction deserves to be corrected in considered opinion of the Court.

11. Additionally, the Court is also of the view that at least it was obligatory on the part of the learned Judge to put this fact of issue involving commercial dispute to the parties to the proceedings. Even if no actual hearing is to be given to the parties as stipulated in one of the decisions of this Court since by virtue of Section 15 of the Act automatically the proceedings shall have to be transferred but to arrive at that conclusion it was obligatory on the part of the learned Judge to satisfy himself so succinctly on the basis of averments that dispute of the plaint falls with the purview of Commercial Court Act. It appears that while passing an order of transfer, the learned Judge has committed a serious error in exercising jurisdiction in sending the matter to commercial Court without having satisfied himself about the controversy where it falls within the definition of commercial dispute or not. Valuation of the property is not a sole yardstick to transfer the proceeding to the commercial Court. Hence, this value which has been taken note of is no doubt relevant but that itself is not sufficient enough to transfer the suit to the commercial Court. The requirement of satisfying the issue where it falls within the definition of Section 2(1)(C) of the Act or not ought to have been examined before passing the brief order. Be that as it may, it further appears that what has been exercised by the Court below is a power of transfer. Here is the case in which there is no pleading at all that the property in question is exclusively being used for the commercial purpose and there is also no assertion that it is likely to be used for the exclusive commercial purpose. And as such basic element of commercial dispute is completely missing from the pleading and in that context essentially the learned Judge though not supposed to exercise the power of transfer, still a specific order of transfer is made which prima facie appears to be not within the domain of the learned trial Judge. Essentially, the power of transfer lies with the High Court and District Court by virtue of Section 24 of the CPC and a bare reading of it clearly stipulates that while passing the order of transfer the learned Judge is not invested with the jurisdiction. Hence, ex facie, the order in question suffers from non-application of mind. Hence, the impugned order is not sustainable in the eyes of law.

12. Now, in the context of aforesaid situation which is prevailing, the learned advocate Mr. Karia has drawn the attention of this Court upon the decision delivered by Division Bench reported in 2018(3) GLR 2318 wherein essentially the said decision is based upon the analysis of Section 15 of the Commercial Court Act and in that context the observation is made that if condition precedent contained in Section 15 of the Act is satisfied, the Civil Suit stands automatically transferred to the concerned commercial Court and such Act would be an administrative act does not require any compliance of principle of natural justice. Now, here is the case in which the plaint itself is not reflecting any condition precedent nor attracting Section 2(1)(C) of the Act and in the absence of specific averments which are required to constitute commercial dispute it was not open for the learned Judge to exercise the judicial power not vested in him and there is not even a stand of the advocate of either side that this order dated 1.1.2019 is in exercise of administrative power. A suit is transferred for which there is no support of any statutory provision. Hence, on that count also, the Court is of the considered opinion that serious error of jurisdiction is committed by the Court below which requires this Court to interfere.

13. The Court while coming to this conclusion is also of the clear opinion that extra ordinary jurisdiction is not that much circumscribed which would allow an apparent error of jurisdiction to go on. Infact, there appears to be clear material error in exercising jurisdiction and hence, this is a fit case in which the extra ordinary jurisdiction deserves to be exercised.

14. In that view of the matter, order in question is not sustainable. Hence, the same is hereby quashed and set aside and the learned Judge is directed to deal with and decide the suit i.e. Special Civil Suit No. 240/2016 at the earliest.

15. It appears that the suit has been filed in the year 2016 and even after 3 years, it appears that the respondents have chosen not to co-operate. It would be desirable in that situation to see that the suit proceedings should go on as expeditiously as possible and the learned Judge is requested to adjudicate the suit on its own merits in accordance with law. With the observation, the present petition stands allowed with no order as to costs.


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