Which commercial disputes the Commercial court can entertain as per The Commercial courts Act?

 The Legislature, in the Commercial Courts Act has not defined commercial disputes as disputes arising out of all commercial transactions. Instead, the Legislature has opted to specify the 22 transactions listed in clauses (i) to (xxii) of Section 2(1)(c) of the Commercial Courts Act, as the transactions, disputes arising wherefrom will constitute a commercial dispute. That being the position, every dispute arising from a commercial transaction, without the same falling in any of the clauses, cannot constitute a commercial dispute within the meaning of Commercial Courts Act. {Para 15}

 In the High Court of Delhi at New Delhi

(Before Rajiv Sahai Endlaw, J.)

Qatar Airways Q.C.S.C.  Vs  Airports Authority of India & anr. 

C.S. (C.O.M.M.) No. 52/2017

Decided on April 26, 2017

Citation: 2017 SCC OnLine Del 8088 : (2017) 240 DLT 731 : (2017) 178 AIC 614.

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Delhi High Court: Definition of Commercial dispute in the Commercial courts Act is exhaustive and not inclusive

The submission of Mr. Lall that this Court should construe the expression "commercial dispute" widely to include all commercial disputes, even if they do not strictly fall within clauses (i) to (xxii) of Section 2(1) (c), cannot be accepted for the reason that the Parliament has consciously given the precise definition as to what a commercial dispute "means". It is not an inclusive definition and the specific matters which qualify as relating to "commercial disputes" have been specifically set out in clauses (i) to (xxii) aforesaid. {Para 21}

 IN THE HIGH COURT OF DELHI

CS (OS) 3187/2015 and I.A. Nos. 22366-22368/2015

Decided On: 03.02.2016

Havells India Limited Vs. The Advertising Standards Council of India

Hon'ble Judges/Coram:

Vipin Sanghi, J.

Citation: (2016) 227 DLT 719, MANU/DE/0297/2016.

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Supreme Court: Rules for interpretation of the term "A dispute relating to immovable property" as per The Commercial courts Act

 A dispute relating to immovable property per se may not be a commercial dispute. But it becomes a commercial dispute, if it falls under Sub-clause (vii) of Section 2(1)(c) of the Act viz. "the agreements relating to immovable property used exclusively in trade or commerce". The words "used exclusively in trade or commerce" are to be interpreted purposefully. The word "used" denotes "actually used" and it cannot be either "ready for use" or "likely to be used" or "to be used". It should be "actually used". Such a wide interpretation would defeat the objects of the Act and the fast tracking procedure discussed above. {Para 37}

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 7843 of 2019.

Decided On: 04.10.2019

Ambalal Sarabhai Enterprises Ltd. Vs. K.S. Infraspace LLP and Ors.

Hon'ble Judges/Coram:

A.S. Bopanna and R. Banumathi, JJ.

Authored By : A.S. Bopanna, R. Banumathi

Citation: MANU/SC/1378/2019,(2020) 15 SCC585.

Read full Judgment here: Click here.

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Supreme Court: If the transaction is contained in more than one document between the same parties they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document

 The defence so raised itself being the question of law, as the interpretation of documents itself goes to the root of the transactions/contract and the claim based upon it. In the present case, B.O.I. Finance Ltd. (Supra), as relied is not applicable on facts and the laws. That was a case of ready forward contract. In the case in hand, three documents and the transactions, of which two views of the learned Judges unless decided finally in due trial, it is difficult to accept the case that the view taken by the one learned Judge that transactions are sham and bogus and unseverable and other Judge hold it to be severable, without trial and by overlooking the earlier opinion, this itself is a triable issue. The Appellate Bench also may not decide such issue on such question of law, considering the scope and purpose of law on order XXXVII of the CPC, at this stage of the Summary Suit. It should be after final Judgment. In the present case, the same documents are interlinked and interconnected as observed by the earlier learned Judge, therefore, unless these findings are set aside, the findings in the impugned order that those are severable just cannot be accepted, without the trial. The case of misconstruction or interpretation of all connected documents itself made out a case of good defence. It cannot be treated as sham or bogus defence. The misinterpretation itself affects the rights and the transaction/claim. Therefore, the construction of documents is always question of law so is the position in case in hand. The distinction, therefore, at this stage, in summary proceedings like this, itself will not sufficient to deny the order of unconditional leave as granted by one Judge on the basis of same documents. (Sir Chunilal V. Mehta and sons Ltd. v. Century Spinning and Manufacturing Co. Ltd.11 and Hero Vinoth (Minor) v. Seshammal12) {Para 56}

Interpretation of documents and the nature of transactions-triable issue-

57. We have to consider the legal position in view of the contentions so raised by the learned counsel appearing for the parties. The Apex Court in Smt. Krishnabai Bhritar Ganpatrao Deshmukh v. Appasaheb Tuljaramarao Nimbalkar13, while dealing with the aspects of interpretation of any deed or documents, has held as under:-

“27. Secondly, there is ample authority for the proposition that when there is a dispute in regard to the true character of a writing, evidence de hors the document can be led to show that the writing was not the real nature of the transaction, but was only an illusory, fictitious and colourable device which cloaked something else, and that the apparent state of affairs was not the real state of affairs. [See Chandi Prasad Singh v. Piari Bidi C.A. No. 75 of 1964, decided on 16-3-1966, and Bhagwan Dayal v. Mst. Reoti Devi (supra)].

58. While dealing with the effect of various transactions, based upon the various documents, the Court required to deal with and take into consideration every connected transactions and the documents, to give total effect to the transactions by treating them all as one document. The Apex Court in (S. Chattanatha Karayalar v. The Central Bank of India Ltd.)14 has observed as under:-

3. ………. “The principle is well established that if the transaction is contained in more than one document between the same parties they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. In Manks v. Whiteley 1912-1 Ch. 735 at p. 754, Moulton, L.J. Stated:

“Where several deeds form part of one transaction and are contemporaneously executed they have the same effect for all purposes such as are relevant to this case as if they were one deed. Each is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole.”

 In the High Court of Bombay

(Before Anoop V. Mohta and G.S. Kulkarni, JJ.)

Hubtown Limited Vs IDBI Trusteeship Service Limited, 

Commercial Appeal No. 7 of 2016

Decided on October 24, 2016

     

Citation: 2016 SCC OnLine Bom 9019. Read full Judgment here: Click here.

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Bombay HC: summary suit as originally filed, prior to the commencement of the and as now transferred, being commercial dispute matter, the original procedure as provided under Order XXXVII shall be applicable to such summary suits

“Summary Suit” and “Summary Judgment”-

34. The conceptual position of “summary suit” as contemplated under Order XXXVII of CPC and its specific provisions are governed as per the original provisions of CPC. The amended CPC, in view of Section 16 of the Commercial Courts Act inserted the provision for a “summary judgment”, through Order XIII-A which is made applicable to the classes of Suits (commercial suits) which required to be decided by the Commercial Division/Court. It prescribes the procedure and stages for application for summary judgment. This also includes and provides the powers of a Commercial Judge to pass conditional order including for evidence for hearing of summary judgment. We are concerned with Order XIII-A, Rule 1(3) of CPC, whereby it is specifically provided “notwithstanding anything to the contrary, “an application” for summary judgment under this Order shall not be made in a Suit in respect of any commercial disputes that is originally filed as a summary suit under Order XXXVII.”. Therefore, once the summary suit as originally filed, prior to the commencement of the and as now transferred, being commercial dispute matter, the original procedure as provided under Order XXXVII shall be applicable to such summary suits. The parties are not entitled to prayer for summary judgment under XIII-A in view of the specific provision so referred above. This also means that the judgments and the issues so decided in summary suit shall for all purposes be governed by the CPC, even after such suits are transferred as commercial suits. The Commercial Division Judge is required to follow the original C.P.C. and is required to keep in mind the position in law revolving around all the facets of summary suits. The provisions of Section 13, therefore, is required to be interpreted and/or considered accordingly, when any decision is given by the Commercial Division/Court in such summary suit. 

 In the High Court of Bombay

(Before Anoop V. Mohta and G.S. Kulkarni, JJ.)

Hubtown Limited Vs IDBI Trusteeship Service Limited, 

Commercial Appeal No. 7 of 2016

Decided on October 24, 2016

     

Citation: 2016 SCC OnLine Bom 9019.

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Bombay HC: The Commercial court Act is not applicable to the transaction of advancing the amount as a friendly loan

In the wake of the above, the impugned order which take a view that the transaction of advancing the amount as a friendly loan is commercial in nature, is an erroneous finding as a solitary transaction of advancing loan, on friendly terms, unlike a commercial lending with the prevailing market rate, would fall short or ordinary transaction of a financer, banker. Moreso, even the plaintiff is conscious of this position and in her response to the Application filed for return of plaint for presentation of appropriate court, she admit so. {Para 17}

 In the High Court of Bombay

(Before Bharati Dangre, J.)

Glasswood Realty Pvt. Ltd. and Others Vs  Chandravilas Kailashkumar Kothari 

Writ Petition No. 8393 of 2021

Decided on December 6, 2021

Citation: 2021 SCC OnLine Bom 5032 : (2022) 1 Bom CR 527.

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Under which circumstances the loan transaction between businessman relating to mercantile documents will not be treated as Commercial dispute?

 The plaintiff is a businessman. The 1st defendant is a partnership firm; the 2nd and 3rd defendants are its partners. And the 2nd defendant is said to be the plaintiffs friend. Therefore, acting beyond the call of his business, the plaintiff has given “a friendly loan” to the defendants. The defendants executed a promissory note and issued cheques as well. But the cheques were dishonoured. So, the plaintiff has sued the defendants for recovery.

16. It is trite to observe that, for the Court to determine the nature of the suit, what matters at this stage is the plaint allegations and nothing else. Both the learned counsel agree of section 2, what applies is clause (c) (i) of sub-section (1), the lexical provision of the Commercial Courts Act, 2015. The transaction may be ‘ordinary’ but must have occurred between “merchants, bankers, financiers and [or] traders”. And that ordinary transaction may relate to “mercantile documents, including enforcement and interpretation of such documents”. A merchant or a trader need not be as such-always and invariably. That merchant or trader is an individual, at first. And he may transact with another only as an individual. An individual may help another individual and that help may take the shape of lending. Not every instance of lending must reek of business or trade; not every trader must always act as a trader.

17. Here, the plaintiff pleads that he lent a friendly loan to another needy friend. It is not a transaction between them in the course of their ordinary business; much less can it be treated as money lending perse.

18. First, the definition is exhaustive because section 2 (1) (c) (i) employs the expression “means”. Second, though it may be an ordinary transaction, it is not between or among merchants, bankers, financiers, or traders. So, it cannot be treated as a transaction, ordinary or otherwise, between merchants, bankers, financiers, or traders. It is indeed a private transaction sans any commercial or business trappings.

19. At any rate, the Commercial Courts Act, 2015 has not obliterated Order 37 of CPC. If I indulge in some generalisation, Order 37 is a genus and the Commercial Courts Act, 2015 a species.

20. Under these circumstances, I hold that the Suit ought to be treated as a Summary Suit rather than a Commercial Summary Suit. After re-numbering the suit thus, the Registry will place it before the Court the next week.

 In the High Court of Bombay

(Before Dama Seshadri Naidu, J.)

Bharat Huddanna Shetty  Vs  Ahuja Properties & Developers and Others 

Summons for Judgment No. 9 of 2021, 

Decided on July 13, 2021

Citation: 2021 SCC OnLine Bom 13984.

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What precautions the court should take while granting leave to defend in a summary suit based dishonoured cheque?

 A Summary Suit based on dishonoured cheques stands on a higher pedestal. In addition to the proof of underlying consideration, evidenced by the documents and material on record, in a given case, the plaintiff can bank upon the presumptions contained in Section 118 of the Negotiable Instruments Act, 1881 and Section 114 illustration (c) of the Indian Evidence Act, 1872.

32. A slightly distinct position of a Summary Suit based on a dishonoured cheque has been expounded by a Division Bench of this Court in the case of Rajesh Laxmichand Udeshi @ Bhatia v. Pravin Hiralal Shah8 wherein the Court adverted to the effect of the statutory presumptions under the Negotiable Instruments Act, 1881, while considering the prayer for leave to defend the suit based on a negotiable instrument.

33. The observations of the Division Bench in paragraph 14 and 15 of the said judgment are material and, hence, extracted below.-

14] When a summary suit instituted is based on a cheque which is dishonoured, effect of Sections 138 and 139 of Negotiable Instruments Act raising statutory presumption that the cheque was issued in discharge of a liability, is a relevant consideration to be kept in mind. The said Sections cast a burden upon the defendant to rebut the presumption. Summary suits instituted on cheques which are dishonoured will, therefore, stand on a higher footing than summary suits instituted on the basis of other documents. In such cases, the Court will have to take into consideration the statutory presumption which is raised when the cheques are dishonoured. The object behind providing a statutory presumption under the N egotiable Instruments Act has to be kept in mind while judging the credibility of a defence raised by the defendant in summary suit. Thus, the test of more than “shadowy” and less than “probable” as adverted to by the Apex Court cannot apply in cases where the law requires a person to explain certain state of affairs. The judgments which are relied upon by the learned counsel do not consider the effect of the statutory presumptions raised under the Negotiable Instruments Act when a cheque is dishonoured. In our opinion, when a cheque is dishonoured, the Court is enjoined with the duty to scrutinize the defence put up by the defendant with a much higher degree of care and circumspection. Such summary suits cannot be treated as on par with the cases instituted on contracts or invoices etc. where such statutory presumptions do not operate.

15] The legislative intent behind enactment of Sections 138 and 139 of the Negotiable Instruments Act is to prevent abuse of the banking system. Thus, one who issues a cheque extends a solemn promise to pay. Based on this promise and action, the recipients arrange their affairs and quite often enter into further transactions. Unless extra ordinary circumstances are made out, one who issues cheque is deemed to have undertaken to pay. Negotiable Instruments Act enforces the promise strictly by raising statutory presumption and treating it as an offence. This provision elevates a cheque to a higher status than the other instruments, such as written contract etc. to which no such statutory presumption is attached. What needs to be emphasized is that presumption in respect of a dishonoured cheque places a higher burden on the defendant to elucidate the defence than the burden which is cast on a defendant where the suit is filed on the basis of ordinary instruments. In the cases based on dishonour of cheques, the defendant must satisfy the conscience of the Court and cannot take shelter behind the rules formulated primarily in respect of suits based on ordinary instruments. The Court while exercising the discretion to grant leave or otherwise to the defendant in such cases cannot be oblivious of the legislative intent to place the promise made through a cheque on a higher pedestal than the promise made through an ordinary instrument. This is not to state that moment a Summary Suit is lodged based on a dishonoured cheque, it must be decreed without anything more. What needs to be emphasised is that the fact that there is a statutory presumption attached to the dishonoured cheque will constitute an important ingredient while considering the question whether leave to defend should be granted in cases of dishonoured cheques and the Court must scrutinise the defence strictly. The object of the summary procedure is ultimately to see that the defendant does not needlessly prolong the litigation by creating untenable, frivolous and casual defences so as to deprive the plaintiff of the monies due to him.

 In the High Court of Bombay

(Before N.J. Jamadar, J.)

Shailesh Bhagoobhai Bhoolabhai Vs  Deepak Raheja.

Summons for Judgment No. 36 of 2021,

Decided on December 15, 2022, 

Citation: 2022 SCCONLINE Bom 11643.

Read full Judgment here: Click here.

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Under which circumstances defendant is not entitled to get leave to defend the Summary suit qua the interest component?

  Even the endeavor of Mr. Momaya to seek leave to defend by canvassing a submission that plaintiff has charged interest at an exorbitant and unconscionable rate does not advance the cause of the defendant. The plaintiff is seeking pre-suit, pendent lite, and future interest at the agreed rate of 12% per annum. In a business transaction in a commercial city like Mumbai, interest at the rate of 12% per annum can not be said to be exorbitant and unreasonable. Moreover, in the case at hand, there is an unequivocal undertaking to pay interest. In any event the award of interest on the amount covered by dishonoured cheques would be governed by the provisions contained in Section 80 of the Negotiable Instruments Act, 1881, which stipulates rate of 18 % per annum. Therefore, I am not persuaded to accede to the submission on behalf of the defendant to grant leave to defend the suit qua the interest component. {Para 35}

 In the High Court of Bombay

(Before N.J. Jamadar, J.)

Shailesh Bhagoobhai Bhoolabhai Vs  Deepak Raheja.

Summons for Judgment No. 36 of 2021,

Decided on December 15, 2022, 

Citation: 2022 SCCONLINE Bom 11643.

Read full Judgment here: Click here.

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Bombay HC: Loan against bill of exchange for business purpose is a Commercial dispute

The second challenge based on the dispute not falling within the ambit of ‘commercial dispute’ under Section 2(c) of the Act, 2015, also does not carry much substance. Mr. Momaya made an endeavor to demonstrate that the dispute in question does not fall within the meaning of “commercial dispute” as envisaged by Section 2(1)(c)(i) of the Act, 2015. According to Mr. Momaya, the transaction in question is essentially of a loan simplicitor and does not partake the character of ordinary transactions of merchants, bankers, financiers and traders. {Para 17}

18. To bolster up of this submission, Mr. Momaya placed reliance on an order passed by Calcutta High Court in the case of Ladymoon Towers Private Limited v. Mahendra Investment Advisors Private Limited in IA No. GA/4/2021 in CS/99/2020, decided on 13th August, 2021, and another order passed by this Court in Summons for Judgment No. 9 of 2021, in Commercial Summary Suit No. 6 of 2021, Bharat Huddanna Shetty v. Ahuja Properties & Developers, dated 13th July, 2021.

19. “Commercial dispute” is defined under Section 2(1)(c)(i) of the Act, 2015 as under:—

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

20. Evidently, whether a dispute falls within the ambit of Section 2(1)(c)(i) is, by its very nature, rooted in facts. The decisions relied upon by Mr. Momaya essentially turned on the facts of those cases with which the Court was confronted. It is true that in the case of Ambalal Sarabhai Enterprises Limited v. K.S. Infraspace LLP3, the Supreme Court has not approved a wide construction of the definition of “commercial dispute”. However, the issue as to whether the dispute in a given case constitutes a “commercial dispute” must necessarily be decided in the backdrop of the facts of the said case.

21. In the case at hand, in my view, the following factors assumes significance. First, the deceased plaintiff claimed that the loan was advanced to the defendant, who was dealing in a real estate business, to discharge his statutory dues. Second, the Bill of Exchange against which the loan was advanced, over the drawal of which there is no dispute, clearly records that the loan was advanced for a business purpose. Third, the letter dated 20th December, 2016, suggests that the defendant availed loan from the plaintiff and his companies regularly. Fourth, the plaintiff seems to have advanced the amount to the defendant in the regular course of business as is evident from the ledger account maintained by the plaintiff. In the circumstances, I find it rather difficult to accede to the submission that the transaction in question is one of a loan advanced by an individual to another without there being any element of commercial interest therein.

 In the High Court of Bombay

(Before N.J. Jamadar, J.)

Shailesh Bhagoobhai Bhoolabhai Vs  Deepak Raheja.

Summons for Judgment No. 36 of 2021,

Decided on December 15, 2022, 

Citation: 2022 SCCONLINE Bom 11643.

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Under which circumstances Commercial court can allow the production of documents at the subsequent stage?

 The learned Trial Court has referred to the provisions of Order XI Rule 5 CPC, as applicable to the commercial disputes. But, it has overlooked the provisions of Order XI Rule 1(1)(c)(ii) CPC, which permits the plaintiff to file documents in answer to the case set up by the defendant subsequent to the filing of the plaint. The precise case of the petitioner/plaintiff is that when the respondents/respondents denied that invoices were ever raised, the application was moved to bring the invoices on record. Under Order XI Rule 5 CPC, the court can grant leave to the plaintiff to file documents, not filed with the plaint. The learned Commercial Court erred in over-looking these provisions of the CPC. {Para 12}

 IN THE HIGH COURT OF DELHI AT NEW DELHI

CM (M) 324/2021

VALO AUTOMOTIVE PVT LTD. Vs SPRINT CARS PVT LTD & ORS.

CORAM:

 MS. JUSTICE ASHA MENON

Pronounced on: 18th August, 2021

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