Paragraph numbers below are the court’s original numbering, recovered from the source text.
1. I have gone through the judgment of my esteemed Brother Justice A.S. Bopanna. I am in full agreement with the conclusion that in order to fall within Section 2(1)(c)(vii) of the Commercial Courts Act, the immovable property must be “used exclusively” or “being used exclusively” in trade or commerce. However, in view of the importance of the question involved, I would like to give my reasonings for concurring with the conclusion of my esteemed Brother.
2. The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Act No.4 of 2016) published in the Gazette of India on 01.01.2016. The Act is deemed to have come into force w.e.f. 23.10.2015. The Act No.4 of 2016 was amended by Central Act 28 of 2018 – The Commercial Courts Act.
3. We may refer to the Law Commission’s 253rd Report, which inter alia made various recommendations. Para (4.2) of Chapter IV- ”Conclusions and Summary of Recommendations” of Law Commission’s 253rd Report reads as under:- “4.2 The Commercial Courts, the Commercial Divisions and the Commercial Appellate Divisions of High Courts that have been recommended are intended to serve as a pilot project in the larger goal of reforming the civil justice system in India. The goal is to ensure that cases are disposed of expeditiously, fairly and at reasonable cost to the litigant. Not only does this benefit the litigant, other potential litigants (especially those engaged in trade and commerce) are also advantaged by the reduction in backlog caused by the quick resolution of commercial disputes. In turn, this will further economic growth, increase foreign investment, and make India an attractive place to do business. Further, it also benefits the economy as a whole given that a robust dispute AMBALAL SARABHAI ENTERPRISES LTD. v. K. S. INFRASPACE LLP & ANR. resolution mechanism is a sine qua non for the all-round development of an economy”.1 After Law Commission’s 253rd Report, the Act No.4 of 2016 was amended by Central Act 28 of 2018.
4. Section 3 of the Act deals with Constitution of Commercial Courts. As per Section 3 of the Act, the State Government shall, after consultation with the High Court, by notification, constitute Commercial Courts at District level if deemed necessary for the purpose of exercising jurisdiction under the Act. As per Section 3(1A) of the Act, Commercial Courts shall have jurisdiction to try the commercial disputes of a “Specified Value” which shall not be less than three lakh rupees or such higher value, for whole or part of the State, as it may consider necessary. After amendment in 2018, proviso to Section 3 provides that Commercial Courts may be constituted with respect to area over which the High Courts have ordinary original civil jurisdiction. Section 5(1) of the Act provides for the constitution of Commercial Appellate Division having one or more Division Benches for the purpose of exercising jurisdiction and powers conferred on it by the Act.
5. Section 6 deals with the jurisdiction of Commercial Court. Section 6 of the Act reads as under:- “6. Jurisdiction of Commercial Court. – The Commercial Court shall have jurisdiction to try all suits and applications relating to a commercial dispute of a Specified Value arising out of the entire territory of the State over which it has been vested territorial jurisdiction. Explanation. – For the purposes of this section, a commercial dispute shall be considered to arise out of the entire territory of the State over which a Commercial Court has been vested jurisdiction, if the suit or application relating to such commercial dispute has been instituted as per the provisions of sections 16 to 20 of the Code of Civil Procedure, 1908 (5 of 1908)”.
6. Section 7 deals with the jurisdiction of Commercial Divisions of High Courts. Section 7 of the Act reads as under:- 1 See Para (4.2) of Chapter-IV-‘Conclusions and Summary of Recommendations’ of Law Commission’s 253rd Report – Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015. “7. Jurisdiction of Commercial Divisions of High Courts. – All suits and applications relating to commercial disputes of a Specified Value filed in a High Court having ordinary original civil jurisdiction shall be heard and disposed of by the Commercial Division of that High Court: Provided that all suits and applications relating to commercial disputes, stipulated by an Act to lie in a court not inferior to a District Court, and filed or pending on the original side of the High Court, shall be heard and disposed of by the Commercial Division of the High Court: Provided further that all suits and applications transferred to the High Court by virtue of sub-section (4) of section 22 of the Designs Act, 2000 (16 of 2000) or section 104 of the Patents Act, 1970 (39 of 1970) shall be heard and disposed of by the Commercial Division of the High Court in all the areas over which the High Court exercises ordinary original civil jurisdiction”.
7. Commercial Divisions are to be set up in High Courts that are already having ordinary original civil jurisdiction having one or more Benches consisting of a Single Judge having experience in dealing with commercial disputes for exercising powers under the Act. As per Section 7(1) and the proviso thereto, Commercial Division will hear and dispose of all suits and applications relating to commercial disputes of a specified value, that lie in a court not inferior to district court and filed in a High Court having ordinary original civil jurisdiction and also those cases transferred to High Court under Section 22(4) of the Designs Act, 2000 or under Section 104 of the Patents Act, 1970.
8. Section 5 of the Act deals with the Constitution of Commercial Appellate Division. Section 5(1) of the Act reads as under:- “5. Constitution of Commercial Appellate Division. – (1) After issuing notification under sub-section (1) of section 3 or order under sub-section (1) of section 4, the Chief Justice of the concerned High Court shall, by order, constitute Commercial Appellate Division having one or more Division Benches for the purpose of exercising the jurisdiction and powers conferred on it by the Act. ………” AMBALAL SARABHAI ENTERPRISES LTD. v. K. S. INFRASPACE LLP & ANR. [R. BANUMATHI, J.] In terms of Section 5(2) of the Act, the Chief Justice of the High Court shall nominate such Judges of the High Court who have experience in dealing with commercial disputes to be Judges of the Commercial Appellate Division.
9. Section 2(1)(c) defines “commercial dispute” as under:- “2. Definitions. – (1) In this Act, useless the context otherwise requires,- ………. (c) “Commercial dispute” means a dispute arising out of- (i) ordinary transaction 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 agreement; (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 resource including electromagnetic spectrum; (xx) insurance and re-insurance; (xxi) contract 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 commercial dispute merely because- (a) it also involves action for recovery of immovable property or for realising 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 or any of its agencies or instrumentalities, or a private body carrying out public functions; (d) “Commercial Division” means the Commercial Division in a High Court constituted under sub-section (1) of section 4; (e) “District Judge” shall have the same meaning as assigned to it in clause (a) of Article 236 of the Constitution of India: (f) “Document” means any mater expressed or described upon any substance by means of letters, figures or marks, or electronic means, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matters; (g) “Notification” means a notification published in the Official Gazette and the expression “notify” with its cognate meanings and grammatical variations shall be construed accordingly; AMBALAL SARABHAI ENTERPRISES LTD. v. K. S. INFRASPACE LLP & ANR. [R. BANUMATHI, J.] (h) “schedule” means the Schedule appended to the Act; and (i) “Specified Value”, in relation to a commercial dispute, shall mean the value of the subject matter in respect of a suit as determined in accordance with section 12 [which shall not be less than three lakh rupees] or such higher value, as may be notified by the Central Government.” [Subs. by Act 28 of 2018, sec. 4(II), for “which shall not be less than one crore rupees” (w.r.e.f. 3-5-2018)].
10. As noted above, clause (i) of Section 2 of the Act defines “Specified Value”, in relation to a commercial dispute, shall mean the value of the subject matter in respect of a suit as determined in accordance with section 12 [which shall not be less than three lakh rupees] or such higher value, as may be notified by the Central Government”. Section 12 provides for criteria for valuation of the suit, application or appeal for the purpose of the Act.
11. A matter will fall under the jurisdiction of the Commercial Court or the Commercial Division of the High Court on the following factors:- (i) it shall be a commercial dispute within the meaning of Section 2(1)(c) of the Act; and (ii) such commercial disputes are of a specified value as per Section 2(i) of the Act.
12. As per Section 11 of the Act, notwithstanding anything contained in the Act, a Commercial Court or a Commercial Division shall not entertain or decide any suit relating to any commercial dispute in respect of which the jurisdiction of the civil court is either expressly or impliedly barred under any other law for the time being in force.
13. Section 15 of the Act deals with transfer of pending cases. Section 15 of the Act reads as under:- “15. Transfer of pending cases. – (1) All suits and applications, including applications under the Arbitration and Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute of Specified Value pending in a High Court where a Commercial Division has been constituted, shall be transferred to the Commercial Division. (2) All suits and applications, including applications under the Arbitration and Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute of a Specified Value pending in any civil court in any district or area in respect of which a Commercial Court has been constituted, shall be transferred to such Commercial Court: Provided that no suit or application where the final judgment has been reserved by the Court prior to the constitution of the Commercial Division or the Commercial Court shall be transferred either under sub-section (1) or sub-section (2). ………”.
14. Insofar as transferred cases, as per Section 15(4) of the Act, the Commercial Division or Commercial Court shall prescribe new timelines or issue further directions for speedy and efficacious disposal of such suit or application in accordance with Order XVA of the Code of Civil Procedure. New time period for filing written statement shall be prescribed and the proviso to sub-rule (1) of rule 1 of Order V of the Code of Civil Procedure shall not apply to the transferred cases and the Court may, in its discretion, prescribe a new time period within which the written statement shall be filed.
15. The preamble of the Commercial Courts Act, 2015 reads as under:- “An Act to provide for the constitution of Commercial Courts, Commercial Appellate Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of specified value and matters connected therewith or incidental thereto.”
16. The Statement of Objects and Reasons of the Commercial Courts Act reads as under:- “Statement of Objects and Reasons The proposal to provide for speedy disposal of high value commercial disputes has been under consideration of the Government for quite some time. The high value commercial disputes involve complex facts and question of law. Therefore, there is a need to provide for an independent mechanism for their early resolution. Early resolution of commercial disputes shall AMBALAL SARABHAI ENTERPRISES LTD. v. K. S. INFRASPACE LLP & ANR. [R. BANUMATHI, J.] create a positive image to the investor world about the independent and responsive Indian legal system. ………. 6. It is proposed to introduce the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 to replace the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance, 2015 which inter alia, provides for the following namely:- (i) constitution of the Commercial Courts at District level except for the territory over which any High Court is having ordinary original civil jurisdiction; (ii) constitution of the Commercial Divisions in those High Courts which are already exercising ordinary civil jurisdiction and they shall have territorial jurisdiction over such areas on which it has original jurisdiction; (iii) constitution of the Commercial Appellate Division in all the High Courts to hear the appeals against the Orders of the Commercial Courts and the Orders of the Commercial Division of the High Court; (iv) the minimum pecuniary jurisdiction of such Commercial Courts and Commercial Division is proposed as one crore rupees; and (v) to amend the Code of Civil Procedure, 1908 as applicable to the Commercial Courts and Commercial Divisions which shall prevail over the existing High Courts Rules and other provisions of the Code of Civil Procedure, 1908 so as to improve the efficiency and reduce delays in disposal of commercial cases. ………” The object and purpose of Commercial Courts Act is to ensure that the Commercial Courts, Commercial Appellate Courts, Commercial Division and Commercial Appellate Division of the High Courts dispose of commercial cases expeditiously, fairly and at reasonable cost to the litigant. 17. Section 13 deals with appeals from decrees of Commercial Courts and Commercial Divisions. As per Section 14 of the Act, the Commercial Appellate Court and the Commercial Appellate Division shall endeavour to dispose of appeals filed before it within a period of six months from the date of filing of such appeal. Fast Track Procedure for deciding the Commercial Disputes 18. As per Section 16 of the Act, the provisions of the Code of Civil Procedure as amended under the Act, shall apply in the trial of suit in respect of a commercial dispute of a specified value. Section 16 of the Act reads as under:- “16. Amendments to the Code of Civil Procedure, 1908 in its application to commercial disputes. – (1) The provisions of the Code of Civil Procedure, 1908 (5 of 1908) shall, in their application to any suit in respect of a commercial dispute of a Specified Value, stand amended in the manner as specified in the Schedule. (2) The Commercial Division and Commercial Court shall follow the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, in the trial of a suit in respect of a commercial dispute of a Specified Value. (3) Where any provision of any rule of the jurisdictional High Court or any amendment to the Code of Civil Procedure, 1908 (5 of 1908), by the State Government is in conflict with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, the provisions of the Code of Civil Procedure as amended by this Act shall prevail”. 19. The Schedule to the Commercial Courts Act amends various provisions of the Code of Civil Procedure and thereby makes significant departure from the Code. After Order XIII of the Code, Order XIIIA – “Summary Judgment” has been inserted. Order XIIIA contains the scope and classes of suits to which Order XIIIA applies, grounds for summary judgment, procedure to be followed, evidence for hearing of summary judgment, orders that may be made by Court in such proceedings for summary judgment, etc. After Order XV of the Code, Order XVA–”Case Management Hearing” has been inserted. Order XVA provides for first Case Management Hearing (Rule 1); recording of oral evidence on a day-to-day basis (Rule 4); powers of the Court AMBALAL SARABHAI ENTERPRISES LTD. v. K. S. INFRASPACE LLP & ANR. [R. BANUMATHI, J.] in a Case Management Hearing (Rule 6); adjournment of Case Management Hearing (Rule 7); consequences of non-compliance with orders (Rule 8). By way of amendment, several rules have been incorporated to make the matters of commercial disputes on fast track. In Order XX of the Code – “Judgment”, Rule 1 has been substituted that within ninety days of the conclusion of arguments, the Commercial Court/Commercial Division/Commercial Appellate Division to pronounce the judgment and copies thereof shall be issued to all the parties to the dispute through electronic mail or otherwise. 20. Various provisions of the Act namely Case Management Hearing and other provisions makes the court to adopt a pro-active approach in resolving the commercial dispute. A new approach for carrying out case management and strict guidelines for completion of the process has been introduced so that the adjudicatory process is not delayed. I have referred to the various provisions of the Act and the Schedule bringing in amendments brought to the Civil Procedure Code to deal with the commercial disputes, only to highlight that the trial of the commercial dispute suits is put on fast track for disposal of the suits expeditiously. Various provisions of the Act referred to above 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 Reasons, words such as ‘early’ and ‘speedy’ have been incorporated and reiterated. The object shall be fulfilled only if the provisions of the Act are interpreted in a narrow sense and not hampered by the usual procedural delays plaguing our traditional legal system. 22. 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. 23. On 03.11.2017, a Memorandum of Understanding was executed between the appellant-plaintiff, respondent-defendant and Ketan Bhailalbhai Shah-second respondent. As per the terms of MOU, parties executed a Deed of Conveyance of the land. A mortgage deed was executed simultaneously along with the MOU with respect to the part of the land admeasuring 15,000 sq.ft. in favour of the plaintiff. It was understood between the parties that respondent No.1 would apply for change of land use permission for the land in question on signing of the MOU. Mortgage deed was executed by respondent No.1 in favour of the appellant in order to ensure performance of obligations under the MOU. But the said mortgage deed was not presented for registration. 24. It appears that the trial court has proceeded under the footing that the parties to the suit more particularly, the appellant-plaintiff seems to be carrying on business as Estate Agent and to manage land, building, etc. and the very object as enumerated in Memorandum and Articles of Association of the appellant-plaintiff company established that the property in question are being used exclusively in trade or commerce rather in the business of the plaintiff. As rightly pointed out by the High Court, there is nothing on record to show that at the time when agreement to sell came to be executed in 2012, the property was being exclusively used in trade and commerce so as to bring dispute within the ambit of sub-clause (vii) of Section 2(1)(c) of the Act. Merely because, the property is likely to be used in relation to trade and commerce, the same cannot be the ground to attract the jurisdiction of the Commercial Court. AMBALAL SARABHAI ENTERPRISES LTD. v. K. S. INFRASPACE LLP & ANR. [R. BANUMATHI, J.] 25. In the case of Ujwala Raje Gaekwar v. Hemaben Achyut Shah 2017 SCC Guj 583, a Special Civil Suit No.533/2011 was instituted for declaration that the sale deed valued at Rs.17.76 crores executed by the appellant-original defendant No.1 in favour of respondent No.4 be declared illegal and also, for permanent injunction with respect to the land in question. The appellants-defendants thereon filed an application that in sale deed, it has been clearly mentioned that the agreement relating to immovable property used exclusively in trade or commerce and falls within the meaning of Section 2(1)(c)(vii) of the Commercial Courts Act and that the matters above, the value of rupees one crore are to be transferred to the Commercial Court. Trial court rejected the said application which was challenged before the Gujarat High Court. The Gujarat High Court held that the aim, 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, and if such a suit which is as such arising out of the probate proceedings and/or is dispute with 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 the object for the establishment of the Commercial Division/ Commercial Courts shall be frustrated. 26. In Vasu Healthcare Private Limited v. Gujarat Akruti TCG Biotch Limited & Another 2017 SCC OnLine Guj 724, referred to in extenso by my learned Brother, it was held that “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”. We entirely agree with the above purposive interpretation adopted by the Gujarat High Court. 27. The object and purpose of the 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 litigants. Keeping in view the object and purpose of the establishment of the Commercial Courts and fast tracking procedure provided under the Act, the statutory provisions of the Act and the words incorporated thereon are to be meaningfully interpreted for quick disposal of commercial litigations so as to benefit the litigants especially those who are engaged in trade and commerce which in turn will further economic growth of the country. On the above reasonings, I agree with the conclusion arrived at by my esteemed brother Justice A.S. Bopanna. Nidhi Jain Appeal dismissed. AMBALAL SARABHAI ENTERPRISES LTD. v. K. S. INFRASPACE LLP & ANR. [R. BANUMATHI, J.]