Commercial Courts Act Applies On Immovable Properties 'Actually & Exclusively Used' For Trade & Commerce: MP High Court

The Madhya Pradesh High Court has clarified that for a dispute to fall within the jurisdiction of the Commercial Courts Act, 2015 the immovable property in question must be "actually used" and "exclusively used" for the purpose of trade and commerce.

The bench of Justice G.S. Ahluwalia held:

Thus, 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 Commercial Courts Act viz. "the agreements relating to immovable property used exclusively in trade or commerce". The conclusion arrived at herein, 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, is agreed to. 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". 

The court applied purposive interpretation to uphold the objective of the Act, which is to ensure the speedy resolution of genuine high-value commercial disputes and to prevent the misuse of commercial jurisdiction in cases that do not strictly qualify under its provisions.

Background

The high court was hearing a revision plea challenging civil court's order which had dismissed the petitioner's application under Order 7 Rule 11 CPC seeking rejection of respondent's plaint. 

The respondent landlord had filed a civil suit for eviction of the petitioner-tenant from a shop (suit premises). The petitioner argued that since he was conducting business from the shop, the matter qualifies as a commercial dispute under Section 2(1)(c)(vii) of the CC Act. On this ground, the petitioner claimed that the plaint of the landlord should be rejected as the civil court does not have the jurisdiction to adjudicate the matter.

The respondent-landlord argued that merely using property for business does not make an eviction suit a commercial dispute. He sought eviction under Section 12 of the MP Accommodation Control Act. He relied on precedents to argue that routine landlord-tenant disputes, even involving commercial premises, do not automatically qualify as commercial disputes.

Findings

The court discussed the definition and scope of commercial disputes under Section 2(1)(c) of the Act, noting that it provides for “agreements relating to immovable property used exclusively in trade or commerce”. However, the court further clarified that in order to find out whether a dispute is commercial or not, there should be a conjoined reading of Sections 2(1)(c)(vii), 2(1)(i) and 12. Thus, the bench noted that only appeals, suits or applications related to commercial disputes of a specified value are to be tried by commercial courts. 

Relying on the Supreme Court's decision on Ambalal Sarabhai Enterprises Limited v K.S. Infraspace LLP, the court reiterated that only disputes that clearly meet the definition under Section 2(1)(c) should be tried in commercial courts. A purposive and strict interpretation of the Act was deemed necessary to ensure that only genuine high-value commercial matters are fast-tracked.

"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... 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". 

Relying on the interpretation by the Supreme Court, the court emphasized that the term 'used exclusively in trade and commerce' must be interpreted as 'actually used'- not 'likely to be used' or 'intended to be used'. Therefore, if the use of the property for trade is incidental or unsubstantiated at the time of the agreement, the commercial court cannot assume jurisdiction.

"Merely because suit shop is being used for running business, the question of eviction from said suit shop would not become commercial dispute", the court held.

In the case before it the court said that there was nothing on record to show that at the time when the agreement to sell came to be executed in 2012, the property was being exclusively used in trade and commerce so as to bring the dispute within the ambit of sub-clause (vii) of Section 2(1)(c) of the Commercial Courts 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," the court added.

Therefore, the court dismissed the revision plea noting that the trial court had not committed any mistake by rejecting the application filed under Order 7 Rule 11 CPC.

For Petitioner: Advocate Prakash Chandra Chandil

For Respondent: Advocate Sameer Kumar Shrivastava

Case Title: Mohit Sadana v Vijay Kumar Goyal (Civil Revision  No. 169 of 2024)

Click here to read the Judgment