Dispute Regarding Share Purchase Agreement Not Maintainable Before Commercial Court: Karnataka High Court

The Karnataka High Court has held that a dispute related to the recovery of money in regard to the share purchase agreement is not maintainable before the Commercial Court.

A single judge, Justice H T Narendra Prasad allowed the petition filed by Bhashakar Naidu challenging the order of the Commercial Court which had rejected its application filed under Order VII Rule 10 of the Civil Procedure Code, for returning the money recovery suit filed by Arvind Yadav.

The petitioner had argued that he is a shareholder of the company, and the respondent/plaintiff is a third party. There was an agreement between the petitioner and the respondent for the purpose of the sale of shares belonging to the petitioner. The agreement dated 09.10.2020 is only a Share Purchase Agreement and it is not a Shareholder Agreement. Therefore, the suit is not maintainable before the Commercial Court.

Further, it was submitted that as per Section 2(1)(c)(xii) of the Commercial Court's Act, only disputes related to the Shareholder Agreement are only maintainable before the Commercial Court and not disputes in respect of the Share Purchase Agreement.

Findings:

The bench noted that the petitioner/defendant is a shareholder of Bengaluru Fresh Fruits Pvt. Ltd. He wants to sell his shares to a third party. The respondent/plaintiff agreed to purchase the same. For that purpose, they have entered into an agreement dated 09.10.2020. The suit is filed for recovery of money in respect of Annexure-B, i.e., Share Purchase Agreement.

It referred to Section 2(1)(c) of the Act which defines “Commercial dispute”. Thus it held “The suit filed by the respondent/plaintiff before the Commercial Court is not maintainable. The trial court has erred in dismissing the application filed by the petitioner/defendant under Order VII Rule 10 of CPC.”

Allowing the petition it said, “Since the matter comes within the jurisdiction of the Principal City Civil and Sessions Judge, Bengaluru, the matter is remitted back to the Court of Principal City Civil and Sessions Judge, Bengaluru to re-allot the case to any other regular court, in accordance with law.”

Appearance: Senior Advocate Reuben Jacob for Advocate Sourabh R K for Petitioner.

Advocate Annaiah C V for Respondent.

Citation No: 2025 LiveLaw (Kar) 50

Case Title: Bhaskar Naidu and Arvind Yadav

Case No: WRIT PETITION NO. 6985 OF 2024

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