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Disputes arising from agreements relating to property used solely for ‘Trade and Commerce’ will constitute “Commercial Disputes”: Gujarat High Court

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The Gujarat High Court on 10th June 2022 ruled that the key factor in determining whether a property dispute is a “commercial dispute” under the Commercial Courts Act, 2015 is that the property in question is being used “exclusively” in trade or commerce, through the division bench of Justice N. V. Anjaria and Justice Samir J. Dave in the case of M/S Kushal Ltd. through Auto Sign. & Managing Director Mr Yogesh Ghanshyambhai Patel vs M/S Tirumala Technocast Private Limited. (Special Civil Application No. 3572 of 2022).

 

FACTS OF THE CASE:

The original Defendant (Petitioner herein) filed this application to challenge the order of the Commercial Court in a civil suit, that rejected its application for return of plaint under Order VII Rule 10 of the CPC. The primary question was whether the parties were involved in a “commercial dispute” or not.

According to the facts of the present case, the original plaintiff (Respondent herein) purchased a property from the Petitioner-Defendant through a sale deed in 2019. The defendant was said to have originally used the property as a business warehouse. Following that, to allow Defendant to find a new address for its business, the parties executed a Leave and License Agreement for a monthly licence fee, which was due from Defendant.

When a dispute arose over the payment of the monthly licence fee, a legal notice was sent to Defendant requesting the return of suit property, but Defendant continued to reside on the property’s premises. As a result, Plaintiff filed a suit for a permanent injunction. Defendant also filed an application under Order VII Rule 10 of the CPC, contending that Plaintiff’s plaint could not have been heard in commercial court because it did not involve a commercial dispute. The commercial court ruled that the suit involved a “commercial dispute” within the meaning of the Commercial Courts Act, and this decision was appealed to the Gujarat High Court in the present case.

The Petitioner- Defendant’s main argument was that because the prayer was for the recovery of immovable property, it could not be considered a commercial suit because other characteristics of a commercial dispute were missing. In the matter of Ambalal Sarabhai Enterprises Limited vs. K. S. Infraspace LLP and Others [(2020) 15 SCC 585], the premises should be utilised only for trade, commerce, and business. The Agreement, on the other hand, stated that the premises would be “used for industrial purposes.” If that is the case, it cannot be stated that it was submitted for exclusive use.

JUDGEMENT:

The Bench stated that a commercial dispute does not cease to be a commercial dispute just because it involves the recovery of immovable property or the realisation of money from such property. In this case, it was obvious that Defendant was utilising the suit property as a warehouse for its business. The Court stated that the criteria that the property is genuinely utilised for trade or commerce and business purposes as a warehouse are fulfilled in the present case. Later, Defendant urged Plaintiff to accept the suit property on a Leave and License basis so that Defendant may find a new location for its business operations.

The Bench paid reliance upon Ambalal Sarabhaito’s case and observed that when the plaintiffs’ godown was rented on a fixed rent by the defendant, and the suit claim and relief sought pertained to damages arising out of such subject transaction, the dispute arising therefrom becomes a ‘commercial dispute’ within the meaning of Section 2(1) (c) of the Act.

As a result, the Bench upheld the commercial court’s decision and determined that the suit fulfilled the material elements of a “commercial dispute.”

Accordingly, the petition was dismissed.

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JUDGEMENT REVIEWED BY NIDHI KUMAR

 

 

Read the full judgement.

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