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2024 Supreme(Online)(ALL) 714
HIGH COURT OF ALLAHABAD
Hon'ble Shekhar B. Saraf,J.
Mamta Kapoor And Another – Appellant
Versus
Vinod Kumar Rai – Respondent
MATTERS UNDER ARTICLE 227 No. - 4127 of 2023 at Allahabad
Petitioner: Ujjawal Satsangi
Respondent: Mangal Rai , Pankaj Kumar Rai and Praveen Kumar Chaubey
Disputes arising out of agreements relating to immovable property used exclusively for trade or commerce fall within the definition of 'commercial disputes' under Section 2(1)(c)(vii) of the Commercial Courts Act, 2015.
Headnote:
Commercial Dispute - Hotel Management Agreement - Sections 2(1)(c)(vii) of the Commercial Courts Act, 2015
Fact of the Case:
The petitioners entered into a business agreement with the respondent to run and manage a hotel. Disputes arose between the parties, and the petitioners approached the Commercial Court. The Commercial Court dismissed the suit, holding that the hotel was not being used for trade or commerce, and hence the dispute did not fall under the ambit of the Commercial Courts Act, 2015.
Finding of the Court:
The High Court held that the agreement between the parties was for the exclusive purpose of business operation and management of the hotel, and hence any dispute arising out of the agreement would fall within the definition of a 'commercial dispute' under Section 2(1)(c)(vii) of the Commercial Courts Act, 2015. The Commercial Court's dismissal of the suit was erroneous.
Issues: Whether the dispute between the parties falls within the definition of a 'commercial dispute' under the Commercial Courts Act, 2015.
Ratio Decidendi: For a dispute arising out of an immovable property to be qualified as a commercial dispute, the immovable property must be actually used or being used for the purpose of 'trade or commerce', and the immovable property must be exclusively used for trade or commerce. The nature and purpose of the agreement between the parties, and not just the nomenclature used, should be considered to determine if the dispute is a 'commercial dispute'.
Final Decision: The High Court quashed the impugned order of the Commercial Court and directed the Commercial Court to hear the suit filed by the petitioners on merits.
1. The instant application under Article 227 of the Constitution of India has been preferred by Mamta Kapoor and Anurag Kumar Gupta (hereinafter referred to as ‘the Petitioners’) against the order dated January 17, 2023 passed by the Presiding Officer, Commercial Court, Varanasi in Misc. (Civil) Suit No. 375/2022. FACTS
2. I have laid down the factual matrix of the instant lis below:
a.
Petitioners and Vinod Kumar Rai (hereinafter referred to as ‘the Respondent’) entered into a business agreement on July 7, 2022 for running, operating and managing Hotel Niveditta, situated at B-30/1-A-1-D, Assi, Varanasi (hereinafter referred to as ‘the Hotel’).
b.
In pursuance of the aforesaid agreement, a total amount of Rs.30,00,000/- was to be paid by the Petitioners to the Respondent as security and the possession of the Hotel was to be taken over by the Petitioners. Thereafter, the Petitioners, approached the electricity department for verification of dues and to obtain appropriate electricity connection at the Hotel.
The Petitioners were informed about the requirement of the installation of a separate transformer at the Hotel for electricity supply. The Petitioners informed the Respondent about the said requirement and asked them to apply or obtain the necessary certification from the electricity department.
c.
However, disputes and differences arose between the parties and the Petitioners approached the Commercial Court, Varanasi.
d.
The Commercial Court, Varanasi vide order dated January 17, 2023 refused to entertain the suit filed by the Petitioners on the ground that since the Hotel was not being used for trade or commerce, the dispute cannot be considered as falling within the ambit of Section 2(1)(c)(vii) of the Commercial Courts Act, 2015 (hereinafter referred to as ‘the CC Act’).
e.
Aggrieved by the aforesaid order dated January 17, 2023, the Petitioners have preferred the instant application under Article 227 of the Constitution of India before this Court.
Contentions By The Petitioners
3. Shri Ujjawal Satsangi, learned counsel appearing for the Petitioners has made the following submissions before this Court:
a.
A perusal of the agreement between the parties would show that although the nomenclature used for referring it is “Rent Agreement” but the clauses therein refer to a business operation and management agreement.
b.
Clause 4 of the agreement between the parties specifies that the Petitioners will be permitted to use the premises of the Hotel only for running a hotel and for no other purpose. Moreover, Clause 18 further clarifies that the Petitioners were prohibited from keeping the Hotel closed for over a period of 15 days. It was further provided therein that if the Petitioners keep the Hotel closed for more than 15 days, then the Respondent would have the right to take over the Hotel and only if the Petitioners, upon notice, agree to run the Hotel, the agreement will continue otherwise it would be deemed that the Petitioners are not interest in running the Hotel and as such the agreement will be terminated. A combined reading of all these clauses goes on to show that though the nomenclature used in the agreement dated July 7, 2021 is “tenancy/rent”, the agreement is in the nature of operation and management of a hotel.
c.
It is apparent from the perusal of the facts and circumstances that the dispute in the instant case relates to a commercial dispute under Section 2(1)(c) of the CC Act and therefore, the Commercial Court was required to register the suit as a proper suit and thereafter afford an opportunity to the Petitioners to argue on merits.
d.
Rather than marking the suit as a Commercial Suit, as warranted under law, the Commercial Court, registered the suit as a Misc. Civil Case, which is an anomaly, and unrecognised under the eyes of law.
e.
Commercial Court incorrectly applied the law laid down by the Hon’ble Supreme Court in Ambalal Sarabhai Enterprises -v- KS Infraspace LLP reported in (2020) 15 SCC 585 to conclude that the Hotel w
