VARANIUM CLOUD LIMITED vs ROLTA PRIVATE LIMITED - 2024 Supreme(Online)(Bom) 6628

Headnote:(A) Commercial Courts Act, 2015 - Section 2(1)(c)(i) - Definition of commercial dispute - Code of Civil Procedure, 1908 - Order VII Rule 10 - Return of plaint - Summary Suit - Section 12A - Pre-suit mediation.

(B) The dispute must arise out of ordinary transactions of merchants, bankers, financiers and traders within the meaning of Section 2(1)(c)(i) of the Commercial Courts Act, 2015. The term “ordinary” connotes normal, usual or regular course of business. A singular transaction not falling within the ordinary business activity of the plaintiff, even if authorized by its memorandum of association, does not constitute a commercial dispute. The provisions of the Act are to be strictly construed; only genuine commercial disputes of specified value are to be tried in the Commercial Division. (Paras 19, 21, 23, 24, 26, 27)

(C) Exemplary costs may be imposed for frivolous applications aimed at delaying progress of a suit. (Para 30)

Facts of the case:
The plaintiff, a company engaged in providing leasing services, had advanced a loan to another company and later entered into an agreement dated 7th July 2023 with the defendant for assignment of that debt for Rs.800 crores. The defendant failed to pay, and the plaintiff filed a summary suit in the Ordinary Original Civil Jurisdiction of the Bombay High Court. The defendant filed an interim application under Order VII Rule 10 CPC seeking return of the plaint to the Commercial Division, contending that the dispute was a commercial dispute under Section 2(1)(c)(i) of the Commercial Courts Act, 2015. The plaintiff opposed, asserting that its ordinary business was leasing, not financing or trading, and the assignment was a singular transaction.

Findings of Court:
The court held that the plaintiff’s normal business activity is providing leasing services, and the assignment of debt was not an ordinary transaction of a financier or trader. Even if the memorandum of association authorized such activity, the singular nature of the transaction did not make it an ordinary transaction of a merchant, banker, financier or trader. Consequently, the dispute did not fall within the definition of commercial dispute under Section 2(1)(c)(i) and was not triable by the Commercial Division. The defendant’s application was also found to be a dilatory tactic.

Issues: Whether a dispute arising from a single transaction of assignment of debt by a company whose ordinary business is leasing services constitutes a commercial dispute under Section 2(1)(c)(i) of the Commercial Courts Act, 2015.

Ratio Decidendi: For a dispute to be a commercial dispute under Section 2(1)(c)(i), it must arise from the ordinary transactions of merchants, bankers, financiers or traders. The ordinary business of a company is determined by its main activities, not by isolated transactions that may be authorized by its objects clause. A singular transaction of assignment of debt, where the company’s core business is leasing, does not qualify as an ordinary transaction of a financier or trader.

Result: Interim Application (L) No. 6341 of 2024 dismissed. Consequently, Interim Application (L) No. 3102 of 2024 also dismissed. Exemplary costs of Rs.5 lacs imposed on the defendants to be paid to the High Court Non Gazetted Ministerial Staff Association, Mumbai within two weeks.

Legal Category Hierarchy

1. Summary suit for recovery on assignment of debt – Defendant's application for return of plaint on ground it should be a commercial suit under Commercial Courts Act, 2015. (Para 1 , 14 )

2. Defendant submitted the dispute is commercial as plaintiff acted as financier; plaintiff countered it is not a commercial dispute as plaintiff's ordinary business is leasing services. (Para 2 , 8 )

3. Interim application rejected; related application dismissed; exemplary costs imposed. (Para 28 , 29 , 30 )

4. What constitutes an 'ordinary transaction of merchants, bankers, financiers and traders' under Section 2(1)(c)(i) of the Commercial Courts Act, 2015?

It requires that the plaintiff's normal or usual business activity falls within one of those categories; a single assignment of debt by a leasing company does not qualify. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 27 )

5. Should the definition of 'commercial dispute' in the Commercial Courts Act be interpreted strictly or liberally?

The definition must be strictly construed to avoid clogging commercial courts with non-commercial suits; liberal interpretation would defeat the Act's purpose of speedy disposal of genuine commercial disputes. (Para 23 , 24 , 26 )

6. Is the Memorandum of Association of a company determinative of whether a transaction is an 'ordinary transaction' for the purpose of defining a commercial dispute?

No. While the memorandum shows the company's objects, it does not make a single isolated transaction an ordinary transaction; the ordinary business of the company must be evaluated based on its regular activities. (Para 20 , 21 , 25 )

7. Can a defendant seek return of plaint under Order VII Rule 10 CPC on the ground that the suit should have been filed as a commercial suit, and can such application be considered a dilatory tactic?

Yes, such an application can be made, but if it is found to be a delay tactic, the court may dismiss it and impose exemplary costs. (Para 1 , 28 , 29 , 30 )

ORDER:-

1. This Interim Application seeks return of the Plaint under Order VII Rule 10 of the Code of Civil Procedure, 1908 (“CPC”) on the ground that the Summary Suit falls within the scope and ambit of the Commercial Courts Act, 2015 (the “said Act”) and has been incorrectly instituted as an Ordinary Summary Suit on the Ordinary Original Civil Jurisdiction of this Court, but ought to have been filed before the Commercial Division of this Court as a Commercial Summary Suit under the said Act.

2. Mr. Narvekar, learned Counsel appearing for the Applicant-Defendant No.1 would submit that considering that the Plaintiff No.1 had advanced the loan in the course of its business to Rolta India Limited having acted as a financier and then has sought to assign it to the Defendant No.1 viz the Applicant, is only acting as a Financier/Trader which falls within the definition of commercial dispute in terms of Section 2(1)(c)(i) of the said Act and that therefore, the Plaint should be returned to the Court in which it should have been instituted viz. the Commercial Court Division of this Court as a Commercial Summary Suit as the dispute set out in the Plaint is a commercial dispute of a specified value viz. more than Rs. 3 lacs.

3. Mr. Narvekar has submitted that in view of the dictionary meanings of the words Ordinary, Financier, Trader and Mercantile as appearing in Section 2(1)(c)(i) of the said Act, the present dispute is a commercial dispute. That the said term had to be seen in their expansive sense and not in the narrow sense in view of the use of the words arising out of Section 2(1)(c)(i) of the said Act.

4. Mr. Narvekar would submit that the Plaintiff No. 1 has acted as a financier and financed monies to Rolta India Limited, which was to be assigned to the Defendant No.1 and for purely commercial purposes as admitted in paragraph 4.3 of the Plaint. That the present dispute is of a specified value has been admitted by the Plaintiffs.

5. Mr. Narvekar would submit that if it is shown from the Plaint that the dispute is a commercial dispute of specified value then the suit has to be mandatorily tried as such by the Commercial Division of the High Court as the exclusive jurisdiction lies with the commercial division. Mr. Narvekar has taken this Court through the preamble to the said Act as well as Sections 4 , 7 and 15 of the said Act.

6. As noted above, Mr. Narvekar has relied upon the dictionary meanings of the words Ordinary, Transaction, Financer, Trader, Mercantile, Commerce in support of his submissions. In support of his contentions Mr. Narvekar has also relied upon the decisions in the following cases:-

i) State of Mysore Vs. T. V. Sundaram Iyengar¹1 (1980) 1 SCC 66

ii) M/s Doypack Systems Pvt. Ltd. vs. Union of India ²2 (1988) 2 SCC 299

iii) Ambalal Sarabhai Enterprises Ltd. Vs. K. S. Infraspace LLP & Anr.³3 (2020) 15 SCC 585

7. Mr. Narvekar would therefore submit that the Plaint be therefore returned under Order VII Rule 10 of the CPC to be filed before the Commercial Division of this Court.

8. On the other hand, Mr. Ankit Lohia, learned Counsel appearing for the Plaintiffs has opposed the said submissions. Mr. Lohia has submitted that the Application filed under Order VII Rule 10 is nothing but a dilatory tactic to prevent this Court from adjudicating the Suit.

9. Mr. Lohia would submit that this Interim Application is a delayed attempt to correct the false assumptions in Interim Applications (L) No. 3102 of 2024 which has been filed seeking dismissal of the Suit on account of the purported non-compliance with Section 12A of the said Act.

10. Mr. Lohia would submit that it is denied that the present Summary Suit falls within the ambit of the said Act as the said Act is only applicable to a Summary Suit with respect to a commercial dispute as defined under Section 2(1)(c)(i) of the said Act. That the subject dispute in the present Summary Suit does not fall within a ambit of “Commercial Disputes” as defined under the sai

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2024 Supreme(Online)(Bom) 6628

HIGH COURT OF BOMBAY
HON'BLE SHRI JUSTICE ABHAY AHUJA
VARANIUM CLOUD LIMITED – Appellant
Versus
ROLTA PRIVATE LIMITED – Respondent
IAL/6341/2024

A dispute does not qualify as a commercial dispute under Section 2(1)(c)(i) of the Commercial Courts Act unless it arises from the ordinary (normal/usual) transactions of merchants, bankers, financiers or traders; a singular transaction outside the plaintiff's core business is insufficient.

Legal Category Hierarchy

Table of Contents

4. What constitutes an 'ordinary transaction of merchants, bankers, financiers and traders' under Section 2(1)(c)(i) of the Commercial Courts Act, 2015?

5. Should the definition of 'commercial dispute' in the Commercial Courts Act be interpreted strictly or liberally?

6. Is the Memorandum of Association of a company determinative of whether a transaction is an 'ordinary transaction' for the purpose of defining a commercial dispute?

7. Can a defendant seek return of plaint under Order VII Rule 10 CPC on the ground that the suit should have been filed as a commercial suit, and can such application be considered a dilatory tactic?

2024 Supreme(Online)(Bom) 6628

HIGH COURT OF BOMBAYHON'BLE SHRI JUSTICE ABHAY AHUJAVARANIUM CLOUD LIMITED – AppellantVersusROLTA PRIVATE LIMITED – RespondentIAL/6341/2024

A dispute does not qualify as a commercial dispute under Section 2(1)(c)(i) of the Commercial Courts Act unless it arises from the ordinary (normal/usual) transactions of merchants, bankers, financiers or traders; a singular transaction outside the plaintiff's core business is insufficient.

Legal Category Hierarchy

Table of Contents

4. What constitutes an 'ordinary transaction of merchants, bankers, financiers and traders' under Section 2(1)(c)(i) of the Commercial Courts Act, 2015?

5. Should the definition of 'commercial dispute' in the Commercial Courts Act be interpreted strictly or liberally?

6. Is the Memorandum of Association of a company determinative of whether a transaction is an 'ordinary transaction' for the purpose of defining a commercial dispute?

7. Can a defendant seek return of plaint under Order VII Rule 10 CPC on the ground that the suit should have been filed as a commercial suit, and can such application be considered a dilatory tactic?

Cases Referred (5)

HIGH COURT OF BOMBAY
HON'BLE SHRI JUSTICE ABHAY AHUJA
VARANIUM CLOUD LIMITED – Appellant
Versus
ROLTA PRIVATE LIMITED – Respondent
IAL/6341/2024