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Analysing the retrieved Case Laws
Scanned Judgements…!
In the fast-paced world of commerce, not every transaction is created equal. What might seem like a standard deal to one business could be scrutinized under the legal lens as outside the norm. A key phrase often invoked in contracts, bankruptcy proceedings, and commercial disputes is ordinary course of business. But what does it truly mean? This blog post breaks down the concept, drawing from judicial precedents and related cases to help you understand when a transaction qualifies—and when it doesn't.
Whether you're a business owner navigating daily operations or a legal professional advising clients, grasping this term can prevent costly missteps. We'll explore its definition, applications, exceptions, and practical tips, all while emphasizing that this is general information and not specific legal advice.
The term ordinary course of business refers to transactions that are part of the normal, usual, and routine operations of a business. These are activities occurring as an integral and undistinguished part of its ongoing commercial activities, without arising from any special or extraordinary circumstances. ANUJ JAIN INTERIM RESOLUTION PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VS AXIS BANK LIMITED ETC. ETC. - 2020 0 Supreme(SC) 191
In essence, it describes dealings that are habitual, systematic, and form part of the regular flow of business activities. The transaction must be consistent with the usual flow of business and not out of any particular or exceptional situation. ANUJ JAIN INTERIM RESOLUTION PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VS AXIS BANK LIMITED ETC. ETC. - 2020 0 Supreme(SC) 191
Judicial interpretations provide clarity on this concept. In Burns v. McFarlane, the court examined sub-s. 2(b) of s. 95 of the Bankruptcy Act, identifying three key issues: (1) good faith; (2) valuable consideration; and (3) ordinary course of business. The court clarified that the ordinary course does not require investigation into whether the dealings are normal or usual in the specific trade but rather whether they are part of the common, everyday flow of business. ANUJ JAIN INTERIM RESOLUTION PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VS AXIS BANK LIMITED ETC. ETC. - 2020 0 Supreme(SC) 191
Similarly, Downs Distributing Co. elaborated that transactions in the ordinary course are those that form part of the undistinguished common flow of business, not arising out of any special or particular situation. ANUJ JAIN INTERIM RESOLUTION PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VS AXIS BANK LIMITED ETC. ETC. - 2020 0 Supreme(SC) 191 This underscores that the transaction must align with the normal pattern of dealings typical to the business, avoiding anything extraordinary or isolated.
Even seemingly unusual activities can fall within the ordinary course if they are routine for the business. For instance, providing security or mortgaging assets may qualify if they are habitual and systematic parts of routine dealings. ANUJ JAIN INTERIM RESOLUTION PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VS AXIS BANK LIMITED ETC. ETC. - 2020 0 Supreme(SC) 191
However, context is crucial. In one case, mortgaging assets to secure debts of a holding company—amid financial distress and external pressure—was held not to be in the ordinary course because it fell outside the normal, undistinguished flow. ANUJ JAIN INTERIM RESOLUTION PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VS AXIS BANK LIMITED ETC. ETC. - 2020 0 Supreme(SC) 191 The core test remains: Does the transaction fit seamlessly into the undistinguished common flow of business, arising from routine dealings rather than exceptional situations?
This principle extends beyond bankruptcy. In commercial law, courts apply similar scrutiny. For example, under the Commercial Courts Act, 2015, disputes must qualify as 'commercial disputes' arising from actions in the course of business. A suit involving recovery of embezzled funds by an ex-employee was deemed not a 'business transaction' or one arising 'in the course of business,' as losses from theft or embezzlement do not constitute ordinary course activities. Ihhr Hospitality (Andhra) Pvt. Ltd. VS Seema Swami - 2022 Supreme(Del) 1754 The court noted: any loss on account of theft cannot be considered to be in the ordinary course of business transaction. Ihhr Hospitality (Andhra) Pvt. Ltd. VS Seema Swami - 2022 Supreme(Del) 1754
Not all dealings qualify. Transactions prompted by unusual circumstances—such as financial distress, pressure, or fraud—are typically excluded:
In agency law, an agent's authority is limited to every lawful thing necessary for the purpose, or usually done in the course of conducting such business. ASIA CAPITAL COMMODITIES TRADE SDN BHD vs THE OWNER OF THE VESSEL ORIENTAL DRAGON Actions beyond this habitual scope may not qualify.
Moreover, in misclassified suits under the Commercial Courts Act, courts have ruled that merely designating a suit as 'commercial' doesn't suffice if it lacks a true commercial dispute rooted in ordinary business. Such cases revert to ordinary civil jurisdiction. Prime Developers vs Prime Developers - 2025 Supreme(Bom) 1674
The concept permeates various domains:
In mergers or amalgamations, restrictions on alienating assets apply unless in the ordinary course or scheme-permitted, ensuring business continuity without extraordinary encumbrances. NEW INDIA SUGAR MILLS VS STATE OF U. P. - 2010 Supreme(All) 1406
These examples illustrate that while sector-specific, the test consistently hinges on routine, undistinguished flow.
To determine if a transaction is in the ordinary course:
Consulting legal experts for your specific situation is advisable, as courts evaluate on facts.
This framework equips you to navigate transactions confidently. For tailored advice, engage a qualified attorney. Stay informed, operate prudently, and keep your dealings in the ordinary course.
#OrdinaryCourseOfBusiness, #BusinessLaw, #LegalInsights
of ordinary business. ... Since the business of the assessee was not that of money lending, it cannot be said that the sum in question represents money lent in the ordinary course of the business of money lending carried on by the assessee. ... The alternative claim of the assessee that the sum in question should be allowed as a deduction as a business loss cannot also be accepted, since the sum in question was not incurred as expenditure in the ordinary#HL_....
of ordinary business. ... Since the business of the assessee was not that of money lending, it cannot be said that the sum in question represents money lent in the ordinary course of the business of money lending carried on by the assessee. ... The alternative claim of the assessee that the sum in question should be allowed as a deduction as a business loss cannot also be accepted, since the sum in question was not incurred as expenditure in the ordinary#HL_....
of ordinary business. ... Therefore, any loss on account of theft cannot be considered to be in the ordinary course of business transaction. 25. In Curtis v. ... It is absolutely evident that the nature of transaction and the recovery is sought on the averments of embezzled amounts which cannot be termed as a 'business transaction' or having arisen 'in the course of business'. ... In the said case the Company was in the business of ....
of ordinary business. ... Therefore, any loss on account of theft cannot be considered to be in the ordinary course of business transaction. 25. In Curtis v. ... It is absolutely evident that the nature of transaction and the recovery is sought on the averments of embezzled amounts which cannot be termed as a 'business transaction' or having arisen 'in the course of business'. ... In the said case the Company was in the business of ....
course of business. ... of ordinary business. ... Such monetary transaction in an ordinary course of business transacted by the merchants, bankers, financers and traders based upon a mercantile documents are regarded as a commercial transactions and a suit before the Commercial Court is maintainable. ... We, therefore, find no difficulty in considering that the mercantile document as an instrument by any other means coming within the ambit of the definition of a docum....
In the ordinary course the appellant comes to Hulftsdorp and argues his cases. An advocate interviews proctors, accepts retainers and does other legal work at Hulftsdorp. At stated times the appellant is available to his clients and proctors at Hulftsdorp. ... the course of his morning or evening round. ... which the appellant resorts in the course of carrying on his profession. ... It is conceded of course that a man may have a place of business, but that there may be no #HL_STA....
141(2) CA (An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business). ... (2) An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business. Section 142. ... An authority is said to be implied when it is to be inferred from the circumstances of the case; a....
As to whether or not he is a person 'who carries on the business of money lending, the only evidence is that of the plaintiff himself. He is a school teacher, and said " I lend money also ". In cross-examination he added "I do a small business in money lending. ... For the sake of convenience I will set out section 8, which is as follows: - "8 (1) A person who carries on the business of money lending, or who advertises or announces himself or holds himself out in any way as carrying on that business, shall keep....
This means that where a commercial organisation fails to prevent a person associated with the commercial organisation from giving or offering gratification to obtain or retain business or an advantage in the conduct of business for the commercial organisation, the commercial organisation may be liable ... for the commercial organization; or s 17A(4) of the Act, the legal issue would be addressed effectively during the course of the trial at the Sessions Court. ... PP [1974] 1 MLRH 63; [1974] 2 MLJ 48, the High Court held that inter alia t....
Of course, the discretion of the Court still remains under Section 89 of the CPC, to refer the parties to mediation, to work out an amicable settlement between the parties before embarking on the trial, subject of course, to the time-frame provided under the Act. 19. ... If the Commercial Court comes to a conclusion that a Suit has wrongly been filed as a commercial matter and the subject matter thereof is not a commercial dispute or vice versa, that the Suit has been filed as an ordinary Suit when it is a commercial Suit, the correct #HL....
The concern expressed by lenders of JAL is legally untenable 99-100 17. It means that the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation.”(emphasis supplied) 25.6.2. Taking up the transactions in question, we are clearly of the view that even when furnishing a security may be one of normal business practices, it would become a part of ‘ordinary course of business’ of a pa....
(A) if the same is in the ordinary course of business; (B) if the same is expressly permitted by this Scheme; or 7.With effect from the date of filing of this Scheme with the Hon’ble BIFR and upto and including the Effective Date, no assets of the Transferor Company shall be alienated, charged, mortgaged or encumbered and the Transferor Company shall carry on the business and activities not expressly prohibited herein with reasonable diligence and business prudence and shall not undertake any additional financial commitments or any nature whatsoever, borrow any amounts nor ....
i) As understood in the ordinary course of trade and business; iii) Finance Minister's speech referring to package tea only; So, to avoid redundancy the words 'put up in unit container with brand name' must be given a qualified meaning to include only package tea with such qualified meaning because of the following :
6. It is to be noted that expression used is "ordinary course of business". It is trite law that definition or interpretation given in respect of a particular entry has to be judged in the background of that statute itself and cannot always throw a guiding light in respect of other statutes. The expression "in the ordinary course, of business" relates to both "kept" or "used". Expression "in the ordinary course of business" means in the usual course of routine of business. the language used is definitely deficient and inappropriate. Be th....
The transactions with it took place in the ordinary course of business. The balance-sheet as on March 31, 1975, of Seema Traders is not an indication of its position as on September, 1970. All new assessees are assessed by the survey circle and hence assessment in that circle is not necessarily an indication that the assessee was of such a standing that no prudent man would do business with it. That there was a party called 'Seema Traders' in Cuttack is not denied.
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