CONSEQUENCE OF FILING COMMERCIAL DISPUTE AS ORDINARY CIVIL SUIT?
The Commercial Courts Act, 2015 was brought in to remedy the prolonged judicial delays and encourage foreign investments by creation of specialized, fast-track courts for adjudication of commercial disputes. Consequently, the CC Act, 2015 has overall improved ease of doing business in India both for domestic and also for international businesses.
However, within the legal fraternity, confusion regarding which disputes would fall within the definition and ambit of a “commercial dispute” under Section 2(1)(c) of the CC Act,2015[6] continues to exist. Consequently, commercial disputes are often mistakenly filed before civil courts as ordinary civil suits, while ordinary civil disputes, at times, are erroneously presented as commercial suits before the Commercial Courts under the CC Act,2015.
The Supreme Court of India in ‘Ambalal Sarabhai Enterprises Ltd. vs. K.S. Infraspace LLP and Ors.’ ([1]), while dealing with a situation where an ordinary civil dispute was presented as a commercial suit before the commercial court had observed and held that such suit has to be transferred from the commercial court before the ordinary civil court under Order VII Rule 10 CPC[5].
Supreme Court in Ambalal;
“14. In that view it is also necessary to carefully examine and entertain only disputes which actually answers the definition "commercial disputes" as provided under the Act. In the instant case, as already taken note neither the agreement between the parties refers to the nature of the immovable property being exclusively used for trade or commerce as on the date of the agreement nor is there any pleading to that effect in the plaint…Therefore, if all these aspects are kept in view, we are of the opinion that in the present facts the High Court was justified in its conclusion arrived through the order dated 01.03.2019 impugned herein. The Commercial Court shall therefore return the plaint indicating a date for its presentation before the Court having jurisdiction”.
At the time when CC Act,2015 was enacted all disputes of commercial nature were to be filed before commercial courts only if the value of the subject matter in dispute was more than Rs. 1 Cr. in terms of 2(1) (i) of the CC Act, 2015. But later by amendment made in the year [7] the specified value was reduced to Rs. 3 lacs in order to give wider and broader application of the CC Act, for the benefit of the business people at large.
However, there may arise situations where commercial disputes are mistakenly filed as ordinary civil suits. The issue for consideration, therefore, is whether such ordinary civil suits can be transferred or simply returned to the concerned Commercial Courts for adjudication.
The answer to this issue stands clarified through the following judgments passed by Delhi High Court:
In Narendra Kumar vs. Om Daily Needs Retailing Pvt. Ltd. & Ors. [2](FAO (Comm) 92/2023/decided on 28.08.2023) and Virender Kumar vs. Rekha Bhayana[3] (CM(M) 842/2022 & CM APPL. 36582/2022/decided on 25.08.2022), Delhi High Court had observed that, at first impression, it may appear that a commercial dispute filed as an ordinary civil suit could also be transferred to the Commercial Court on the basis of the approach adopted by the Supreme Court in Ambalal Sarabhai in a reverse situation.
However, the Delhi High Court in both the above-mentioned caselaws has specifically observed that the approach laid down by Supreme Court in Ambalal Sarabhai cannot be followed in an opposite situation, as commercial suits are mandatorily required to be filed in strict compliance with the provisions of the CC Act, which are mandatory in nature and cannot be overlooked or ignored. Once a commercial dispute is presented as a civil suit before an ordinary civil court, the mandatory requirement of undergoing pre-institution mediation as prescribed under Section 12A of the CC Act gets bypassed. Moreover, other procedural requirements, such as signing on each page of the pleadings and filing of the Statement of Truth, may also get ignored under the ordinary civil suit filing procedure. Thus, if such suits are simply transferred to the Commercial Courts, the mandatory requirements prescribed under the CC Act stand overlooked and bypassed. For this reason, law is very clear on this point that when a commercial dispute is filed as ordinary civil suit, the only remedy available to the plaintiff is to file a fresh commercial suit after complying with all mandatory requirements as prescribed under the CC Act, 2015.
Delhi High Court in Narendra Kumar;
“13. In the present case, the Suit had been filed as a regular Civil Suit in respect of a dispute which is indisputably a commercial dispute. The moot question is whether the Civil Suit so filed before the learned ADJ could have been transferred to the Commercial Court…
“15…The perusal of the plaint would also show that it did not meet the parameters of a commercial suit and was not supported with a Statement of Truth. Moreover, Section 12A of the CCA, 2015 provides for the Pre-Institution Mediation which was introduced with effect from 03.05.2018. The present suit has not complied with Section 12A CCA, 2015 requirement which was mandatory in nature…”
“18. In the present case, though the case had been transferred from the Court of learned ADJ to the Court of Commercial Judge, but that procedure was incorrect as the suit did not meet the requirements of a Commercial Suit. The learned Judge Commercial Court has therefore, rightly returned the suit to be filed in the appropriate format before the competent Commercial Court”…
The legal position has more become clearer in ‘Namita Gupta vs. Suraj Holdings Ltd.’ [4](CM(M) 457/2023 & CM APPL. 13615/2023/decided on 08.11.2023) in this case, the order passed by Ld. Principle and District Judge was challenged on the ground that district court has erred in transferring the plaint from ordinary civil court to commercial court. The Delhi High Court had observed that there was no such power vested with the Ld. District and Sessions Judge to transfer the Suit before the Commercial Court and the only recourse available with the district court would be to return the plaint which is required to be re-filed in the appropriate format before the competent Commercial Court.
Delhi High Court in Namita Gupta;
“60. Therefore, once it is accepted that a Suit, which though relates to a Commercial Dispute of a Specified Amount, is filed as an ordinary Suit before a Civil Court, the plaint, under Order VII Rule 10 CPC, shall be returned to the plaintiff to present the same before the Commercial Court of appropriate jurisdiction, equally, either of the parties may invoke the provisions of Section 24 of the CPC to seek transfer of such a Suit.”
Moreover, in Namita Gupta, J. Navin Chawla had raised and discussed an interesting issue regarding the distinction between return of plaint under Order VII Rule 10 CPC and transfer of proceedings under Section 24 CPC. The Court observed that when a suit is returned under Order VII Rule 10 CPC, the proceedings before the transferee court have to commence afresh and all previous proceedings effectively become null and void. However, in situations, where a suit is transferred under Section 24 CPC, the transferee court may proceed from the stage at which the matter was transferred and the earlier proceedings do not become non-est.
The Court further held that where a commercial dispute is filed as an ordinary civil suit, the plaint ought to be returned under Order VII Rule 10 CPC and not transferred under Section 24 CPC, since the mandatory requirements prescribed under the CC Act, 2015 cannot be overlooked and are required to be strictly complied with, at the very stage of filing of pleadings.
Thus, an ordinary civil dispute wrongly filed before a Commercial Court may be transferred to an ordinary civil court. However, the same approach cannot ordinarily be followed in the reverse situation as the mandatory requirements prescribed under the CC Act, 2015 cannot be ignored. Therefore, such suits are required to be returned under Order VII Rule 10 CPC and re-filed before the competent Commercial Court after complying with all the mandatory requirements provided under the CC Act, 2015.