Karnataka High Court
Mrs. Geeta Peter Khubani vs M/S Maxworth Realty on 4 October, 2023
Author: G.Narendar
Bench: G.Narendar
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COMAP No.188 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 4TH DAY OF OCTOBER, 2023
PRESENT
THE HON'BLE MR. JUSTICE G.NARENDAR
AND
THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
COMMERCIAL APPEAL NO.188 OF 2021
BETWEEN:
1. MRS. GEETA PETER KHUBANI
AGED ABOUT 67 YEARS
R/AT 14, SUNSET COURT
MOUNTUVILLE, NEW JERSEY-7045
NEW JERSEY, UNITED STATE OF AMERICA.
ALST AT B20, BHATIA BUILDING
MAHIM, MUMBAI-400016
(REPRESENTED BY HER POWER OF ATTORNEY
HOLDER MR. AJAY G. SAMAT).
Digitally signed ...APPELLANT
by RUPA V
(BY SRI. SHREYAS JAYASIMHA, ADV.,)
Location: HIGH
COURT OF AND:
KARNATAKA
1. M/S MAXWORTH REALTY
INDIA LIMITED
AT NO.12/2, KMP HOUSE
YAMUNABHAI ROAD
MADHAVANAGAR
BENGALURU-560001
REP. BY ITS CHAIRMAN
AND MANAGING DIRECTOR.
2. MR. KESHAV K
MR. KESHAV KOLAR
ALIAS K. KESHAV
ALIAS KESAVA K ALIAS KESHAV K
CHAIRMAN AND MANAGING DIRECTOR
M/S MAXWOTH REALTY INDIA LIMITED
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NC: 2023:KHC:36918-DB
COMAP No.188 of 2021
AT NO.12/2, KMP HOUSE
YAMUNABHAI ROAD
MADHAVANAGAR, BENGALURU-560001.
ALSO AT NO.22/1 RAILWAY
PARALLEL ROAD, NEHRU NAGAR
OPP. REDDY PETROL BUNK
BANGALORE-560020.
3. MR. SAGAR H.G. ALIAS
SAGAR GANGARAJU HUSSERAMANE
DIRECTOR
M/S MAXWOTH REALTY INDIA LIMITED
AT NO.12/2, KMP HOUSE
YAMUNABHAI ROAD
MADHAVNAGAR, BENGALURU-560001.
ALSO AT NO.203, 7TH CROSS
7TH MAIN, MEI LAYOUT
HESARAGHATTA MAIN ROAD
BEHIND BBMP OFFICE
BENGALURU-560073.
4. MRS. HEMALATHA K ALIAS
KESHAV HEMALATHA
DIRECTOR
56/2, IST D CROSS
MATHIKERE LAYOUT
BEHIND RELIABLE SCHOOL
BENGALURU-560001.
ALSO AT NO.562, IST D CROSS
MATHIKERE LAYOUT
BEHIND RELIABLE SCHOOL
BENGALURU-560054.
5. MRS. R. PRAVEENA
DIRECTOR
KMP HOUSE, NO.12/2, YAMUNA BAI ROAD
MADHAVANAGAR
BENGALURU-560001.
...RESPONDENTS
(BY SRI. SUSHAL TIWARI, ADV., FOR
SRI. NISHAN G.K. ADV.,)
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NC: 2023:KHC:36918-DB
COMAP No.188 of 2021
THIS COMAP/COMMERCIAL APPEAL IS FILED U/S 13(1)
OF THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND
COMMERCIAL APPELLATE DIVISION OF HIGH COURTS ACT,
2015, PRAYING TO CALL FOR THE LOWER COURT RECORDS IN
COMM.O.S.NO.350/2021 FILED BEFORE THE HON'BLE COURT
OF THE LXXXVIII ADDL. CITY CIVIL AND SESSIONS JUDGE,
COMMERCIAL COURT AT BENGALURU (CCH-89), CURRENTLY
PLACED BEFORE ADDL. CITY CIVIL AND SESSIONS JUDGE AT
BENGLAURU (CCH-02). ALLOW THE PRESENT APPEAL IN
FAVOUR OF THE APPELLANT BY SETTING ASIDE THE
IMPUGNED ORDER DATED 10/06/2021 PASSED BY THE
HON'BLE COURT OF THE LXXXVIII ADDL. CITY CIVIL AND
SESSIONS JUDGE, COMMERCIAL COURT AT BENGALURU (CCH-
89) IN COMM O.S.NO.350/2021 BACK TO LXXXVIII ADDL.
CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT AT
BENGALURU (CCH-89) FOR TRIAL AND ADJUDICATION.
GRANT SUCH OTHER RELIEF OR RELIEFS THAT THIS HON'BLE
HIGH COURT MAY DEEM FIT UNDER THE FACTS AND
CIRCUMSTANCES OF THE CASE TO SECURE THE ENDS OF
JUSTICE AND EQUITY.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,
VIJAYKUMAR A. PATIL J., DELIVERED THE FOLLOWING:
JUDGMENT
This Commercial appeal is filed under Section 13 (1) of the Commercial Courts Act, 2015 (hereinafter referred to as 'the Act') against the Order dated 10.06.2021 passed by the LXXXVIII Additional City Civil and Sessions Judge, Commercial Court, Bengaluru (hereinafter referred to as, 'the Commercial Court') in -4- NC: 2023:KHC:36918-DB COMAP No.188 of 2021 Comm.O.S.No.350/2021 wherein the Commercial Court has held that the suit filed by the appellant does not fall under the ambit of Section 2(c)(i) of the Act.
2. Sri.Shreyas Jayasimha, learned counsel appearing for the appellant submits that the Commercial Court has committed grave error in holding that the suit filed by the appellant is not a commercial dispute by incorrect interpretation of the provisions of the Act. It is submitted that the appellant-plaintiff has clearly pleaded in the plaint that the transaction between the parties is towards the business financial requirement, hence, the transaction is required to be considered as a commercial dispute and the commercial Court alone has the jurisdiction to try the suit. It is further submitted that on bare perusal of Section 2(c)(vii) of the Act that the disputes arising in respect of immovable properties used in a trade or a commerce are certainly commercial disputes and the explanation to the definition of commercial dispute -5- NC: 2023:KHC:36918-DB COMAP No.188 of 2021 further makes it clear that a commercial dispute shall not ceases to a commercial dispute merely because it is for realization of moneys out of the immovable property given as a security or involves any other relief pertaining to immovable property, hence, the Commercial Court has erred in understanding the provision of law correctly. It is also submitted that the respondent No.1-company is involved in the business of real estate and construction and the mortgaged properties are owned by the respondent-company hence, the dispute is a commercial dispute. The Commercial Court without appreciating the pleading and the documents on record has erred in holding that the dispute is not a commercial dispute. Hence, he seeks to allow the appeal by setting aside the impugned order.
3. Learned counsel for the respondent support the impugned order and submits that the agreement in question and the mortgage deed are entered for the -6- NC: 2023:KHC:36918-DB COMAP No.188 of 2021 purpose of obtaining the loan and there is no element of commercial dispute in the present case. Therefore, he seeks to dismiss the petition.
4. Having heard the learned counsel for the appellant and perused the material on record, it is evident that the appellant has filed a suit in O.S.No.350/2021 before the Commercial Court seeking prayer to direct the respondent to pay the plaintiff a sum of Rs.2,58,59,527/-
along with interest, further direction that the mortgage against the suit schedule property be executed and proceeded for the said property to the extent of Rs.2,58,59,527/- pay to the plaintiff in lieu of registered mortgage deed and addendum to the mortgage deed with interest.
5. On perusal of the plaint averments it is pleaded that the respondent No.1 had sought for financial assistance vide a loan agreement dated 21.01.2013 from -7- NC: 2023:KHC:36918-DB COMAP No.188 of 2021 the appellant and the appellants close acquaintance Mr.Ajay G.Samat to the tune of Rs.1,00,00,000/- to this end the appellant came to extend an amount of Rs.25,00,000/- out of the total amount sought and again the respondent No.1 approached appellant seeking financial assistance to meet its financial requirement and accordingly loan agreement dated 26.08.2013 came to be executed between the respondent No.1 and the appellant for a sum of Rs.1,10,00,000/- of which the appellant has extended Rs.20,00,000/-. Similar loan agreements were entered between the appellant and respondents for different transactions. It is further pleaded that the respondent has executed the deed of simple mortgage deed dated 21.04.2014. On close scrutiny of the pleading and the stipulations of documents on record i.e., loan documents and the mortgage deed, it is evident that the respondent has approached the appellant for loan of sum to meet his business financial requirements and he has agreed to repay the said loan with agreed interest. The -8- NC: 2023:KHC:36918-DB COMAP No.188 of 2021 mortgage deed reflects that it was executed as a security for repayment of advance principal amount received by the respondent to a sum mentioned in the mortgage deed.
The money referred in these instruments is advanced not on the property but the property referred are only as a security. The covenants of the instruments does not reflect that the agreements in question relates to immovable property used exclusively in trade or commerce. This Court is of the considered view that unless the dispute falls within the 22 enumerated classifications of Section 2(1)(c) of the Act, the dispute cannot be termed as commercial dispute for the purpose of jurisdiction of the Commercial Court. In order to appreciate the controversy, we would extract Section 2(1)(c) of the Act, which reads as under:
"2.(1)(c) "commercial dispute" means a dispute arising out of-
(i) ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;-9-
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(ii) export or import of merchandise or services;
(iii) issues relating to admiralty and maritime law;
(iv) transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same;
(v) carriage of goods;
(vi) construction and infrastructure contracts, including tenders;
(vii) agreements relating to immovable property used exclusively in trade or commerce;
(viii) franchising agreements;
(ix) distribution and licensing agreements;
(x) management and consultancy agreements;
(xi) joint venture agreements;
(xii) shareholders agreements;
(xiii) subscription and investment agreements pertaining to the services industry including outsourcing services and financial services;
(xiv) mercantile agency and mercantile usage;
(xv) partnership agreements;
(xvi) technology development agreements;
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 (xvii) intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits;
(xviii) agreements for sale of goods or provision of services;
(xix) exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum;
(xx) insurance and re-insurance;
(xxi) contracts of agency relating to any of the above; and (xxii) such other commercial disputes as may be notified by the Central Government.
Explanation.-- A commercial dispute shall not cease to be a commercial dispute merely because--
(a) it also involves action for recovery of immovable property or for realisation of monies out of immovable property given as security or involves any other relief pertaining to immovable property;
(b) one of the contracting parties is the State or any of its agencies or instrumentalities, or a private body carrying out public functions"
6. It will be useful to refer the decision of the Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprises Limited vs. K.S.Infraspace LLP and
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 another reported in (2020) 15 SCC 585, wherein the paragraph Nos.32 to 37 and 42 reads as under:
"32. Section 13 deals with appeals from decrees of Commercial Courts and Commercial Divisions. As per Section 14 of the Act, the Commercial Appellate Court and the Commercial Appellate Division shall endeavour to dispose of appeals filed before it within a period of six months from the date of filing of such appeal.
Fast Track Procedure for deciding the commercial disputes
33. As per Section 16 of the Act, the provisions of the Code of Civil Procedure as amended under the Act, shall apply in the trial of suit in respect of a commercial dispute of a specified value. Section 16 of the Act reads as under:
"16. Amendments to the Code of Civil Procedure, 1908 in its application to commercial disputes. --(1) The provisions of the Code of Civil Procedure, 1908 (5 of 1908) shall, in their application to any suit in respect of a commercial dispute of a specified value, stand amended in the manner as specified in the Schedule.
(2) The Commercial Division and Commercial Court shall follow the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, in the trial of a suit in respect of a commercial dispute of a specified value.
(3) Where any provision of any rule of the jurisdictional High Court or any amendment to the Code of Civil Procedure, 1908 (5 of 1908), by the State Government is in
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 conflict with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, the provisions of the Code of Civil Procedure as amended by this Act shall prevail."
34. The Schedule to the Commercial Courts Act amends various provisions of the Code of Civil Procedure and thereby makes significant departure from the Code. After Order 13 of the Code, Order 13-A -- "Summary Judgment" has been inserted. Order 13-A contains the scope and classes of suits to which Order 13-A applies, grounds for summary judgment, procedure to be followed, evidence for hearing of summary judgment, orders that may be made by Court in such proceedings for summary judgment, etc. After Order 15 of the Code, Order 15-A--"Case Management Hearing" has been inserted. Order 15-A provides for first case management hearing (Rule 1); recording of oral evidence on a day-to-day basis (Rule 4); powers of the court in a case management hearing (Rule 6); adjournment of case management hearing (Rule 7); consequences of non-compliance with orders (Rule
8). By way of amendment, several rules have been incorporated to make the matters of commercial disputes on fast track. In Order 20 of the Code --
"Judgment", Rule 1 has been substituted that within ninety days of the conclusion of arguments, the Commercial Court/Commercial Division/Commercial Appellate Division to pronounce the judgment and copies thereof shall be issued to all the parties to the dispute through electronic mail or otherwise.
35. Various provisions of the Act, namely, case management hearing and other provisions makes the court to adopt a pro-active approach in resolving the commercial dispute. A new approach for carrying out case management and strict guidelines for completion of the process has been introduced so that the adjudicatory process is not delayed. I have referred to the various provisions of
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 the Act and the Schedule bringing in amendments brought to the Civil Procedure Code to deal with the commercial disputes, only to highlight that the trial of the commercial dispute suits is put on fast track for disposal of the suits expeditiously. Various provisions of the Act referred to above and the amendments inserted to the Civil Procedure Code by the Schedule is to ensure speedy resolution of the commercial disputes in a time bound manner. The intent of the legislature seems to be to have a procedure which expedites the disposal of commercial disputes and thus creates a positive environment for investment and development and make India an attractive place to do business.
36. A perusal of the Statement of Objects and Reasons of the Commercial Courts Act, 2015 and the various amendments to the Civil Procedure Code and insertion of new rules to the Code applicable to suits of commercial disputes show that it has been enacted for the purpose of providing an early disposal of high value commercial disputes. A purposive interpretation of the Statement of Objects and Reasons and various amendments to the Civil Procedure Code leaves no room for doubt that the provisions of the Act require to be strictly construed. If the provisions are given a liberal interpretation, the object behind constitution of Commercial Division of Courts viz. putting the matter on fast track and speedy resolution of commercial disputes, will be defeated. If we take a closer look at the Statement of Objects and Reasons, words such as "early" and "speedy" have been incorporated and reiterated. The object shall be fulfilled only if the provisions of the Act are interpreted in a narrow sense and not hampered by the usual procedural delays plaguing our traditional legal system.
37. A dispute relating to immovable property per se may not be a commercial dispute. But it becomes a commercial dispute, if it falls under sub- clause (vii) of Section 2(1)(c) of the Act viz. "the
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 agreements relating to immovable property used exclusively in trade or commerce". The words "used exclusively in trade or commerce" are to be interpreted purposefully. The word "used" denotes "actually used" and it cannot be either "ready for use" or "likely to be used" or "to be used". It should be "actually used". Such a wide interpretation would defeat the objects of the Act and the fast tracking procedure discussed above.
38. On 3-11-2017, a Memorandum of Understanding was executed between the appellant- plaintiff, respondent-defendant and Ketan Bhailalbhai Shah, second respondent. As per the terms of MoU, parties executed a deed of conveyance of the land. A mortgage deed was executed simultaneously along with the MoU with respect to the part of the land admeasuring 15,000 sq ft in favour of the plaintiff. It was understood between the parties that Respondent 1 would apply for change of land use permission for the land in question on signing of the MoU. Mortgage deed was executed by Respondent 1 in favour of the appellant in order to ensure performance of obligations under the MoU. But the said mortgage deed was not presented for registration.
39. It appears that the trial court has proceeded under the footing that the parties to the suit more particularly, the appellant-plaintiff seems to be carrying on business as estate agent and to manage land, building, etc. and the very object as enumerated in Memorandum and Articles of Association of the appellant-plaintiff company established that the property in question is being used exclusively in trade or commerce rather in the business of the plaintiff. As rightly pointed out by the High Court, there is nothing on record to show that at the time when agreement to sell came to be executed in 2012, the property was being exclusively used in trade and commerce so as to bring dispute within the ambit of sub-clause (vii) of Section 2(1)(c) of the Act. Merely because, the
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 property is likely to be used in relation to trade and commerce, the same cannot be the ground to attract the jurisdiction of the Commercial Court.
40. In Ujwala Raje Gaekwar v. Hemaben Achyut Shah [Ujwala Raje Gaekwar v. Hemaben Achyut Shah, 2017 SCC OnLine Guj 583] , Special Civil Suit No. 533 of 2011 was instituted for declaration that the sale deed valued at Rs 17.76 crores executed by the appellant-original Defendant 1 in favour of Respondent 4 be declared illegal and also, for permanent injunction with respect to the land in question. The appellants-defendants thereon filed an application that in sale deed, it has been clearly mentioned that the agreement relating to immovable property used exclusively in trade or commerce and falls within the meaning of Section 2(1)(c)(vii) of the Commercial Courts Act and that the matters above, the value of rupees one crore are to be transferred to the Commercial Court. Trial court rejected the said application which was challenged before the Gujarat High Court. The Gujarat High Court held that the aim, object and purpose of establishment of Commercial Courts, Commercial Divisions and Commercial Appellate Divisions of the High Court is to ensure that the cases involved in commercial disputes are disposed of expeditiously, fairly and at reasonable cost to the litigant, and if such a suit which is as such arising out of the probate proceedings and/or is dispute with respect to the property are transferred to the Commercial Division/Commercial Court, there shall not be any difference between the regular civil courts and the Commercial Division/Commercial Courts and the object for the establishment of the Commercial Division/Commercial Courts shall be frustrated.
41. In Vasu Healthcare (P) Ltd. v. Gujarat Akruti TCG Biotech Ltd. [Vasu Healthcare (P) Ltd. v. Gujarat Akruti TCG Biotech Ltd., 2017 SCC OnLine Guj 724 : AIR 2017 Guj 153] , referred to in
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 extenso by my learned Brother, it was held that:
(SCC OnLine Guj para 33) "33. ... On plain reading of the relevant clause, it is clear that the expression "used"
must mean "actually used" or "being used". If the intention of the legislature was to expand the scope, in that case the phraseology used would have been different as for example, "likely to be used" or "to be used". The word "used" denotes "actually used" and it cannot be said to be either "ready for use" or "likely to be used"; or "to be used"."
We entirely agree with the above purposive interpretation adopted by the Gujarat High Court.
42. The object and purpose of the establishment of Commercial Courts, Commercial Divisions and Commercial Appellate Divisions of the High Court is to ensure that the cases involved in commercial disputes are disposed of expeditiously, fairly and at reasonable cost to the litigants. Keeping in view the object and purpose of the establishment of the Commercial Courts and fast tracking procedure provided under the Act, the statutory provisions of the Act and the words incorporated thereon are to be meaningfully interpreted for quick disposal of commercial litigations so as to benefit the litigants especially those who are engaged in trade and commerce which in turn will further economic growth of the country. On the above reasonings, I agree with the conclusion arrived at by my esteemed Brother A.S. Bopanna, J."
7. Keeping in mind the enunciation of law laid down by Hon'ble Supreme Court referred supra. In the case on hand, the transaction where the appellant has lent
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 the money to the respondent, and as a security the respondent has executed loan agreement and mortgage deed in his favour, the lending of money is towards meeting of the business requirements of the respondent.
However, that itself would not constitute the requirements of Section 2(1)(c)(vii) of the Act, the agreement should be relating to the immovable property used exclusively in a trade or commerce, the reference of word 'immovable property' should form the dominant purpose of the agreement out of which dispute arises. In the instant case the agreement is a loan agreement between the parties.
The property referred in the agreement is not used exclusively in a trade or commerce and it is purely a simple loan transaction between the parties. The transaction referred in the plaint and the documents referred supra are not the transaction of trade and commerce but it is lending and repayment of the money under the loan agreements and the mortgage deed.
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8. The definition of commercial dispute in the Act to mean a dispute arising or falling in any of the sub clauses of Section 2(1)(c) of the Act, the expression arising out of in the context of Clause (vii) refers to an agreement in relating to immovable property. The Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprises Limited vs. K.S.Infraspace LLP and another referred supra has held that the agreement relating to immovable property used exclusively in a trade or commerce. The words "used exclusively in a trade or commerce" are to be interpreted purposefully. The word "used" denotes actual use and it cannot be either ready for use or likely to be used or to be used. It should be actually used. Such a vide interpretation would defeat the object of the Act and the fast tracking of the procedure discussed above. Applying the above ratio of the Hon'ble Supreme Court to the case on hand, it is evident that the immovable property is not exclusively used in a trade or commerce, hence, contrary contentions and interpretation
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NC: 2023:KHC:36918-DB COMAP No.188 of 2021 of the appellant is without any merit. In the instant case, the dispute does not fall within the ambit of Section 2(1)(c) of the Act and the commercial Court has no jurisdiction to decide the suit. It would be a suit under Section 9 of the CPC. We do not find any error in the impugned order calling for interference in the present appeal. Accordingly, the appeal is rejected.
No order as to costs.
Sd/-
JUDGE Sd/-
JUDGE BSR