Jurisdiction of Commercial Court : Nature of the Transaction is Determining Factor
The Division Bench of Delhi High Court rules that the nature of the transaction, not the property, determines jurisdiction under the Commercial Courts Act, 2015.
News Report:
In a significant judgment, the Delhi High Court has set aside an order by the Commercial Court that dismissed an execution application filed by M/S Chopra Marketing Private Limited against M/s Drishticon Properties Private Limited, ruling that the dispute indeed falls under the definition of a commercial dispute per the Commercial Courts Act, 2015.
The case revolves around a transaction concerning an Agreement to Sell dated July 18, 2006, which initially appeared to pertain to a residential property. However, upon closer examination by the courts, it was revealed that the agreement was, in substance, a collateral security for a commercial loan transaction amounting to Rs. 94,00,000 between the parties.
The Commercial Court had dismissed the execution application on May 17, 2024, citing lack of jurisdiction due to the residential nature of the property involved. The court interpreted Section 2(1)(c)(vii) of the Commercial Courts Act, which pertains to agreements involving immovable properties used exclusively in trade and commerce, to argue that the dispute did not qualify as a commercial dispute.
However, the Division Bench of the Delhi High Court, comprising Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, clarified that the core of the dispute lies in its nature as a financial arrangement, thereby qualifying it as a commercial dispute under Section 2(1)(c)(i) of the Act. This section includes ordinary transactions of merchants, bankers, financiers, and traders.
The High Court emphasized that the underlying transaction, and not the nature of the property, determines jurisdiction under the Commercial Courts Act. The judgment notes that the property's role was merely collateral for securing loan repayment, and the dispute had previously been treated as commercial in prior proceedings under the Arbitration and Conciliation Act, 1996.
The court's decision reaffirms the interpretation that the true nature of a transaction, when characterized as commercial, should guide jurisdictional determinations. It also underscores the role of executing courts, which cannot re-evaluate the transaction's nature once it has been conclusively determined in prior legal proceedings.
The ruling directs the Commercial Court to proceed with the execution application, marking a pivotal moment in the interpretation and application of the Commercial Courts Act, 2015.
Bottom Line:
Commercial Courts Act, 2015 - Determination of "commercial dispute" - Nature of the transaction, rather than the nature of the property, is determinative of jurisdiction under the Act.
Statutory provision(s): Commercial Courts Act, 2015 Sections 2(1)(c)(i), 2(1)(c)(vii), 6; Code of Civil Procedure, 1908 Section 47; Arbitration and Conciliation Act, 1996 Sections 34, 37.
