Single Transaction Of Assignment Of Debt Not 'Commercial Dispute': Bombay HC Imposes Cost Of ₹5 Lakh On Plea For Return Of Plaint In Summary Suit

Varanium Cloud Ltd (applicant/defendant) filed an interim application for return of plaint on the ground that the suit was incorrectly instituted by Rolta Private Ltd (plaintiff) as an Ordinary Summary Suit. It argued that the suit was a Commercial Suit and thus ought to have been filed before the Commercial Court.

Rolta, which is engaged business of providing leasing services entered into an agreement with Varamium for assignment of debt. As per the agreement, Varamium would acquire Rolta's secured financial debt and pay Rs. 800 crore to Rolta as consideration.

Since Varanium failed to pay the amount, Rolta filed a summary suit seeking recovery of the amount along with interest.

Varanium had earlier filed an interim application for dismissal of suit on ground that Section 12A of CC Act, which prescribes mandatory pre-suit mediation, was not followed by Rolta. During the pendency of this application, Varanium filed the present application.

Varanium contended that the agreement of assigning Rolta's debt to Varamium was a commercial transaction arising out of the commercial contract and thus, a should be considered as a commercial dispute. However, Rolta opposed the plea that the suit was a commercial dispute and contended that the application was dilatory tactic by Varamium to prevent the court from adjudicating the suit.

A single judge Justice Abhay Ahuja referred to Section 2(1)(c) of the Commercial Courts Act (CC Act), which provides that 'commercial dispute' arises out of ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents including enforcement and interpretation of such documents.

Here, the Court stated that as Rolta is in the business of providing leasing services, it cannot be said that it is 'ordinarily' transacting as a merchant, banker, financier or trader.

“As noted above, the Plaintiff No.1 is in the business of providing leasing services and therefore, it cannot by any stretch of imagination be said that the Plaintiff No. 1 is ordinarily transacting as a merchant or as a banker or as a financier or a trader or ordinarily in such business.”

Varanium's counsel argued that the dictionary meaning of a commercial dispute means a dispute arising out of ordinary transactions of merchants, bankers or financiers or when a person lends a large amount of money to a business to other entity for a project or activity.

However, the Court rejected this argument and observed that the dictionary meaning does not even remotely describe the transaction of assignment of debt.

The Court referred to M/s Glasswood Realty Pvt. Ltd. Vs. Mrs. Chandravilas Kailashkumar Kothari (2021), where a single bench of the Bombay High Court observed that a solitary transaction of advancing a loan would not amount to an ordinary transaction of a financier.

Here, the Court observed that the assignment of debt was not the ordinary business of Rolta and that the assignment of debt to Varanium was a 'singular transaction'.

It further stated, “In my view, just because the dispute arises purportedly out of a contract which has been referred to as a commercial contract for the purposes of levying interest which has not been stated in the agreement cannot be used to say that the dispute arising out of a purported breach of the said contract is a commercial dispute, even if the transaction is a commercial one in a general sense as the dispute to be a commercial dispute has to arise out of the specific items listed in Section 2(1)(c)(i) to (xiii), which is not the case here.”

The Court thus held that the suit was not a commercial suit and dismissed Varanium's application for rejection of plaint. It also rejected the prior application under Section 12A of CC Act as objection to mandatory pre-suit mediation could only be taken up in a commercial suit.

Furthermore, on Varanium's application, the Court remarked that it was “quite surprising and rather curious” that Varanium as a defendant was persuading a court to register a summary suit as a commercial suit. It observed that this was ordinarily the concern of a plaintiff, who is interested in adjudication of its cases in a fast track manner.

The Court opined that as summary procedures entail expeditious disposal, Varanium's application was to delay the adjudication of summary suit.

It remarked, “Keeping in mind the objectives of the summary procedure under Order XXXVII of the CPC, so that cases falling in the specific classes of suits as specified in Rule 2 of Order XXXVII of the CPC, are disposed of expeditiously by following a summary procudure, I am of the view that the whole endeavour by the Defendants is to delay the progress of the Summary Suit. The very fact that this Application is filed after the Interim Application seeking dismissal of the Suit on the purported ground of breach of Section 12A of the said Act, itself is a pointer to the conduct of the Defendants in proceeding in the suit.”

The Court imposed an 'exemplary cost' of Rs. 5 lakhs on Varanium, to be paid to the High Court Non Gazetted Ministerial Staff Association.

Case title: Varanium Cloud Limited And Anr. vs. Rolta Private Limited And Anr. (Interim Application (L) No. 6341 Of 2024 In Summary Suit No. 18 Of 2023)

Citation: 2024 LiveLaw (Bom) 586