Dispute Arising Out Of Agreements Relating To Property Used Exclusively In 'Trade & Commerce' Constitutes "Commercial Dispute": Gujarat High Court

The brief facts of the case were that the original-plaintiff (Respondent herein) had purchased a property from the Petitioner-Defendant vide a sale deed of 2019. The property was said to be used by the Defendant originally as a warehouse for business. Subsequently, in order to enable the Defendant to find a new address for its business, a Leave and License Agreement was executed between the parties for a monthly license fee and that amount was due from the Defendant.

When a dispute arose regarding the payment of the monthly license fee, a legal notice was sent to the Defendant for the return of suit property but the Defendant continued to reside in the premises of the property. Thus, a suit for permanent injunction came to be filed by the Plaintiff.

The Defendant also filed an application under Order VII Rule 10 of CPC averring that the plaint filed by the Plaintiff could not have been instituted before the commercial court as it did not involve a commercial dispute. The commercial court held that the suit involved a 'commercial dispute' within the meaning of the Commercial Courts Act and this order was challenged before the Gujarat High Court through the instant petition.

The primary contention of the Petitioner-Defendant was that merely because the prayer was for the recovery of an immovable property, it could not be treated as a commercial suit as other characteristics of a commercial dispute were absent. Reliance was placed on Ambalal Sarabhai Enterprises Limited Vs. K. S. Infraspace LLP and Another [(2020) 15 SCC 585] to contest that as per Sec 2(1)(c), the premises should be used exclusively for trade, commerce and business. However, the Agreement designated that the premises 'to be used' for industrial purpose. When that is so it cannot be said, it was submitted that it was meant for exclusive use.

The Bench observed that a commercial dispute would not cease to be a commercial dispute merely because it involved recovery of the immovable property or realisation of money from such property. In the instant case, it was clear that the Defendant was using the suit property as a warehouse for its business. It was held, "The test that the property is actually used for trade or commerce and for business purpose as warehouse, is satisfied in the present case." Later, the Defendant urged the Plaintiff to take the suit property on Leave and License basis for enabling the Defendant to locate new property for its business activities. The Bench relied on Ambalal Sarabhai to observe:

"When the godown owned by the plaintiffs was rented by the defendant on a fixed rent, and the suit claim and relief sought for pertained to damages arising out of such subject transaction, the dispute arising therefrom becomes a 'commercial dispute' within the meaning of the Section 2(1)(c) of the Act."

Accordingly, the Bench affirmed the decision of the commercial court and held that the suit satisfied the material ingredients of 'commercial dispute.'

Case Title: M/S. KUSHAL LIMITED THROUGH AUTO. SIGN. AND MANAGING DIRECTOR MR. YOGESH GHANSHYAMBHAI PATEL v/s M/S. TIRUMALA TECHNOCAST PRIVATE LIMITED