On February 8, 2019, the Hon’ble Bombay High Court passed a judgement in the matter of Kanchanganga Realtors Private Limited v. Monarch Infrastructure Developers Private Limited, dealing with the issue of whether seeking of specific performance of agreement to sell proposed to be used for commercial purpose would amount to 'commercial dispute', to be tried under Commercial Courts Act, 2015 (“Act”).

Facts of the case

The respondent had filed a suit for specific performance against the petitioners in respect of an agreement dated April 4, 2015, whereby petitioner no.1 had agreed to sell immovable property specified in the suit to respondent no.1. After entering appearance before the trial Court, the petitioners moved an application under Section 15(2) of the Act, contending that since the immovable property in question was intended to be used for commercial purpose, the dispute between the parties was a commercial dispute and thence, the suit was required to be transferred under Section 15(2) of the Act.

Issue of the case 

Whether or not the suit ought to have been transferred to the Commercial Court since suit filed by the respondent pertains to a commercial dispute and that under Section 15(2) of Act?

Judgement

The Court held that a perusal of the Section 2(1)(c)(vii) of the Act shows that a commercial dispute would include dispute arising out of agreements relating to immovable property used exclusively in trade and commerce. The crucial words for placing a proper interpretation on the said provision are “relating to” and “used”. 

The Court relied on the decision of the Supreme Court in the case of Mansukhlal Dhanraj Jain v. Eknath Vithal Ogale, for the meaning of the expression ‘relating to’ and referred to the following observation: 

“The words relating to" are of wide import and can take in their sweep any suit in which the grievance is made that the defendant is threatening to illegally recover possession from the plaintiff licensee…… In this connection, we may refer to Blacks" Law Dictionary Super Deluxe 5th Edition. At page 1158 of the said Dictionary, the term "relate" is defined as under: "to stand in some relation, to have bearing or concern, to pertain, refer, to bring into association with or connection with…….Expressions such as "arising out of" or "in respect of" or "in connection with" or "in relation to" or "in consequence of" or "concerning" or "relating to" the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the arbitration agreement….. The word "pertain" is synonymous with the word "relate". The expression "in relation to" (so also "pertaining to"), is a very broad expression which presupposes another subject matter. These are words of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context,……"

Similarly, for the contention that the word “used” would include the expression “capable of being used”, the Court relied upon the ratio of number of judgments which interpreted the word 'used' as capable of being used or for the purpose of being used. 

Therefore, the Court held that the expressions used in Section 2(1)(c)(vii) of the Act read with Explanation (a) of the Act have to be given wide interpretation and the suit for specific performance for enforcement of an agreement for sell pertaining to immovable property proposed to be used for commercial purpose would be ‘commercial dispute’  to be tried under the Act.