The Delhi High Court has reiterated that District Judges are not empowered to transfer ordinary suits to the Commercial Court under Section 24 of the Civil Procedure Code.

The single-judge bench of Justice Navin Chawla observed that the Commercial Court even at the level below the District Judge is not a Court subordinate to the District Judge.

"Though the Commercial Court below the level of a District Judge may be manned by Officers of the Delhi Higher Judicial Services, in my opinion, these Courts do not still become subordinate to the District Court for purposes of Section 24 of the CPC. Equally, because of certain powers delegated by the High Court to the learned District and Session Judge to transfer certain Suits from one Commercial Court to another, it cannot be said that these Courts are subordinate to the District Court. In such cases, the learned District Judge exercises the powers as a delegate of the High Court", the court said.

Brief Facts of the Case

The petition was filed by one defendant in a Suit challenging the impugned order passed by the learned Additional District Judge and another impugned order passed by the learned Principal District and Sessions Judge.

The learned Additional District Judge observed that the dispute between the parties was commercial in nature, and directed the file of the Suit to be placed before the Court of the learned Principal District and Sessions Judge, for passing appropriate orders. The learned Principal District and Sessions Judge directed that the Suit be withdrawn from the Court of the learned Additional District Judge, and transferred the same to the Court of the learned District Judge, Commercial Court for proceeding further per law.

Contention of the Parties

The learned counsel for the petitioner submitted that the learned Additional District Judge, and even the learned Principal District and Sessions Judge, do not have the power to transfer the Suit, which is filed as an Ordinary Suit, to a Commercial Court. He submitted that the only power available to the Court is to return the plaint for the plaintiff to file the same, if so advised, before the Court of appropriate jurisdiction.

He further submitted that under the Act, there are special requirements for a Suit to be filed before a Commercial Court, which are in the form of a prescribed Statement of Truth and affidavit to be filed, as well as Pre-Institution Mediation to be initiated, as mandated under Section 12-A of the Act. He submitted that as in the present case, the plaint does not meet the above requirements, the learned Additional District Judge should have rejected/returned the plaint.

He averred that the only provision for transfer of the Suit, which is filed as an Ordinary Suit, to a Commercial Court, is contained in Section 15(2) of the Act and that the said provision applies only to the Civil Suits relating to commercial disputes of a specified value that were pending before the Civil Courts in any District or area in respect of which a Commercial Court has been constituted, as on the date of such constitution. It does not apply to Suits that are filed after the constitution of the Commercial Courts in a particular District. He submits that where a Suit, though relating to a commercial dispute of a specified value, is filed as an Ordinary Civil Suit after the constitution of the Commercial Courts, the only power available with the Court is to return the plaint under Order VII Rule 10 of the CPC for the presentation of the plaint before the Commercial Courts, that is, the Court of appropriate jurisdiction, he argued and placed reliance on the judgment of the Supreme Court in Ambalal Sarabhai ENTERPRISE LIMITED vs. KS INFRASPACE LLP LIMITED.

He submitted that the Commercial Courts Act, 2015 being a special and subsequent statute, would override the general provisions of the CPC and especially Section 24 of the CPC and cited the Supreme Court ruling in Jaycee Housing Pvt. Ltd. Vs. Registrar (General), Orissa High Court, Cuttack.

The learned counsel for the petitioner further submitted that, even assuming that Section 24 of the CPC would apply, a Commercial Court constituted under the Act is not a Court subordinate to the Court of the Principal District and Sessions Judge, therefore, in any case, the learned Principal District and Sessions Judge did not have the power to transfer the Suit to a Commercial Court.

On the other hand, the learned counsel for the respondent submitted that the learned District Judge, as also the High Court, by the provisions of the Act is not denuded of the powers under Section 24 of the CPC. He submitted that Section 15 of the Act provides for the transfer of the cases that are pending adjudication as on the date of the constitution of the Commercial Division in the High Court or the Commercial Courts at the District Level. The said provision, however, is in addition to the general power which is vested in the District Judge, as also the High Court, under Section 24 of the CPC to transfer any proceedings pending in a Court subordinate to any other Court subordinate, he further argued.

High Court's Observation

The Court framed two legal issues as below:

(i) Whether the Act excludes the application of Section 24 of the CPC to commercial disputes having a specified value?

(ii) If the answer to the above issue is in the negative, whether the power under Section 24 of the CPC to transfer the Suit is also available to the District and Session Judge?

With regard to the first issue, the court examined the Commercial Courts Act and observed that a separate and distinct hierarchy of Courts has been prescribed for adjudicating the commercial disputes of a specified value and these Courts are distinct from the Ordinary Civil Courts.

The Court after further examination went onto note that the Act provides for the constitution of Commercial Courts and Commercial Divisions of the High Courts to adjudicate on commercial disputes of a specified value. However, the implementation of the said provisions and the overall administrative control over these Courts remains vested with the High Courts and, therefore, Commercial Courts would be a Court Subordinate to the High Courts. Section 24 of the CPC is not amended by the Act or by the Schedule appended thereto, therefore, there is no reason for it to be not applied to a Suit relating to a commercial dispute of a Specified Value.

The Court accordingly concluded the following:

"a) The Commercial Courts Act provides for a special format and specific requirements in relation to the pleadings and affidavits, in the form of a Statement of Truth, verification, among others. It further requires mandatory compliance with provisions under Section 12-A of the Act in the form of a Pre- Institution Mediation;

(b) If a Suit raises a Commercial Dispute of a Specified Value, the Ordinary Civil Court shall have no jurisdiction to entertain the same, and it must, therefore, return the plaint in exercise of its power under Order VII Rule 10 of the CPC;

(c) On return of the plaint, the plaintiff may, after making necessary corrections in the pleadings, present the plaint before the Court of competent jurisdiction."

"The difference between Section 24 and Order VII Rule 10 of the CPC is that in terms of Sub-Section (2) of Section 24, where any Suit or proceeding has been transferred or withdrawn, the Court which is thereafter to try or dispose of such Suit or proceeding may, subject to any special directions in the case of an order of transfer, either re- try it or proceed from the point at which it was transferred or withdrawn. Therefore, all proceedings that were undertaken before the Court where a Suit was earlier instituted, though it lacked jurisdiction to try the same, can be saved, and the Suit on its transfer can be proceeded from the point at which it was transferred", the judgement reads to this regard.

"Therefore, once it is accepted that a Suit, which though relates to a Commercial Dispute of a Specified Amount, is filed as an ordinary Suit before a Civil Court, the plaint, under Order VII Rule 10 CPC, shall be returned to the plaintiff to present the same before the Commercial Court of appropriate jurisdiction, equally, either of the parties may invoke the provisions of Section 24 of the CPC to seek transfer of such a Suit", it further states.

As far as the non-compliance with Section 12A of the Act was concerned, the court stated the Transferee Court shall consider the said objection on merits upon the transfer of the Suit.

"The transfer of the Suit does not, in any manner, affect the right of the defendant to contend that the Suit has been filed without any cause of action or is otherwise barred by any provision of law or is liable to be dismissed under Order VII Rule 11 of the CPC for any other reason, including for the failure of the plaintiff to initiate pre-suit mediation as mandated under Section 12A of the Act. These objections would remain open to the defendant even on the transfer of the Suit under Section 24 of the Act", the court said.

When considered the second issue as to whether a Commercial Court below the level of a District Judge would be a Court subordinate to a District Court, the court answered it in negative.

"In terms of section 3 of the Act, the State Government, after consultation with the concerned High Court, by notification, may constitute such number of Commercial Courts at the District level as it may deem necessary for the purpose of exercising the jurisdiction and powers conferred upon those Courts under the Act. Sub-Section (3) of Section 3 of the Act further provides that the State Government may, with the concurrence of the Chief Justice of the High Court, appoint one or more person having experience in dealing with Commercial Disputes to be a Judge or Judges of Commercial Courts either at the level of District Judge or a Court below the level of a District Judge. Appeals against the order passed by a Commercial Court below the level of a District Judge shall lie before a Commercial Appellate Court constituted under Section 3A of the Act, and against a Commercial Court at the level of the District Judge or against an order of a Commercial Division, as the case may be, shall lie to the Commercial Appellate Division of that High Court constituted under Section 5 of the Act", the court ruled.

Case Title: Namita Gupta vs Suraj Holdings Limited, 2024 Latest Caselaw 1 Del
Case Details: CM(M) 457/2023 & CM APPL. 13615/2023
Coram: Hon'ble Mr. Justice Navin Chawla
Citation: 2024 Latest Caselaw 1 Del
Advocates for Petitioner: Mr.Bhuvan Gugnani, Mr.Rupender Sharma, Advs.
Advocates for Respondent: Mr.Ashish Mohan, Mr.Hemant, Manjani, Ms.Sagrika Tanwar, Advs.