Calcutta High Court
Prime Hitech Textiles Llp vs Manish Kumar on 13 July, 2022
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ODC-6
IA NO. GA/3/2022
In CS/141/2021
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
PRIME HITECH TEXTILES LLP
Vs.
MANISH KUMAR
BEFORE :
The Hon'ble JUSTICE KRISHNA RAO
Date: 13th July, 2022.
Appearance:
Mr. Sabyasachi. Choudhury, Adv.
Mr. Neelesh Choudhury, Adv.
Mr. Rupak Ghosh, Adv.
Ms. Anuradha Poddar, Adv.
....for the plaintiff
Mr. Sankarsan Sarkar, Adv.
Mr. Indradeep Basu, Adv.
....For the defendant
The Court :- The defendant has filed an application under Order VII Rule 11 of
the Code of Civil Procedure for rejection of plaint on the ground that the suit
filed by the plaintiff is not fall within the definition of commercial disputes as
envisaged under Commercial Courts Act, 2015.
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The Counsel for the defendant submits that the allegation made in the
plaint that the plaintiff has lent an advance alleged temporary loan to the
defendant initially for a sum of Rs. 75,00,000/- and thereafter for an amount
of Rs. 50,00,000/- and mere reading of plaint, it is clear that the transaction in
the instant suit is not a commercial dispute under the provisions of
Commercial Courts Act, 2015.
The Counsel for the defendant submits that the plaintiff has filed the suit
on the basis of an oral agreement, no document was executed and not filed any
memorandum of understanding to establish whether the transaction is for any
commercial business.
The Counsel for the defendant relied upon Paragraph 4 of the plaint
which reads as follows:-
"4. By reason of the aforesaid, it was agreed by and between the
plaintiff and the defendant, the plaintiff would lend an amount of Rs. 75
lacs to the defendant for a period of six months and the defendant would
re pay the said amount along with interest @ 14.5 % per annum. The
defendant would also secure the payment of principal and interest
component by post dated cheques issued in favour of the plaintiff. The
terms and conditions of the agreement as aforesaid entered into between
the plaintiff and the defendant at the office of the plaintiff at 89, Jamunlal
Bajaj Street, Kolkata-70007 within the jurisdiction aforesaid would, inter
alia, also appear from the conduct of the parties and exchange of
subsequent correspondence."
The Counsel for the plaintiff submits that the Counsel for the defendant
has not gone through the entire plaint and the document enclosed therewith.
Counsel for the plaintiff submits that in paragraphs 1 and 2 of the plaint, it is
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mentioned that the plaintiff is engaged in the business, inter alia, in of textiles
as also that of investing in textile related business and the defendant at all
material times represented himself to be a trader in textile goods of the
plaintiff.
The Counsel for the plaintiff has further referred the documents along
with the plaint and submits that on 05.06.2018, the plaintiff by way of
communication intimated to the defendant that an amount of Rs. 50,00,000/-
was remitted in the account of the defendant towards loan and on the same
day the defendant by way of communication dt. 05.06.2018 had acknowledged
the receipt of Rs. 50,00,000/- for a period of 181 days at an interest rate at the
rate of 14.5 % re-payable on 03.12.2018. Ld. Counsel for the plaintiff has
further referred the communication dt. 06.8.2018, wherein the defendant had
informed regarding renew of loan of Rs. 75 lacs from 06.08.2018 for a further
period for 271 days at an interest @ 14.5 % re-payable on 04.05.2019. Ld.
Counsel for the plaintiff has further submitted that in lieu of the loan amount
the defendant had also submitted five post dated cheques in favour of the
plaintiff for re-payment of the said loan amount along with interest.
The Counsel for the plaintiff submits that from the averments and from
the documents it is crystal clear that the transaction is for the commercial
purpose and as such the suit is maintainable before this Court.
In the case of Ladymoon Towers Private Ltd. -Vs- Mahendra Investment
Advisers Private Ltd. passed in IA GA No. 4 of 2021 in CS/99/2020 dt.
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S13.08.2021, the Coordinate Bench of this Court held that in order to
ascertain whether the present dispute qualifies a "Commercial Dispute" within
the purview of the Act, it is necessary to break down the classes of persons and
transactions contemplated in the clause. Since, clauses (ii) to (xxii) do not
apply in this case, the construction of 2 (1) (c) (i) falls for consideration in the
present case.
".......... Ordinary transactions of merchants, bankers, financers and
traders ............"
"The statements in the plaint make it evident that the Directors of
the plaintiff and the defendant were known to each other which served as
a reason for the plaintiff to part with Rs.50 lakhs by way of a short-term
loan. The Memorandum of Association of the plaintiff which is annexed to
the plaint states that the plaintiff carries on business of acquisition by
purchase, lease, etc., for development of land and buildings. The Objects of
the Plaintiff Company provide that the plaintiff carries on real estate and
construction business. It is hence evident that the plaintiff's regular
business is not of lending money and the plaint also does not contain any
statement to that effect. The loan given by the plaintiff to the defendant
was based on a familiarity between the Directors of the parties and can
hence be assumed that the loan was in the nature of what is occasionally
referred to as a "hand-loan" and was not given in the regular course of
business or as a commercial loan. This assumes importance in the
difference recognised under Section 34 of The Code of Civil Procedure,
1908 between the rate of interest to be adjudged on a decree for payment
of money and a liability arising out of a commercial transaction. The
aforesaid would find support from Manesh Rajkumar Kanhed vs. Ramesh
Bhagwansa Walale; AIR 2007 Bom 86, wherein it was held that taking of
a "hand-loan" for starting a business of agency cannot come within the
four-corners of the definition of a commercial transaction. Dena Bank vs.
Prakash Birbhan Katariya; AIR 1994 Bom 343 also rejected the idea of a
loan advanced for the construction of a hospital being termed as a
commercial transaction.
"Merchants"
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P. Ramanatha Aiyar's The Law Lexicon, 2nd Edition, Reprint 2010
defines a "merchant" as one who buys and trades in anything and as
merchandise includes all goods and wares exposed to sale in fairs or
markets. The definition of merchant extends to all sorts of traders, buyers
and sellers.
"Bankers"
In Halsbury's Laws of England, Fourth Edition, Volume 3, a banker
has been defined as one who is involved in the business of receipt of
money on current or deposit account and the payment of cheques drawn
by and the collection of cheques paid in by a customer. Section 5(b) of The
Banking Regulation Act, 1949 defines the work of a Banker on the same
lines.
"Traders"
The commonly accepted definition of a "trader" is one who trades in
goods, buys goods and sells them at a profit. Black's Law Dictionary,
Eighth Edition, also defines a trader as one who sells goods substantially
in the form in which they are bought or as a member of a stock exchange,
buys and sells securities on the exchange floor or one who buys and sells
commodities and commodity futures for others or for his / her own account
in anticipation of a speculative profit.
"Financiers"
The Oxford Universal Dictionary Illustrated defines a "Financier" as
an administrator, collector or farmer of taxes or one who is skilled in
levying and managing public money or as a capitalist concerned in
financial operations. The definition proceeds to clarify that the objects of a
financier are to secure an ample revenue.
The above definitions would make it clear that the dispute between
the plaintiff and the defendant, which arises out of a loan given by the
plaintiff to the defendant on the basis of a personal relation of familiarity,
cannot be brought under the individual definitions of a
transaction between either merchants, bankers, financiers and traders,
used disjunctively.
"Commercial Action"
Punjab University vs. Unit Trust of India; (2015) 2 SCC 669, set out
the definition of the term 'commercial' as defined in Stroud's Judicial
Dictionary. Under this definition, commercial action was meant to include
any cause arising out of the ordinary transactions of merchants and
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traders and without prejudice to the generality of the foregoing words, any
cause relating to the construction of a mercantile document, the export or
import of merchandise, affreightment, insurance, banking, mercantile
agency and mercantile usage. The decision also explained that the words
"commercial purpose" would cover an undertaking the object of which is to
make a profit out of the undertaking.
"Mercantile documents"
The Delhi High Court in Kailash Devi Khanna vs. DD Global Capital
Ltd.; 2019 SCC Online Del 9954 held that all suits for recovery of monies
cannot brought under Section 2(1)(c)(i) of the Act where the suit is not
based on any transaction relating to mercantile documents. The Bombay
High Court in Bharat Huddanna Shetty vs. Ahuja Properties &
Developers; (Interim Application (L) No.14350 of 2021) rejected the
contention that the suit should be treated as a commercial summary suit
on the mandate that the transaction had occurred between merchants,
bankers, financiers and traders and further clarified that
transactions between individuals where the plaintiff gives a friendly loan
to a needy friend will not be seen as a transaction in the course of
ordinary business. The Madras High Court in R. Kumar vs. T.A.S.
Jawahar Ayya (C.S. No.431 of 2019) was of the view that since the
plaintiffs did not transact in the capacity of financiers, the dispute was not
a "commercial dispute" and that an ordinary transaction of the four classes
of persons mentioned in 2(1)(c)(i) arising out of mercantile documents alone
would fall within the definition of a commercial dispute. The Calcutta High
Court in Associated Power Co. Ltd. vs. Ram Taran Roy; AIR 1970 Cal 75
focused its gaze on a "mercantile document" within the meaning of the
First Schedule of the City Civil Court Act, 1953 as a document between
merchants and traders where the construction, interpretation and
meanings of words and clauses of the mercantile documents would
assume significance.
It should also be pointed out that the words used in sub-clause (i) of
clause (c) are "ordinary transactions of merchants, bankers, financiers and
traders such as those relating to mercantile documents.........". The
placement of the underlined words between ordinary transactions of the
named persons and the mercantile documents indicates that all
transactions between the specified classes of persons will not result in a
"commercial dispute" where the transaction does not relate to mercantile
documents. Hence, only a dispute arising out of a transaction between the
named classes of persons which has been formalised by way of
a mercantile document will be a "commercial dispute" under Section
2(1)(c)(i) of the 2015 Act.
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The second part of sub-clause (i) of clause (c) "............including
enforcement and interpretation of such documents;" has often missed out
any assessment of whether a dispute is a "commercial dispute" under this
sub-clause. Associated Power considered this aspect of the matter,
namely, whether the dispute involving the construction, interpretation and
meaning of words and clauses of the mercantile documents, could be a
"commercial dispute" on this basis.
The case-law on the subject would indicate that a mercantile
document is a document used in a transaction or in relation to a
transaction between merchants, bankers, financiers and traders. In the
present case, the statements in the plaint make it clear that the plaintiff
lent money to the defendant by way of an oral understanding without
formalising or reducing such understanding in writing. The plaint does not
plead the existence of any agreement, much less a written agreement
involving a mercantile document.
South City Projects (Kolkata) Ltd. vs. Ideal Real Estates Pvt. Ltd.;
(C.S.255 of 2019), a decision of a learned Single Judge of this court shown
on behalf of the plaintiff can be referred to in respect of what would
constitute a "commercial dispute" under the provisions of the 2015 Act can
be distinguished from the present case since the defendant in South City
Projects did not dispute that the claim in the suit was a "commercial
dispute". The plaintiff had even obtained registration under the Bengal
Money-Lenders Act, 1940 in the facts of that case. The Objects clause in
the Memorandum of Association of the plaintiff in that case also permitted
the plaintiff to lend an advance money which the court took into account
and held that the transaction was, therefore, within the scope of the
business of the plaintiff."
In the instant case, though the plaintiff in paragraphs 1 and 2 has stated
that the plaintiff is engaged in business of textile and also investing in textiles
related business and the defendant is a trader in the textile goods of the
plaintiff. In paragraph 3 of the plaint, the plaintiff had made out a case that in
early 2018, the defendant had approached the plaintiff at its office and
requested for temporary loan and/or advance to meet the defendant immediate
finance requirement.
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In none of the paragraphs of the plaint it is ever stated that the
defendant has borrowed the loan from the plaintiff for the purpose of textiles
business or for the purpose of his business. The documents which the plaintiff
has relied upon i.e. the letters dt. 05.06.2018 and 06.08.2018 only reveals that
the plaintiff has paid the amount and the defendant had received the amount
but in none of the documents there is any mentioning about the amount paid
by the plaintiff to the defendant is in connection with in the business of textiles
and/or any kind of business.
The judgment reported in (2020) 15 SCC 585 (Ambalal Sarabhai
Enterprises Ltd. -Vs- K. S. Infraspace LLP & Anr.) the Hon'ble Supreme Court
held that :-
"4. Accordingly, a mortgage deed dated 3-11-2017 was executed
but the same had not been registered. It is in that light the appellant herein
filed the Commercial Civil Suit No. 41/2018 so as to enforce the execution
of a mortgage deed. Consequently, the relief of permanent injunction and
other related reliefs were sought. It is in the said suit, summon was issued
to the respondents herein who are the defendants in the suit, wherein on
filing the written statement the application under Order 7 Rule 10 of CPC
was filed. The Commercial Court while rejecting the application had
referred to the Memorandum and Articles of Association of the appellant
Company and in that light taking note of the business that they were
entitled to undertake has arrived at the conclusion that the plaintiff seems
to be carrying on the business as an estate agent and in that circumstance
has further arrived at its conclusion that it is a commercial dispute. The
High Court on the other hand had found fault with the manner in which
the Commercial Court had rested its consideration on the Memorandum
and Articles of Association and had examined the matter in detail to come
to a conclusion that the immovable property in the instant case was not
being used for trade or commerce. In that regard, the legal position
enunciated by the various decisions was referred to and had accordingly
directed the return of the plaint to be presented in an appropriate Court
which is assailed herein."
Judgment reported in (2021) SCC OnLine TS 688 (Big Bang Boon
Solution -Vs- Centauri Composites Private Ltd.) the Hon'ble Court held that:-
"10. The basis for the claim of damages in the suit is not a
commercial transaction between the parties, but is alleged to be circulation
of an email by the 1st respondent to a third-party allegedly maligning the
reputation of the appellant. Such a claim cannot be said to fall under
Section 2(1)(c)(i) of the Commercial Courts Act, 2015, because the dispute
raised in the suit is not a commercial dispute arising out of ordinary
transactions of merchants on the basis of mercantile documents or the
enforcement and interpretation of such documents.
11. In Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP, the
Supreme Court explained that provisions of the Commercial Courts Act,
2015 have to be strictly construed and merely on account of high value, a
suit cannot be filed before a Commercial Court, particularly where it
does not relate to a 'commercial dispute'. It explained:
"13. ... the very purpose for which the CC Act of 2015 has been
enacted would be defeated if every other suit merely because it is
filed before the Commercial Court is entertained. This is for the
reason that the suits which are not actually relating to commercial
dispute but being filed merely because of the high value and with
the intention of seeking early disposal would only clog the system
and block the way for the genuine commercial disputes which may
have to be entertained by the Commercial Courts as intended by the
lawmakers. In commercial disputes as defined a special procedure
is provided for a class of litigation and a strict procedure will have to
be followed to entertain only that class of litigation in that
jurisdiction. If the same is strictly interpreted it is not as if those
excluded will be non-suited without any remedy. The excluded class
of litigation will in any event be entertained in the ordinary civil
courts wherein the remedy has always existed.
14. In that view it is also necessary to carefully examine and
entertain only disputes which actually answers the definition
"commercial disputes" as provided under the Act..."
Judgment reported in (2019) SCC OnLine (Del) 9954, the Hon'ble Court
held that::-
"29. The counsel for the plaintiffs, on being asked to show under
which Clause of Section 2 (1) (c) of the Commercial Courts Act, 2015, the
present claim constitutes a commercial dispute, draws attention to clause
(i) of Section 2(1) (c) of the Commercial Courts Act but which provides for
"ordinary transactions of merchants, bankers, financiers and traders such
as those relating to mercantile documents, including enforcement and
interpretation of such documents" to constitute commercial disputes.
30. However, all suits for recovery of monies cannot fall under
Clause (i) supra of Section 2 (1)(c) of the Commercial Courts Act. Suffice it is
to state that the suit is not based on any transaction relating to mercantile
documents. Thus, the suit is found to have been wrongly filed as a
commercial suit."
Judgment referred in 2021 SCC Online Cal 35 (Swadha Builders Private
Ltd. -Vs- Nabarun Bhattacharjee & Ors.) the Hon'ble Court held that:-
"25. As the plaint stands, the Court has to decide the issue of the
legality, validity and sufficiency of the equitable mortgage of the Jessore
Road property belonging to the plaintiff No. 1 in favour of the defendant
No. 7. The plaintiffs have relied upon the agreement dated October 3, 2012
and claimed that the defendant Nos. 1 to 6 acted in breach of the terms
and conditions of such agreement. The agreement dated October 3, 2012
has a clause which prevents alienation, transfer or encumbrance of the
Jessore Road property. The parties have entered into a supplemental
agreement dated May 2, 2013. The defendant No. 7 had accepted the
Jessore Road property as collateral security for a loan granted by it to the
defendant No. 3 by way of an equitable mortgage in respect thereof. The
defendant No. 7 is a banker. The defendant No. 7 has proceeded against
such Jessore Road property under the SARFAESI Act. The parties have
not disputed the fact that the relationship between the defendant No. 3
and the defendant No. 7 is one of borrower and banker. As has been noted
herein, the creation of mortgage in respect of the Jessore Road property in
favour of the defendant No. 7 is an issue in the instant suit. The defendant
No. 7 as a banker has not claimed that the creation of such mortgage was
not done as an ordinary transaction of a banker. Again as has been noted
herein, interpretation of a document relating to the immovable property
concerned and in particular the validity sufficiency and legality of the
equitable mortgage is an issue in the instant suit. Therefore, in my view,
the disputes and issues that the parties have raised in the instant suit are
commercial disputes within the meaning of Section 2(1)(c)(i) of the Act of
2015."
After considering the above referred judgments this Court has carefully
gone through the plaint and the documents relied by the plaintiff. It reveals
that in none of the paragraph of the plaint it is mentioned that the transaction
between the plaintiff and the defendant was in connection with any business.
On plain reading of the paragraph 16 on the basis of which the plaintiff has
prayed for a decree for an amount of Rs. 1,76,74,315.07/- is a simple suit of
recovery of money. The plaintiff tried to made out a case of in commercial
nature in the paragraphs 2 and 3 of the plaint but in the said paragraphs, the
plaintiff has only explained the business of both the parties but it is nothing in
the plaint that the transaction between the parties are connected with any
business transaction.
It is settled law that all suit for recovery of money cannot fall under
Section 2(1)(c) of the Commercials Courts Act, 2015.
Though the defendant has filed the instant application for rejection of the
plaint but this Court is of the view that the suit cannot be dealt by the
Commercial Court for the said reason, the plaint cannot be rejected and
accordingly the plaint filed in CS 141 of 2021 is return to the plaintiff for filing
the same before the appropriate the Court.
GA No. 3 of 2022 is disposed of.
(KRISHNA RAO, J.)
p.d
