25. The judgment passed by the Coordinate Bench of this Court in
Deepak Polymers (supra), is binding upon this Court but considering the
fact that in the case of Deepak Polymers (supra), the Explanation Clause
of Section 2(1)(c) of the Commercial Courts Act, 2015 has not considered
and only relying upon Section 106 of the Transfer of Property Act, 1882,
the Hon'ble Judge has come to the conclusion that refusal by the
defendants to comply with the noticed issued by the lessor under Section
106 of the Transfer of Property Act, 1882 which is based on statutory
right independent and irrespective of any clause of the lease agreements
and thus the suit squarely arising out of a statutory right conferred by
Section 106 of the Transfer of Property Act, 882, having no direct nexus
with the lease agreements in respect of the immovable properties
concerned. Thus, the pre-condition of applicability of Section 2(1)(c)(vii),
that is, the emanation of the dispute out of the lease agreement, is not
satisfied in the present suit.
26. This Court with great respect of the Hon'ble Judge dissent the order
passed in Deepak Polymers (supra), in the said case, the Explanation
Clause of Section 2(1)(c) of the Commercial Courts Act, 2015 and the
judgment passed in the case of Samir Mukherjee (supra) and Park Street
Properties Private Limited (supra) were not brought to the notice of the
Hon'ble Judge.
Taking into consideration of the judicial decorum, the matter is referred to
the Hon'ble Chief Justice to constitute Special Bench to decide the
following issues:
α. Whether after issuance of notice under Section 106 of the Transfer of
Property Act, 1882, the defendant or the parties cannot rely the
agreement/ or Lease Deed as the case may be?
b. Whether only on the basis of the case initiated under Section 106 of
the Transfer of Property Act, 1882, it can be said that Court cannot look
into the agreement between the parties and thus the suit cannot be
treated as commercial suit in terms of Section 2(1)(c)(vii) of the
Commercial Courts Act, 2015?
C. Whether if the Explanation Clause of Section 2(1((c) of the Commercial
Courts Act, 2015 taken into consideration along with Section 106 of the
Transfer of Property Act, 1882, the suit can be treated as commercial suit
in terms of the lease agreement/ rent agreement entered between the
parties?"
43. Mr. Bachawat has referred to paragraph 27 in Deepak Polymers
(supra) to demonstrate that the aforesaid finding is factually incorrect and the
judgment in Deepak Polymers (supra) cannot be held to be a judgment sub
silentio and per incuriam.
44. It is submitted that in Deepak Polymers (supra) the Hon'ble
Justice Bhattacharyya was conscious of the explanation for which His
Lordship has observed that in the event the suits were filed for recovery of
possession on the ground of forfeiture or contravention of any of the terms of
the terms and conditions of the agreements in question, it might have been
argued that the suit pertains to "disputes arising out of such agreements.
45. However, in respect of disputes arising out of refusal of defendant
to comply with notices issued under Section 106 of Transfer of Property Act,
1882, it is based on a statutory right independent and irrespective of any
clause of the agreement. Such suits squarely arise out of a statutory rights
under Section 106 of Transfer of Property Act, 1882, having no direct nexus
with the lease agreement. Thus, the pre-condition of applicability of Section
2(1)(c)(vii), i.e., the emanation of the dispute out of the lease agreement is not
satisfied in the present suit.
46. It is submitted that in Deepak Polymers (supra) it was held that
suits based on statutory rights conferred under Section 106 of the TPA
cannot be considered to be a "commercial dispute" within the meaning of the
Commercial Courts Act 2015. The cause of action in each of such suits arises
by way of rights conferred by Section 106 of the TPA. The judgments relied
upon by the plaintiffs and the amicus curiae to contend that all "disputes
arising out of immovable property used exclusively in trade and commerce"
would come within the ambit of "commercial disputes are distinguishable, on
their respective facts, as they related to disputes/proceedings arising out of
agreements. Those judgments also did not address the effect of the word
"dispute", which precedes the expression "arising out of" in Commercial
Courts Act, 2015.
47. It is submitted that the views expressed in Deepak Polymers
(supra) is based on a settled principle of law and the judgment in T.E.
Thomson (supra) is contrary to and diametrically opposite to the view taken
by the Hon'ble Supreme Court in Ambalal Sarabhai (supra) case and is also
contrary to the legislative intent of the Commercial Courts Act, 2015 as taken
note of Ambalal Sarabhai (supra).
48. The judgment in T.E. Thomson (supra) is based entirely on the
incorrect basis of the judgment in Ambalal Sarabhai (supra) and proceeds to
approve the judgment of Delhi High Court in Jagmohan Behl (supra) that
Section 2(1)(c) of the Commercial Courts Act should be widely construed.
49. It is submitted that in Ambalal Sarabhai (supra) the Hon'ble
Supreme Court has expressly opined the view of the decision of the Hon'ble
Division Bench of the Gujarat High Court view in Vasu Healthcare (p) Ltd.
Vs Gujarat Akruti Tcg Biotech Ltd 28 . Section 2(1)(c) of the Commercial
Courts Act, 2015, should be narrowly construed. The wide construction
approach of Jagmohan Behl (supra) was not accepted by the Hon'ble
Supreme Court, which held that a wide construction would be contrary to the
intent of the legislature. In this regard Mr. Bachawat has referred to
paragraph 10, 11, 13, 31, 36 and 41 of Ambalal Sarabhai (supra). Moreover,
the judgment in Jagmohan Behl (supra) is of little relevance in the present
2017 SCC online Guj 583: AIR 2017 Guj 153
case as it was not a suit for eviction but was a suit for realisation of money
arising out of an agreement relating to immovable property which was
admittedly used exclusively trade and commerce. Jagmohan Behl (supra)
was based on the facts of the case where the property was undoubtedly used
in trade and commerce and the suit was for recovery of rent for the use of
such property, as is noted by the Supreme Court in paragraph 10 of Ambalal
Sarabhai (supra). It was not concerned with a suit for possession on refusal
of the defendant to comply with a notice under Section 106 of Transfer of
Property Act, 1882.
50. It is submitted that the judgment in Jagmohan Behl (supra) at
most, may be an authority only for the proposition that the expression "any
other relief pertaining to immovable property in the explanation to Section
2(1)(c)(vii) of the Commercial Courts Act, 2015, will include in its ambit
"disputes relating to breach of agreement and damages payable on account of
breach of agreement" as mentioned in para 18 of that judgment. It is thus
submitted that even assuming that the Jagmohan Behl (supra) can be relied
on, it must be restricted to suits arising out of "disputes relating to breach of
agreement and damages payable on account of breach of agreement" and not
to suits for possession post notice under Section 106. This is the ratio of
Jagmohan Behl and it cannot be applied to a case of determination of lease
under Section 106, upon expiry of the lease. Hon'ble Justice Bhattacharya in
fact accepted the above proposition that Section 2(1)(c)(vii) would be
applicable to suits arising out of disputes relating to breach of agreement and
made it clear in para 27 of Deepak Polymers Judgment, that Section
2(1)(c)(vii) of the Commercial Courts Act, 215, would be applicable to suits
arising out of disputes relating to breach of agreement but would not cover
cases where the suit arises out of failure to comply with notice under Section
106 of Transfer of Property Act, 1882.
51. It is clear from the judgement that Hon'ble Justice Bhattacharya
was cautious and restricted his finding only to cases where the suit arises out
of failure to comply with notice under Section 106 of Transfer of Property Act,
1882.
52. The explanation to Section 2(1)1(c)(vii) is referred to in Paragraph 5
of the Deepak Polymers (supra), to the extent it was necessary to the
purpose of that case. No further discussion was necessary in the facts of that
case and it had no bearing on the outcome of the case.
53. As accepted by the Learned Amicus appointed in this matter, the
Explanation to Section 2(1)(c) merely clarifies that the nature of the relief
claimed in the suit will not be a factor in deciding whether the suit is a
commercial suit or not if it otherwise falls within the definition in Section
2(1)(c) of the Commercial Courts Act, 2015.
54. If the judgment in Deepak Polymers (supra) is sub-silentio as
argued by the plaintiff, the Hon'ble Judge was free to disregard it and there
was no need to refer the same to Larger Bench. This would appear from the
judgements cited by the plaintiff itself which was quoted in Paragraph 16 of
the T. Е. Thomson (supra).
55. It is submitted that in T.E. Thomson (supra) there is no finding
that Section 106 does not give a statutory right to sue. It is a stray sentence
based on no reasoning or authority.
56. Mr. Bachawat has referred to Section 69(2) of the Partnership Act
and submits that the decision in Haldiram Bhujiawala & Anr. v. Anand
Kumar Deepak Kumar & Anr. 29 and Shiv Developers v. Aksharay
Developers & Ors., 30 have clearly distinguished a statutory right and a
contractual right. The learned Senior Counsel has referred to Haldiram
(supra) and more particularly paragraphs 9, 10 and 12 of the decision to
argue that a right arising out of a contract and a common law right or a
statutory right are different.
57. In the context of T.E. Thomson (supra) it is submitted that right to
evict a tenant upon expiry of lease is not a right arising out of a contract but
a common law or a statutory right under Transfer of Property Act, 1882.
Hence the fact that the plaint referred to a lease and its expiry does not make
any difference and the suit will not be barred under Section 69(2) of
Partnership Act, 1932 as the same merely records a historical fact. In such a
case, the partnership firm cannot be said to be enforcing a right arising out of
a contract. The later decision in Shiv Developers (supra) in paragraph 24
following the ratio in Haldiram (supra) has held that a suit where plaintiff
seeks common law remedies as also statutory rights of injunction and
declaration under Specific Relief Act, 1963 and also TPA, 1882, such a suit
2000 (3) SCC 250
2022 (13) SCC 772
shall not be considered to be a suit for enforcement of rights arising out of a
contract. The decision of the Bombay High Court in Central Bank of India
& Anr. v. M/s. Sagdeo Towers, 31 has reiterated the same principles in
paragraphs 7, 8 and 9 in which it has been clearly held that once a suit is for
enforcement of right under Transfer of Property Act, 1882, it cannot be said
to have arisen out of any express term of contract. The suit is based purely on
statutory obligation. It is well settled that the statutory right under Section
106 is independent of any clause in lease deed and that the parties cannot
derogate from or contract out of the statutory provisions of Section 106. Thus
such a suit does not and cannot be a dispute arising out of a lease
agreement. Further, Section 106 is only applicable when there is no period
agreed upon between the parties. In T.E. Thomson (supra) it was held that
while the lease agreement can be admitted in evidence and even be relied on
to prove the tenancy, it can't be used to derogate from the statutory terms of
Section 106. The parties cannot contract out of the statutory provisions of
Section 106.
58. Mr Bachawat has referred to the observation in Park Street
Properties (supra) where it was held that the statutory right under Section
106 is independent of any clause in lease deed and cannot be a dispute
arising out of a lease agreement. It is also well settled that Section 106 will
only apply when there is no period agreed upon between the parties and it
2007 (4) Mh.L.J.
will not apply where the parties by a contract have indicated the duration of
the lease.
59. A question may arise as to whether a claim for mesne profit, which
may arise in a suit for possession, would be a claim in reference to an
agreement relating to an immoveable property held exclusively for trade or
commerce, and hence would fall within Section 2(1)(c)(vii) of the Commercial
Courts Act, 2015. Such a claim cannot be a claim arising out of Section
2(1)(c) of the Commercial Courts Act, 2015 as, (i) a claim for mesne profit is a
claim on account of damages; and, (ii) such a claim for mesne profit only
arises post termination or expiry of lease, and as such, the same cannot be a
claim arising out of any agreement. Such a claim only arises when there is no
subsisting agreement between the parties. In light of the above, it is
submitted that the view of Hon'ble Justice Bhattacharya, as expressed in the
Deepak Polymers (supra) should be preferred over the views of Hon'ble
Justice Rao, as expressed in T. E. Thomson (supra), for the reasons
discussed hereinabove.
60. In reply, Mr. Thakker has submitted that judgment in Jagmohan
Behl (supra) has addressed the said issue in para 9 to 13 and held that a
narrow and restricted meaning ought not to be given the phrases as "arising
out of and "in relation to" read with the Explanation are of widest amplitude
and would include all matters in connection with immovable properties being
used in trade and commerce. As the property before the Delhi High was
actually being used in trade and commerce, the issue of the stage at which
user of the property in question is to be determined did not arise for
consideration before the Delhi High Court whereas this was precisely the
issue before the Hon'ble Supreme Court in Ambalal Sarabhai (supra). It is
only in the context of user actually used and/or being used "as opposed to"
likely to be used/to be used that the Supreme Court held that a restricted
meaning should be given to the term "used" in Section 2 (1) (c) (vii) and the
expansive meaning given to the provision and explanation in general by the
Delhi High Court would not apply. The Supreme Court did not disapprove of
Jagmohan Behl (supra) in Ambalal Sarabhai (supra). The Explanation to
the said sub section did not arise for consideration of the Supreme Court in
Ambalal Sarabhai (supra).
61. Mr. Thakker has referred to paragraphs 296 to 310 of the judgment
in Manish Kumar (supra) in which the Hon'ble Supreme Court whilst
considering the scope and effect of an explanation to Section 11 of the
Insolvency and Bankruptcy Code has held that the law has not stood still.
62. It is submitted that in Haldiram (supra), Shiv Developers (supra)
and Central Bank of India (supra) are clearly distinguishable on facts. In all
the aforesaid judgments the issue was whether the bar to sue under Section
69 of the Partnership Act would apply to the particular suits. None of the
judgments cited by the defendants are on interpretation of the Commercial
Courts Act. It is well settled that a judgment is an authority only for what it
decides and not what flows from the decision or what can be deduced
therefrom.
63. A bare perusal of Section 2 (1) (c) of the Commercial Courts Act
would show that the Legislature intended to define certain jural
relationships/transactions as commercial and the disputes arising out of
such jural relationships/transactions as commercial disputes. The purpose of
such classification is to set up an exclusive and dedicated Court system with
a special codified law in the form of the Act of 2015 to receive, try and
determine commercial disputes. The classification of the dispute is on the
basis of the jural relationship between the parties out of which the dispute
emanates and not the statue under which it is to be decided. A fortiori, a
commercial dispute would not cease to be a commercial dispute merely
because it is to be decided by application of any particular law. Accepting the
contention of the defendants would lead to an absurd situation where all
specified disputes would cease to be commercial disputes merely because the
determination of the merits thereof is to be done on the basis of a particular
statute.
64. Mr. Thakker by way of illustration has referred to section 2(1)(c)(i)
of the Commercial Courts Act, 2015 to show that "a dispute" arising out of
Section 2(1)(c)(i) i.e., "ordinary transactions of merchants, bankers, financiers
and traders such as those relating to mercantile documents, including
enforcement and interpretation of such documents" may involve reference to
Sale of Goods Act and Contract Act. Similar sub-section (v) relating to
"carriage of goods" may involve reference to the Carriage of Goods by Sea Act,
1925, Carriers Act, 1865 and Railways Act, 1989 in case of carriage of goods.
"Partnership agreements" under sub-section (xv) are to be governed by the
Partnership Act, 1932. Section 2(1)(c)(xvii) i.e., "intellectual property rights
relating to registered and unregistered trademarks, copyright, patent, design,
domain names, geographical indications and semiconductor integrated
circuits" are to be read in the light of provisions of the Trademarks Act,
Copyright Act etc.
65. It is submitted that if the argument of Mr. Bachawat is to be
accepted then suits enforcing the remedies for infringement or passing off
under the Trademarks Act would cease to be commercial disputes in spite of
being statutorily defined to be commercial disputes. The application of a
particular statute for instance, Transfer of Property Act or Premises Tenancy
Act, Securities Contracts (Regulation) Act of Sale of Goods Act cannot take
place in a vacuum without taking into consideration and determining the
jural relationship between the parties. In fact, Section 106 starts with the
words "In the absence of a contract to the contrary" and does not supersede
the contract between the parties as argued by the defendants. Also, Section
106 would not apply if there is no jural relationship of landlord and tenant
between the parties.
66. In responding to the submission that Deepak Polymers (supra)
was a judgment is sub silentio it has been submitted that it cannot be
disputed that there is no discussion on the purport, scope or effect of the
Explanation in Deepak Polymers (supra). The judgment in Deepak
Polymers (supra) is therefore passed sub silentio on this very vital issue and
Hon'ble Justice Rao was not bound to follow it. However, it will be clear from
paragraphs 25 and 26 of T. E. Thomson (supra) that Hon'ble Justice Rao did
not give a divergent opinion with a Co-ordinate Bench in the interest of
"judicial decorum". This approach is not unusual and cannot be faulted. Even
the Hon'ble Supreme Court refers matters of consequence to a Larger Bench
for eg. NBCC -Vs.- State of West Bengal 32 as would appear from paragraphs
53 to 56 of the report. It is therefore submitted that the reference be
answered by affirming the view of Hon'ble Justice Rao in T. E. Thomson
(supra).
67. In order to answer the questions, we need to refer to Section 6 of
the Commercial Courts Act, 2015 (in short "the Act of 2015"). The said
section 6 reads as follows:
"6. Jurisdiction of Commercial Court.--The Commercial Court
shall have jurisdiction to try all suits and applications relating to a
commercial dispute of a Specified Value arising out of the entire
territory of the State over which it has been vested territorial
jurisdiction."
68. The expression 'relating to' mentioned in section 6 is of wide
import. In order to decide whether a suit involves a commercial dispute, we
may have to refer to a definition of 'commercial dispute' as given in Section
2(1)(c) of the Act of 2015.
2. Definitions.--(1) In this Act, unless the context otherwise requires,--
.....
(c) "Commercial Dispute" means a dispute arising out of __
..... (emphasis supplied)
(2025) 3 SCC 440
69. The instant matter is in relation to a suit concerning an immovable
property. Hence for the present purpose, the discussion is confined to sub-
clause (vii) of Section 2 (1)(c) of the Act of 2015. The said sub-clause (vii) of 2
(1)(c) reads as follows:-
"2(1)(c)(vii)- agreements relating to immovable property used
exclusively in trade or commerce".
70. Section 6 read with the aforesaid clause of the Act of 2015 would
confer jurisdiction on the Commercial Court to decide a dispute arising out of
an agreement relating to immovable property used exclusively in trade or
commerce. The expression used "exclusively in trade or commerce" has not
been referred to the Special Bench and hence we are not expressing any view
on the said expression. The expressions "relating to" and "arising out of" are
of wide import and considered to be same and similar to the expression
"concerned with" or "connected with" the dispute, as would appear from the
decision of the Hon'ble Supreme Court in Mansukhlal Dhanraj Jain & Ors.
(supra) where in paragraphs 11, 14 to 16 the scope and ambit of these
expressions were considered. It is stated thus:-
"11. In order to resolve the controversy posed for our
consideration, it will be appropriate to note the relevant statutory
provision having a direct bearing on this question. Section 41(1) of
the Small Cause Courts Act reads as under:
"41. (1) Notwithstanding anything contained elsewhere in
this Act or in any other law for the time being in force but
subject to the provisions of sub-section (2), the Court of
Small Causes shall have jurisdiction to entertain and try all
suits and proceedings between a licensor and licensee, or a
landlord and tenant, relating to the recovery of possession
of any immovable property situated in Greater Bombay, or
relating to the recovery of the licence fee or charges or rent
thereof, irrespective of the value of the subject-matter of
such suits or proceedings."
...................................
14. So far as the first condition is concerned, a comprehensive
reading of the relevant averments in the plaints in both these
cases leaves no room for doubt that the plaintiffs claim relief on
the basis that they are licensees on monetary consideration and
the defendants are the licensors. The first condition is clearly
satisfied. Then remains the question whether the third condition,
namely, that the suits must relate to the recovery of possession of
immovable property situated in Greater Bombay is satisfied or
not. It is not in dispute that the suit properties are immovable
properties situated in Greater Bombay but the controversy is
around the question whether these suits relate to recovery of
possession of such immovable properties. The appellants
contended that these are suits for injunction simpliciter for
protecting their possession from the illegal, threatened acts of the
respondents/defendants. Relying on a series of decisions of this
Court and the Bombay High Court, Guttal, J., Pendse, J. and
Daud, J. had taken the view that such injunction suits can be
said to be relating to the possession of the immovable property.
Sawant, J. has taken a contrary view. We shall deal with these
relevant decisions at a later stage of this judgment. However, on
the clear language of the section, in our view, it cannot be said
that these suits are not relating to the possession of the
immovable property. It is pertinent to note that Section 41(1) does
not employ the words "suits and proceedings for recovery of
possession of immovable property". There is a good deal of
difference between the words "relating to the recovery of
possession" on the one hand and the terminology "for recovery of
possession of any immovable property". 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. Suits for
protecting such possession of immovable property against the
alleged illegal attempts on the part of the defendant to forcibly
recover such possession from the plaintiff, can clearly get covered
by the wide sweep of the words "relating to recovery of
possession" as employed by Section 41(1). 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; 'with to'."
It cannot be seriously disputed that when a plaintiff-licensee
seeks permanent injunction against the defendant-licensor
restraining the defendant from recovering the possession of the
suit property by forcible means from the plaintiff, such a suit does
have a bearing on or a concern with the recovery of possession of
such property. In the case of Renusagar Power Co, Ltd. v. General
Electric Co. a Division Bench of this Court had to consider the
connotation of the term 'relating to', Tulzapurkar, J. at page 471
of the report (SCC pp. 703-04, para 25) has culled out
propositions emerging from the consideration of the relevant
authorities. At page 471 proposition 2 has been mentioned as
under: (SCC p. 704, para 25) "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.
15. In Doypack Systems (P) Ltd. v. Union of India, another
Division Bench of this Court consisting of Sabyasachi Mukherji
(as he then was) and G.L. Oza, JJ. had an occasion to consider
this very question in connection with the provisions of Sections 3
and 4 of the Swadeshi Cotton Mills Co. Ltd. (Acquisition and
Transfer of Undertakings) Act, 1986. Sabyasachi Mukherji, J.
speaking for the Court, has made the following pertinent
observations in paras 49 and 50 of the report: (SCCp. 329)
"The words 'arising out of have been used in the sense that
it comprises purchase of shares and lands from income
arising out of the Kanpur undertaking. We are of the
opinion that the words 'pertaining to' and 'in relation to'
have the same wide meaning and have been used
interchangeably for among other reasons, which may
include avoidance of repetition of the same phrase in the
same clause or sentence, a method followed in good
drafting. The word 'pertain' is synonymous with the word
'relate', see Corpus Juris Secundum, Vol. 17, page 693. The
expression 'in relation to' (so also 'pertain ing toʻ'), 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, see State Wakf
Board v. Abdul Azeez', following and approving Nitai
Charan Bagchi v. Suresh Chandra Paul, Shyam Lal v. M.
Shyamlal and 76 Corpus Juris Secundum 621. Assuming
that the investments in shares and in lands do not form
part of the undertakings but are different subject-matters,
even then these would be brought within the purview of the
vesting by reason of the above expression s. In this
connection reference may be made to 76 Corpus Juris
Secundum at pages 620 and 621 where it is stated that the
term 'relate' is also defined as meaning to bring into asso
ciation or connection with. It has been clearly mentioned
that 'relating to' has been held to be equivalent to or sy
nonymous with as to 'concerning with' and pertaining to'.
The expression 'pertaining to' is an expression of expansion
and not of contraction."
16. It is, therefore, obvious that the phrase "relating to recovery
of possession" as found in Section 41(1) of the Small Cause
Courts Act is comprehensive in nature and takes in its sweep all
types of suits and proceedings which are concerned with the
recovery of possession of suit property from the licensee and,
therefore, suits for permanent injunction restraining the
defendant from effecting forcible recovery of such possession from
the licensee-plaintiff would squarely be covered by the wide
sweep of the said phrase. Consequently in the light of the
averments in the plaints under consideration and the prayers
sought for therein, on the clear language of Section 41(1), the
conclusion is inevitable that these suits could lie within the
exclusive jurisdiction of Small Cause Court, Bombay and the City
Civil Court would have no jurisdiction to entertain such suits.
(emphasis supplied)
71. The aforesaid decision was in connection with the jurisdiction of
Small Causes Court under section 41 quoted in paragraph 11 of the said
judgment. The suit was for injunction protecting possession and not for
recovery of possession. Still it was held to be, "related to and/or arising out
of" suit for recovery of possession which was within the jurisdiction of the
Small Causes Court.
72. The expression "arising out of" has received judicial interpretation
to include matters arising under as well as matters connected with as held in
the decision of the Supreme Court in State of Orissa vs. State of A.P33. In
State of Orissa (supra) a suit was filed by the state of Orissa against the
State of Andhra Pradesh claiming this suit relates to a dispute regarding the
boundaries between the States of Orissa and Andhra Pradesh. The State of
Orissa which is the plaintiff claims that certain villages which fell within the
territory of Orissa were being trespassed upon by the State of Andhra
Pradesh. The State of Andhra Pradesh raised certain preliminary objections
including inter alia, the objection that the suit was not maintainable before
this Court in its original jurisdiction by virtue of the proviso to Article 131 of
the Constitution of India. Proviso to Article 131 reads as follows:
"Article 131. Original jurisdiction of the Supreme Court - Subject
to the provisions of this Constitution, the Supreme Court shall, to the
exclusion of any other court, have original jurisdiction in any dispute--
(a) Between the Government of India and one or more Slates;
(b) between the Government of India and any State or States on
one side and one or more other States on the other; or
(c) between two or more States,
if and in so far as the dispute involves any question (whether of law or
fact) on which the existence or extent of a legal right depends:
[Provided that the said jurisdiction shall not extend to a dispute arising
out of any treaty, agreement, covenant, engagement, named or other
similar instrument which, having been entered into or executed before
the commencement of this Constitution, continues in operation after
(2006) 9 SCC 591
such commencement, or which provides that the said jurisdiction shall
not extend to such a dispute."
The said proviso was considered in paragraphs 16 and 17 of the report. It
was stated thus:-
16. The words "arising out of" used in the proviso to Article 131
have a been construed to have a wider meaning than "arising
under". (See Antonis P Lemos, All ER at p. 703 and Doypack
Systenns (P) Lid. v. Union of India.
17. The phrase may, therefore, include not only the matters
"arising under" but also matters "connected with" an instrument
of the kinds mentioned. Disputes, therefore, connected with an
instrument similar to the instruments mentioned in the proviso
would be beyond the scope of enquiry b by this Court."
(emphasis supplied)
73. As very aptly put by Mr. Mitra, learned senior counsel the criteria
therefore for determining whether a suit falls within the scope of Section
2(1)(c)(vii) as defined in the Act of 2015 would be as follows:-
(i) Whether the dispute is arising out of (i.e. connected with) an
agreement related to (i.e concerned with or connected with)
immovable property used exclusively in trade and commerce?
(ii) Any suit relating to (i.e. connected or concerned with)
commercial dispute as above will fall within the jurisdiction
of such commercial court as would have territorial
jurisdiction over the suit.
If we decide (i) in the affirmative, the dispute then would be a
commercial dispute, even if recovery of possession of immovable property or
realization of money out of immovable property given as security or it
involves any other relief pertaining to immovable property as classified by
Explanation (a) under Section 2 (1)(c) of the Act of 2015.
74. In respect of (ii) explanation appended to section 2(1)(c) would
apply which reads as follows:
"Explanation.--A commercial dispute shall not cease to be a
commercial dispute merely because--
(a) it also involves action for recovery of immovable property or for
realisation of monies out of immovable property given as security or
involves any other relief pertaining to immovable property;
(b) one of the contracting parties is the State or any of its agencies or
instrumentalities, or a private body carrying out public functions;
The explanation is in clear and plain language indicating legislative
intent that a commercial dispute shall not cease to be commercial dispute,
even if it also involves three categories mentioned in the explanation.
75. An explanation is an inseparable part of a statute as observed by
the Hon'ble Supreme Court in The Bengal Immunity Company Limited
(supra) in paragraph 286 which reads as follows:
"286. But then, it is contended that whatever the form in which
the Explanation may be couched, it could not be extended beyond
Art. 286(1)(a) and projected into Art. 286(2), and that unless that
was done, it was not possible to hold that the sales falling within
the Explanation are taken out of the purview of Art. 286(2). In my
opinion, this argument proceeds on a misconception of the real
reasoning on which the conclusion that the Explanation and Art.
286 (2) relate to two different subjects is based.
In view of the insistence with which this contention was
pressed by the appellant, it seems desirable to examine the
position in some detail. To start with, the two relevant
provisions to be considered are Article 286(1) (a) with the
Explanation and Article 286 (2). Omitting what is not
material, they would run follows:
286. (1) "No law of a State shall impose a tax on a sale,
where it takes place outside that State.
Explanation: A sale in the course of inter-State trade is
inside that State in which goods are actually delivered for
consumption.
(2). No law of a State shall impose tax on a sale in the
course of inter-State trade".
The argument of the appellant that Art. 286(2) is
comprehensive and includes all sales in the course of inter-
State trade and that therefore the sales covered by the
Explanation fall within its purview, takes into account only
Article 286 (2) and the Explanation, and it would have been
unassailable if the question had to be decided on a
construction only of these two provisions. But that,
however, is not the position. An explanation appended to a
section or clause gets incorporated into it, and becomes an
integral part of it, and has no independent existence- apart
from it. There is, in the eye of law, only one enactment, of
which both the section and the Explanation are two
inseparable parts. They move in a body if they move at all".
When, therefore, the question is whether sales falling
within the Explanation are comprised within Article 286 (2),
what has to be construed is that Article in relation to, not
merely the Explanation taken in isolation but to Article 286
(1) (a) read with the Explanation. If the matter is thus
considered, the resultant position might thus be stated.
Article 286 (1) (a) confers on States power to tax sales
inside their territory. Article 286 (2) prohibits them from
taxing sales in the course of inter-State trade.
Explanation to Article 286 () (a) enacts that sales in
the course of inter-State trade in which goods are delivered
for consumption in a State shall be deemed to have taken
place inside that State. The combined effect of all these
provisions is that States can tax sales in the course of inter-
State trade if they fall within the Explanation. This
conclusion is reached, it will be seen, not by reading the
Explanation into Article 286 (2) as a sort of exception but
giving to all the provisions the status of independent
enactments and determining what, on a construction of the
language, their respective spheres of operation are."
[Emphasis supplied]
76. As rightly argued by Mr. Mitra, that while interpreting section 2
(1)(c), the explanation appended thereto cannot be ignored as explanation is
an integral part of the enactment and is inseperable.
77. We accept the submission of Mr. Mitra that the explanation is in
clear and plain language indicating legislative intent that a commercial
dispute shall not cease to be commercial dispute, even if it involves three
categories of reliefs mentioned in the explanation. Since relief of recovery of
possession of immovable property would not be relevant to decide whether a
dispute is a commercial dispute, the question, whether notice under Section
106 of the Transfer of Property Act, 1882 is a statutory right or not, is not
necessary because that would not change a commercial dispute into non-
commercial dispute.
78. Insofar as notice under section 106 of the Transfer of Property Act
is concerned, it is well settled that section 106 of the Transfer of Property Act
lays down a rule of construction of the lease agreement which is silent on its
duration and reference may be made to the decision of the Delhi High Court
in Jagat Taran Berry (supra),34 and the Hon'ble Supreme Court in Samir
Mukherjee vs. Davinder K Bajaj & Ors, 35 paragraphs 5 to 8 and 14.
79. It would be apposite to refer to paragraph 7 of the Delhi High Court
in Jagat Taran Berry (supra) where the interplay between sections 106 and
107 as explained in Sati Prasanna Mukherjee and other v. Md. Fazel,36,
was accepted and quoted with approval. In Sati Prasanna Mukherjee
(supra) it was said:-
"Under section 106, Transfer of Property Act if the lease is for
manufacturing purpose it will be deemed to be a lease from year to
year. A lease from year to year under S. 107, Transfer of Property Act,
can be made only by a registered instrument. In this case there is
admittedly no registered instrument and it is a case of holding over
AIR 1980 Delhi 7
(2001) 5 SCC 259
AIR 1952 Calcutta 320
under oral arrangement. Although S. 106, Transfer of Property Act
provides that a lease for manufacturing purpose will be "deemed" to be
a lease from year to year that does not in my view exclude such lease
from the operation and requirement of S. 107, Transfer of Property Act.
A lease which under the law is "deemed" to be a lease from year to year
is in my view nonetheless "a lease from year to year" under Section 107
of the Act and must therefore satisfy the statutory requirement of
registration subject of course to the provision of S. 53A Transfer of
Property Act. No question of S. 53A of the Act arises here nor has any
Issue been raised on that point. I am therefore unable to hold that there
is a lease for manufacturing purpose in this case and answer Issue No.
1 in the negative."'
(emphasis supplied)
80. If the document in question does not specify any particular period
of tenancy and is completely silent in this regard, Section 106 Transfer of
Property Act would immediately attract. The said section lays down a rule of
construction for determining the duration of lease where the period is silent
nor fixed by any local law or usage. It says that a lease of immovable property
for any purpose other than agricultural or manufacturing shall be deemed to
be a lease for month to month terminable on the part of either lessor or lessee
by 15 days' notice expiring with the end of the month of tenancy. There is a
presumption for construing a lease which is not for agricultural or
manufacturing purpose as one form month to month.
81. The dispute in the aforesaid case was whether 15 days' notice
period is applicable for termination of unwritten lease agreement.
82. In Ram Kumar Das vs Jagdish Chandra Deo Dhabal Deb and
anr.,37 the Hon'ble Supreme Court considered the relative scope of sections
AIR 1952 SC 23: 1951 SCC 1111
106 and 107 of the Transfer of Property Act. It was observed and held as
under :-
"22. The section lays down a rule of construction which is to be
applied when there is no period agreed upon between the parties.
In such cases the duration has to be determined by reference to
the object or purpose for which the tenancy is created. The rule of
construction embodied in this section applies not only to express
leases of uncertain duration but also to leases implied by law
which may be inferred from possession and acceptance of rent
and other circumstances. It is conceded that in the case before us
the tenancy was not for manufacturing or agricultural purposes.
The object was to enable the lessee to build structures upon the
land. In these circumstances, it could be regarded as a tenancy
from month to month. unless there was a contract to the contrary.
The question now is, whether there was a contract to the contrary
in the present case ?"
[emphasis supplied]
83. In Samir Mukherjee (supra), it has been reiterated that Section
106 pre-supposes a period of tenancy agreement and lays down the rules of
construction of an agreement of lease express or implied, which does not
mention duration of the lease agreement. Duration is ascertained in
accordance with rules of construction prescribed by Section 106 of the T.P.
Act. By referring to the lease agreement for ascertaining the object and
purpose of the lease agreement, whether it is for agricultural or
manufacturing purpose or any other purpose. The existence of a valid lease is
a prerequisite to invoke the rule of construction embodied in Section 106.
84. Under Section 107 of the Act parties have an option to enter into a
lease in respect of an immovable property either for a term less than a year or
from year to year, for any term exceeding one year or reserving a yearly rent.
If they decide upon having a lease in respect of any immovable property from
year to year or for any term exceeding one year, or reserving a yearly rent,
such a lease has to be executed by a registered instrument. In the absence of
a registered instrument no valid lease from year to year or for a term
exceeding one year or reserving a yearly rent can be created. If the lease is not
a valid lease within the meaning of the opening words of Section 106 the rule
of construction embodied therein would not be attracted. This is the legal
position on a harmonious reading of both the sections.
85. The views of the Calcutta High Court in Sati Prasanna Mukherjee
(supra) was approved.
86. In the facts of the case, the Supreme Court observed that when
the rent reserved is an annual rent, the presumption would arise that the
tenancy was an annual tenancy unless there is something to rebut the
presumption. However, the difficulty in applying this rule in the said case
arose from the fact that a tenancy from year to year or reserving a yearly rent
can be made only by registered instrument, as laid down in section 107 of the
Transfer of Property Act and clearly held to be mandatory in Debendra Nath
Bhowmick v. Syama Prosanna Bhowmick. 38 In Debendra Nath
Bhowmick (supra) Mr Justice Woodroffe said:
"Then assuming that this case is governed by the Transfer of
Property Act I should like to notice the agreement that because an
annual rent was mentioned the tenancy must be taken to be a
yearly one. The lease was not for agricultural or manufacturing
purposes and therefore must, in the absence of a contract to the
contrary, be deemed to be a tenancy from month to month. It is said
1906 SCC OnLine Cal 83
here that there was such contract, for yearly tenancy is to be implied
from the mention of an annual rent. But when section 106 speaks of
a contract I think it means a valid contract. But in the present case
there is no such contract and under section 107 a lease such as is
argued for in this appeal can only be created by a registered
instrument and there is none here. The notice was therefore
sufficient so far as the tenancy is concerned." (emphasis supplied)
The aforesaid judgment has been approved in Ram Kumar Das
(supra) in paragraph 24.
87. The decision in Park Street Properties (supra) is an authority for
the proposition that a document which is required to be registered, if
unregistered is not admissible in evidence under Section 49 of the
Registration Act. In absence of a registered instrument no valid lease from
year to year or for a term exceeding one year or reserving a yearly rent could
be created. However, dehors the instrument parties can create a lease as
envisaged in the second paragraph of Section 107 TPA. It is observed in
paragraph 9, 10, 17 and 19 that Section 106 TPA, creates a deemed monthly
tenancy in those cases where there is no express contract to the contrary,
which is terminable at a notice period of 15 days. In the absence of a
registered instrument, the courts are not precluded from determining the
factum of tenancy from the other evidence on record as well as the conduct of
the parties. While Section 106 TPA does contain the phrase "in the absence of
a contract to the contrary", it is a well-settled position of law, that the same
must be a valid contract. As an unregistered lease deed for a period of more
than one year is not a valid lease within the meaning of the opening words of
Section 106 TPA, the rule of construction embodied therein would not be
attracted. Thus, in the absence of registration of such a document, what is
deemed to be created is a month-to-month tenancy, the termination of which
is governed by Section 106 TPΑ.
88. In the aforesaid decision Samir Mukherjee (supra) was relied upon
and Ram Kumar Das (supra) was referred. It would be clear from the said
judgment that reference to the lease agreement was made in paragraph 18
while considering the jural relationship of the parties and validity of the
notice.
89. The three Judge Bench decision in Anthony v. K. C Ittoop &
Sons39 was relied upon wherein it has been observed in paragraphs 13 and
16 as hereunder:
"13. When lease is a transfer of a right to enjoy the property and such
transfer can be made expressly or by implication, the mere fact that an
unregistered instrument came into existence would not stand in the
way of the court to determine whether there was in fact a lease
otherwise than through such deed.
16. Taking a different view would be contrary to the reality when
parties clearly intended to create a lease though the document which
they executed had not gone into the processes of registration. That
lacuna had affected the validity of the document, but what had
happened between the parties in respect of the property became a
reality. Non-registration of the document had caused only two
consequences. One is that no lease exceeding one year was created.
Second is that the instrument became useless so far as creation of the
lease is concerned. Nonetheless the presumption that a lease not
(2000) 6 SCC 394
exceeding one year stood created by conduct of parties remains
unrebutted." (emphasis supplied)
90. Paragraph 20 of the Park Street Properties (supra) has also made
it clear that the lease agreement is a vital document which is to be looked into
and an eviction proceeding cannot merely proceed only on the basis of a
notice under Section 106 of the Transfer of Property Act. The said paragraph,
inter alia, reads as under:
"20........ As is evident from the cases relied upon by the learned
Senior Counsel appearing on behalf of the appellant, the relevant
portions of which have been extracted supra. .........the contract
between the parties must be in relation to a valid contract for the
statutory right under Section 106 of the Act available to a leassor to
determinate the tenancy at a notice of 15 days to not be applicable."
(emphasis supplied)
91. The aforesaid paragraph makes it clear that the contract between
the parties has to be a valid contract which is only possible if the contract is
placed and considered in the said proceeding.
92. To summaries, a bare reading of section 106 of the Transfer of
Property Act will clearly indicate that the reference has to be made to the
lease agreement itself for determining the purpose of the lease. If it is for
agricultural or manufacturing purpose, then it will be a lease from year to
year, and if not, and for any other purpose, it will be a lease deemed to be
from month to month. The period of notice terminating the lease will depend
upon the purpose for which the lease has been given. Thus reference to
agreement of lease cannot be avoided.
93. A monthly tenancy is a tenancy from month to month. It is a result
of an agreement between the parties implied from their conduct of payment of
rent. It is of indefinite duration and continues from month to month until
determined. The enunciation of law by Justice Karia in The Utility Articles
Manufactuering Co. (Original Defendant) v. The Raja Bahadur Motilal
Bombay Mills Ltd.40 is illuminatory as it has lucidly laid down the nature of
periodical tenancies in the following words:
"The judgment of Mr. Justice Salter in Queen's Club Gardens
Estates, Ltd. v. Bignell, [[1924] 1 K.B. 117 at p. 134.] clearly
lays down the nature of these periodical tenancies. It is clear
that such periodical tenancies do not come to an end by the
efflux of time, for the simple reason that the time is not limited
by the original lease itself. It commences with the month, and
without any further action on the part either of the lessor or
lessee continues till either party determines it by giving one
month's notice. It is again material to note that the tenancy
during the second and third or fifteenth month is not a new
tenancy. It is always considered as a part of the original
tenancy. It will be wrong to contend that when the tenancy
commenced, the term was one month or two months, if without
any action on the part of any party it (the original tenancy)
continued, say for fifty years, if no one gave a notice
terminating the tenancy before that. It may thus continue for an
almost indefinite time, but might be brought to an end by either
ILR 1943 Bom 553: AIR 1943 Bom 306
party, without the consent of the other party. I therefore agree
that s. 110 is, in terms, inapplicable to periodical tenancies, and
in this case the monthly tenancy was a periodical tenancy.
That leaves the question what was the agreement between the
parties, apart from the meaning sought to be imposed on the
wording of the letter by reading s. 110? It seems to me clear
that the parties had arranged on July 30 for a lease which was
to commence on August 1. The provision that rent was to be
paid at the expiry of each month, and the provision for one clear
month's notice to determine the lease contained in the letter
indicate that the month contemplated was the English calendar
month. Any other argument will open up difficult questions
about the duration of the month, or when the notice would come
to an end. For instance, why should it not be considered a lunar
month? It seems to me, therefore, that the clear intention of the
parties was to treat this as a tenancy commencing on August 1,
and the whole argument raised on behalf of the appellants is
based on what I should say an inadvertent use of the word
"from" in this letter." (emphasis supplied)
94. Justice Gentle in Usharani Debi v. The Research Industries
Ltd. 41 upon noticing the view expressed by the Chief Justice
Beaumont in the Utility Articles Manufactuering Co. (supra)
observed:
"15. Reference was made in the course of the argument to a
decision of Sir John Beaumont, C.J., and Kania, J., of the
Bombay High Court, sitting on appeal from a decision of Chagla,
J., in the Ordinary Original Civil Jurisdiction of that Court,-- the
1945 SCC OnLine Cal 51: (1945-46) 50 CWN 461
case is The Utility Articles Manufacturing Co. v. The Raja
Bahadur Motilal Bombay Mills, Ltd. [I.L.R. [1943] Bom. 553.] . A
description of the nature of a monthly tenancy, which I have
ventured to express above, appears in the course of the judgment
of the learned Chief Justice at p. 563 of the Report. With/his
observations I respectfully agree, except that I would prefer, in
place of the words: "A monthly tenancy, that is, a tenancy
subject to a month's notice, creates in the first instance a tenancy
for two months certain," words to the effect that, "a monthly
tenancy is one which cannot be determined before the expiry of
two months." A monthly tenancy, in my view, is not a tenancy
which commences or begins in one month and on its expiry a
fresh tenancy is created in the following month or months, but is
one tenancy for an unstated period which is determinable by one
or other of the parties giving a notice to quit."
(emphasis supplied)
95. The learned amicus curie has referred to the aforesaid decisions for
better understanding at the nature of tenancy envisaged under Section 106 of
the Transfer of Property Act.
96. Suit for recovery of possession upon termination of monthly
tenancy by a notice under section 106 as submitted by Mr. Mitra, learned
senior advocate involves two main questions for determination
(i) Whether there is jural relationship of the landlord and tenant
between the plaintiff and the defendant?" This involves
reference to agreement of tenancy express or implied.
(ii) If so, whether the notice of termination of jural relationship
of landlord and tenant is valid?
97. In this regard we may refer to paragraphs 5 and 7 of the judgment
of the Hon'ble Supreme Court in M/s Payal Vision Ltd (supra) in which it
was observed and held as under:-
5. Mr Rai submitted that the defendant had no doubt disputed the title
of e the appellant-plaintiff and alleged that the land underlying the
superstructure had vested in the Gram Sabha but any such contention
was not available to her in view of Section 116 of the Evidence Act,
1872 that estopped a tenant from denying the title of the landlord.
Relying upon the decisions of this Court in Karam Kapahi v. Lal Chand
Public Charitable Trust and Charanjit Lal Mehra v. Kamal Sroj
Mahajan. Mr Rai argued that the High Court ought to have refused any
interference with the decree passed by the court below especially when
no triable issue arose for determination by the trial court.
7 In a suit for recovery of possession from a tenant whose tenancy is
not protected under the provisions of the Rent Control Act, all that is
required to be established by the plaintiff landlord is the existence of
the jural relationship of landlord and tenant between the parties and
the termination of the tenancy either by lapse of time or by notice
served by the landlord under Section 106 of the Transfer of Property
Act. So long as these two aspects are not in dispute the court can pass
a decree in terms of Order 12 Rule 6 CPC,......."
[emphasis supplied]
As observed in paragraph 8 in K. M. Manjunath (supra)
in a suit for eviction filed by the landlord the material questions
would be whether there was jural relationship of landlord -
tenant between the parties and whether tenancy was validly
terminated."
98. Thus, a suit involving termination of tenancy by a notice under
section 106 of the T.P. Act would primarily involve determination of existence
of jural relationship of landlord and tenant, by reference to the lease
agreement, express or implied. Termination of tenancy under Section 106 is
not the only question for consideration of the Court in a suit for recovery of
possession, where tenancy has been determined by a 15 days' notice under
section 106 of the T.P. Act. A notice of termination of tenancy under Section
106 of the T.P. Act for termination of lease from month to month implies
existence of lease agreement. It does not create a right to get recovery of
possession. The mode or manner of termination of the agreement of lease or
the relief claimed quo termination of the agreement is not the criterion to
decide the jurisdiction of the commercial court. The only requirement is that
the dispute should arise out of an agreement involving an immovable
property used exclusively in trade or commence. Merely the fact that it is a
dispute involving an immovable property would not be sufficient unless it is
used exclusively in trade or commence.
99. A suit is required to be filed after termination of the jural
relationship of landlord and tenant because under the settled law of the land,
even a trespasser cannot be evicted without recourse to due process of law.
The validity of notice under section 106 of T. P. Act if raised will have to be
determined by referring to the lease agreement. The period of the notice is
dependent upon the nature and character of the lease. The nature of the jural
relationship between landlord and tenant will be decided by referring to lease
agreement.
100. Relief cannot be the determinative factor in deciding the
character of the suit. The jurisdiction to entertain a claim is an important
factor. Relief is allowed or disallowed depending upon the merits of the case.
The relief for possession would not change the character of the suit if it is
otherwise a commercial suit involving a commercial dispute within the
meaning of Section 2(1)(c)(vii) of the Commercial Courts Act, 2015. Whether a
suit is a commercial suit within the meaning of Section 2(1)(c)(vii) has to be
determined in conjunction with Section 6 of the Commercial Courts Act, 2015
as the commercial courts shall have jurisdiction to try all suits and/or
application relating to commercial disputes of a specified value arising out of
the entire territory of the State over which it has been vested territorial
jurisdiction. The commercial dispute in the present case is a dispute arising
out of an agreement relating to immovable property. The commercial courts
is only required to find out at the initial stage for the purpose of jurisdiction
whether it is a dispute arising out of an agreement relating to immovable
property used exclusively in trade or commerce. In deciding the said
jurisdiction, the explanation is relevant as a commercial dispute would not
cease to be a commercial dispute, merely because it also involves action for
recovery of immovable properties and other reliefs mentioned in the said
explanation clause. We are not concerned whether the property in question is
used exclusively in trade or commerce or is to be used or is being used which
are the matters that may be decided at the trial of the suit. Moreover, it
appears that from the pleadings that the defendant has made a plea of
holding over. However, we are not required to go into such question.
101. The basic approach of the court is not to find out whether it is
enforcement of a statutory right. The argument of Mr. Bachawat that the
principle of Section 69(2) of the Partnership Act would also apply in
answering the reference was not argument made before Hon'ble Justice Rao.
In any event Section 69 (2) of the Partnership Act as rightly pointed out by
Mr. Anindya Mitra, learned amicus curie is drastically different from the
dispute with which we are presently concerned. The word "dispute" is not
synonymous to a "cause of action". A cause of action would arise where there
is an infringement of a right and it gives rise to a relief. A relief does not
control a cause of action. A cause of action may give rise to various reliefs.
The right to sue may arise out of a contractual right or a statutory right.
However, for the purpose of deciding as to whether a commercial court would
decide the commercial dispute, the reference to any statutory right or a
contractual right is immaterial. As rightly pointed out Mr. Thakker various
commercial disputes mentioned under Section 2(1)(c) of the Commercial
Courts Act, 2015 are to be established by reference to certain statutes as for
example, dispute arising out of 2(1)(c)(xvii) which relates to intellectual
property rights. All that is required to be seen as a threshold test is whether
the dispute is in relation to a "commercial dispute" as defined in Section
2(1)(c) of the Commercial Courts Act 2015. The explanation to the said
section is only clarificatory and it permits the commercial court to adjudicate
a dispute arising out of agreements relating to immovable property used
exclusively in trade or commerce if it also involves actions for recovery of
immovable property amongst others as mentioned in the explanation. In
other words, if an action is brought for recovery of immovable property used
exclusively in trade or commerce by necessary implication it would be a
dispute arising out of an agreement relating to immovable property. Over and
above it would be held and considered to be a "commercial dispute" within
the meaning of Section 2(1)(c) of the Commercial Courts Act, 2015 provided it
is of a specified value and has arisen in the territory of the State or within the
territory of the commercial courts established in the State.
102. Section 69(2) of the Partnership Act is a penal provision. It is a
disabling clause and it was held to be so in Haldiram (supra) in paragraph
21 which reads as follows:
"21. The above Report and provisions of the English Acts, in
our view, make it clear that the purpose behind Section 69(2) was
to impose a disability on the unregistered firm or its partners to
enforce rights arising out of contracts entered into by the plaintiff
firm with the third-party defendants in the course of the firm's
business transactions." (emphasis supplied)
103. The expression "arising from" a contract was considered in
Raptakos Brett & Co. Ltd. v Ganesh Property 42 paragraphs 22 and 23
which is stated below:
"22. The net effect of this discussion, therefore, is that the plaint as
framed by the plaintiff-respondent is based on a composite cause of
action consisting of two parts. One part refers to the breach of the
covenant on the part of the defendant when it failed to deliver vacant
possession to the plaintiff-lessor on the expiry of the lease after 15-3-
1985 and thereafter, all throughout, and thus it was guilty of breach of
1998 (7) SCC 184
Covenants 14 and 17 of the lease. The second part of the cause of
action, however, is based on the statutory obligation of the defendant-
lessee when it failed to comply with its statutory obligation under
Section 108(q) read with Section 111(a) of the Property Act. So far as
this second part of the cause of action is concerned, it cannot certainly
be said that it is arising out of the erstwhile contract.
23. However, one contention of learned Senior Counsel for the
appellant is required to be noted so far as this second part of the cause
of action is concerned. It was submitted that Section 108(q) of the
Property Act itself provides that it is subject to the contract or local
usage to the contrary and that Section 4 of the Property Act lays down
that the chapters and sections of this Act which relate to contracts shall
be taken as part of the Indian Contract Act, 1872. Our attention, in this
connection, was also invited to Section 1 of the Indian Contract Act,
1872 which provides that:
"Nothing herein contained shall affect the provisions of any Statute, Act
or Regulation not hereby expressly repealed, nor any usage or custom
of trade, nor any incident of any contract, not inconsistent with the
provisions of this Act."
We fail to appreciate how these provisions are of any assistance to the
learned Senior Counsel for the appellant. Section 108 of the Property Act
lays down that in the absence of a contract to the contrary, the rights
and liabilities of the lessor and lessee would be those which are
covered by the rules mentioned in that section. Consequently it must be
held that as compared to what is laid down by this section by way of
rights and liabilities to the lessor and lessee, if the contracting parties
have not provided anything to the contrary to such statutory rights and
liabilities in their contract, then these statutory rights and liabilities
would prevail. But if any contrary provision is mentioned in the contract
qua such rights and liabilities, then because of Section 4 of the Property
Act, such a contrary provision in the contract will get saved on the
combined operation of Section 4 of the Property Act and Section 1 of the
Indian Contract Act, 1872. But that would also be subject to the rider
that such an inconsistent contract should not be inconsistent with the
provisions of the Indian Contract Act. Thus in the absence of any
contrary provision in the contract, Section 108 will operate on its own. If
there is any contrary provision in the contract, it will prevail over the
provision in Section 108, provided such contrary provision in the
contract is not inconsistent with the main provision of the Indian
Contract Act. The combined operation of Section 108 and Section 4 of
the Property Act and Section 1 of the Indian Contract Act can be better
visualised by illustrations. Clause (b) of Part (A) of Section 108 deals
with the statutory rights of a lessor to put the lessee in possession of
the property leased at the lessee's request. That is the mandate of the
aforesaid statutory provision. This statutory right of the lessee and the
corresponding liability of the lessor can be subject to a contract to the
contrary. If under the contract of lease, the parties have agreed to a
stipulation that the lessor will put the lessee in possession after a
period, say, three or four months within which the lessor will effect
necessary repairs to the premises by way of whitewash, etc., then the
statutory right of the lessee to be put in possession on the extent of the
lease as per the said sub-section (b) would get curtailed or
superimposed by the contractual right of the lessor to wait for the
aforesaid period of delay and it will simultaneously cut across the
statutory right of the lessee to be put in possession on the latter's
request. Such a contrary provision in the contract will in its turn be
saved by Section 4 of the Property Act read with Section 1 of the
Contract Act as it in its turn is not inconsistent with any of the
provisions of the present Indian Contract Act. We may take another
illustration. Part B of Section 108 deals with the rights and liabilities of
the lessee. When we turn to clause (q) thereof, we find that there is a
statutory obligation of the lessee on the determination of the lease to put
the lessor in possession of the property. There can still be a contract
between the parties at the time of entering into lease or even thereafter
that on the determination of the lease, the lessee will be given six
months' time to remove his fixtures and to vacate the premises and
when such a locus poenitentiae is given to the lessee under the
contract by the lessor, the statutory obligation of the lessee flowing from
Section 108(q) immediately to put the lessor in possession of the
property on the determination of the lease would get superseded and
postponed by six months as stipulated in the contract. This will be a
contract contrary to what is statutorily provided under Section 108(q). It
is such a contract to the contrary which would be saved by Section 4 of
the Property Act as such a contract to the contrary is expressly saved
by Section 108 and it also cannot be said to be consistent with any of
the provisions of the Indian Contract Act. Hence Section 1 of the
Contract Act also will not hit the said contract to the contrary. Thus on a
conjoint reading of the statutory scheme of Section 108 and Section 4 of
the Property Act and Section 1 of the Contract Act, it must be held that
in the absence of such contrary legally permissible contracts, the
statutory rights and liabilities of the lessors and lessees as laid down
under Section 108 of the Property Act, especially Section 108(q) in the
present case, would remain fully operative by force of the statute itself.
It is not the contention of either side that there was any contract to the
contrary which permitted the lessee to continue in possession after the
determination of the lease by the efflux of time even for a day more. In
this connection, we may usefully refer to a decision of this Court. While
interpreting the phrase "contract to the contrary" as found in Section
108 of the Property Act, this Court in the case of Madan Lal v. Bhai
Anand Singh [(1973) 1 SCC 84] speaking through Shri Beg, J., held that
if the tenant on the determination of the lease wants to show that he is
not bound to hand over the vacant possession forthwith to the landlord
as he has paid the market value of the construction put in by him on the
leased premises, there should be an express term to the contrary in the
contract of tenancy which would override Section 108(q) obligation and
as in the case before this Court, there was no such express term to the
contrary in the lease deed, it was held that the obligation under Section
108(q) had to be complied with by the tenant. In this connection, the
following pertinent observations were made in para 4 of the Report as
under: (SCC pp. 86-87)
"If this had really been the intention of the parties, there was nothing to
prevent them from inserting such a term in the deed so as to make that
intention explicit. It appears to us that the more natural construction of
the clause is that rights of ownership, including the right to take
possession of the building, would become vested in the lessor at the
expiry of the period of the lease, and that 50% of the market value of the
building, which was to be paid in any case, became a condition
attached to this ownership of the building when it vested in the lessee.
The lessor was, in any case, to pay 50% of the market value of the
structure, and, in the event of a sale, the payment of this amount
became a first charge on the proceeds of sale. It is also significant that
it is not mentioned in the deed that a purchaser of the cinema house,
who would presumably prefer to obtain possession so as to be able to
run it, could not get possession of it until the market value was
ascertained or 50% of it was paid. Possession of a cinema house after
the expiry of a building lease involving the passing of ownership of the
building on such expiry is, after all, an important matter. In view of
Section 108(q) of the Transfer of Property Act the burden of proving 'a
contract to the contrary' was on the lessee; and, something to indicate
an agreement to the contrary should be there, on such a matter
involving a valuable right before this burden could be held to have been
duly discharged."
On the facts of the present case it has to be held that there is no
further locus poenitentiae given to the tenant to continue to remain in
possession after the determination of the lease by the efflux of time on
the basis of any such contrary express term in the lease. Consequently, it
is the legal obligation flowing from Section 108(q) of the Act which would
get squarely attracted on the facts of the present case and once the suit
is also for enforcement of such a legal right under the law of the land
available to the landlord, it cannot be said that the enforcement of such
right arises out of any of the express terms of the contract which would in
turn get visited by the bar of Section 69 sub-section (2) of the Partnership
Act. Consequently it has to be held that when para 2 of the plaint in
addition made a reference to the right of the plaintiff to get possession
under the law of the land, the plaintiff was seeking enforcement of its
legal right to possession against the erstwhile lessee flowing from the
provisions of Section 108(q) read with Section 111(a) of the Property Act
which in turn also sought to enforce the corresponding statutory
obligation of the defendant under the very same statutory provisions. So
far as this part of the cause of action is concerned, it stands completely
outside the sweep of Section 69 sub-section (2) of the Partnership Act.
The net result of this discussion is that the present suit can be said to be
partly barred by Section 69 sub-section (2) so far as it sought to enforce
the obligation of the defendant under clauses 14 and 17 of the contract of
lease read with the relevant recitals in this connection as found in para 2
of the plaint. But it was partly not barred by Section 69 sub-section (2)
insofar as the plaintiff based a part of its cause of action also on the law
of the land, namely, the Transfer of Property Act whereunder the plaintiff
had sought to enforce its statutory right under Section 108(q) read with
Section 111(a) of the Property Act. Enforcement of that right had nothing
to do with the earlier contract which had stood determined by the efflux
of time. The first point for determination, therefore, has accordingly to be
held partly in favour of the plaintiff and partly in favour of the defendant.
As the decree for possession is passed on the basis of both parts of
causes of action, even if it is not supportable on the first part, it will
remain well sustained on the second part of the very same cause of
action." (emphasis supplied)
104. The suit was held to be maintainable as the suit was based on
infringement of statutory rights under the Trade Marks Act. It is also based
upon the common law principles of tort applicable to passing off actions. The
suit is not for enforcement of any right arising out of a contract entered into
by or on behalf of the unregistered firm with third parties in the course of the
firm's business transactions. The suit is therefore not barred by Section
69(2). (See. Haldiram (supra) paragraph 27).
105. The issue was further considered with reference to Raptakos
Brett (supra) and Haldiram (supra) in Shiv Developers (supra) in paragraph
16 in which it was held as follows:
"16. In our view, the questions arising in this matter could be directly
answered with reference to the principles enunciated by this Court
in Raptakos Brett & Co. Ltd. v. Ganesh Property [Raptakos Brett & Co.
Ltd. v. Ganesh Property, (1998) 7 SCC 184] , which have further been
explained and applied by this Court in Haldiram Bhujiawala [Haldiram
Bhujiawala v. Anand Kumar Deepak Kumar, (2000) 3 SCC 250]
and Purushottam [Purushottam v. Shivraj Fine Arts Litho Works, (2007) 15
SCC 58] . We may take note of the principles vividly exposited in Haldiram
Bhujiawala [Haldiram Bhujiawala v. Anand Kumar Deepak Kumar, (2000)
3 SCC 250] that to attract the bar of Section 69(2) of the 1932 Act, the contract
in question must be the one entered into by firm with the third-party
defendant and must also be the one entered into by the plaintiff firm in the
course of its business dealings; and that Section 69(2) of the 1932 Act is not a
bar to a suit filed by an unregistered firm, if the same is for enforcement of a
statutory right or a common law right." (emphasis supplied)
106. It was clarified in Haldiram (supra) in paragraph 23 to 25 that
the bar must apply to a suit for enforcement of right arising from a contract
entered into by the unregistered firm with a third party in course of business
dealings with such third party. If the rights sought to be enforced does not
arise from a contract to which the unregistered firm is a party or is not
entered into in connection with the business of the unregistered firm with the
third party the bar of Section 69 (2) will not apply.
107. In Central Bank of India (supra) paragraphs 22 to 25 of
Haldiram (supra) were relied upon to return a finding that the cause of
action for the suit is based purely on the statutory obligation of the
petitioners/defendants under Section 108(q) read with Section 111(h) of the
TPA. In Central Bank of India (supra) the cause of action for filing the suit
arose after issuance of notice dated 7th July, 2000 and when pursuant to the
said notice petitioner/defendant did not vacate the suit premises upon expiry
of the period of notice. A notice under Section 106 of the TPA was issued.
108. The reference of the aforesaid three decisions in our considered
opinion is misplaced given the facts and circumstances of the case and the
issues involved. In the instant case we are only concerned with
understanding the jurisdiction of a commercial court in relation to the
dispute canvassed, if it can be tried by the Commercial Division of this court.
109. Since extensive arguments have been made with regard to the
interpretation of the phrase "arising out of" and "in relation to" immovable
property as interpreted in Ambalal (supra) we would like to refer to few of the
paragraphs relied upon by the parties.
"10. Be that as it may, the learned Senior Advocates on both
sides have sought to rely on the legal position decided by the
various High Courts in the absence of the pronouncement of this
Court. The learned Senior Advocate in that regard have referred
to the various decisions on the same point. However, we do not
find it appropriate to refer to each of them and over burden this
order since we notice that the High Court in fact has referred to
various decisions while deciding the instant case and has
thereafter arrived at its conclusion. The discussion as made by
the High Court with reference to the various decisions is also
justified. In that view, we would refer to the decision of a Division
Bench in Jagmohan Behl v. State Bank of Indore [Jagmohan Behl
v. State Bank of Indore, 2017 SCC OnLine Del 10706] relied on
by the learned Senior Advocate for the appellant. In that regard, it
is noticed that in the said case on taking note of the provision
contained in Section 2(1)(c)(vii) of the CC Act, 2015 it is held that
the dispute involved therein would constitute a commercial
dispute and the expression "arising out of" and "in relation to
immovable property" should not be given the narrow and
restricted meaning and the expression would include all matters
relating agreements in connection with the immovable properties.
The said conclusion reached was in a circumstance where the
immovable property in question was undoubtedly being used for
a trade or commerce and it was held so when the claim in the
suit is for recovery of rent or mesne profit, security deposit, etc.
for the use of such immovable property.
11. On the other hand, the learned Senior Advocate for the
respondents has relied on the decision of a Division Bench of the
Gujarat High Court in Vasu Healthcare (P) Ltd. v. Gujarat Akruti
TCG Biotech Ltd. [Vasu Healthcare (P) Ltd. v. Gujarat Akruti TCG
Biotech Ltd., 2017 SCC OnLine Guj 724 : AIR 2017 Guj 153]
wherein a detailed consideration has been made and the
conclusion reached therein by taking note of an earlier decision is
that on a plain reading of Section 2(1)(c) of the CC Act, 2015 the
expression "used" must mean "actually used" or "being used". It
is further explained that if the intention of the legislature was to
expand the scope, in that case the phraseology "likely to be used"
or "to be used" would have been employed. The verbatim
consideration therein is as hereunder: (SCC OnLine Guj para 33)
"33. Therefore, if the dispute falls within any of the Section
2(c) the dispute can be said to be "commercial dispute" for
which the Commercial Court would have jurisdiction. It is
required to be noted that before the learned Commercial
Court the original plaintiff relied upon Sections 2(c)(i), 2(c)(ii)
and 2(c)(xx) of the Commercial Courts Act only. The learned
counsel appearing on behalf of the original plaintiff has
candidly admitted and/or conceded that the case shall not
fall within Sections 2(c)(i); 2(c)(ii) or 2(c)(xx) of the Commercial
Courts Act. It is required to be noted that before the learned
Commercial Court it was never the case on behalf of the
original plaintiff that the case would fall within Section
2(c)(vii) of the learned Commercial Court. Despite the above
we have considered on merits whether even considering
Section 2(c)(vii) of the Commercial Courts Act, the dispute
between the parties can be said to be "commercial dispute"
within the definition of Section 2(c) of the Commercial Courts
Act or not? Considering Section 2(c)(vii), "commercial
dispute" means a dispute arising out of the agreements
relating to immovable property used exclusively in trade or
commerce. As observed hereinabove, at the time of filing of
the suit and even so pleaded in the plaint, the immovable
property/plots the agreements between the parties cannot
be said to be agreements relating to immovable property
used exclusively in trade or commerce. As per the agreement
between the party after getting the plots on lease from the
GIDC, the same was required to be thereafter developed by
the original Defendant 1 and after providing all
infrastructural facilities and sub-plotting it, the same is
required to be given to other persons like the original
plaintiff. It is the case on behalf of the original plaintiff that
as the original Defendant 1 has failed to provide any
infrastructural facilities and develop the plots and therefore,
a civil suit for specific performance of the agreement has
been filed. There are other alternative prayers also.
Therefore, it cannot be said that the agreement is as such
relating to immovable property used exclusively in trade or
commerce. It is the case on behalf of the original plaintiff
that as in clause (vii) of Section 2(c), the phraseology used is
not "actually used" or "being used" and therefore, even if at
present the plot is not used and even if it is likely to be used
even in future, in that case also, Section 2(c)(vii) shall be
applicable and therefore, the Commercial Court would have
jurisdiction. The aforesaid has no substance. As per the
cardinal principle of law while interpreting a particular
statute or the provision, the literal and strict interpretation
has to be applied. It may be noted that important words
used in the relevant provisions are "immovable property
used exclusively in trade or commerce". If the submission on
behalf of the original plaintiff is accepted in that case it
would be adding something in the statute which is not there
in the statute, which is not permissible. On plain reading of
the relevant clause it is clear that the expression "used"
must mean "actually used" or "being used". If the intention
of the legislature was to expand the scope, in that case the
phraseology used would have been different as for example,
"likely to be used" or "to be used". The word "used" denotes
"actually used" and it cannot be said to be either "ready for
use" or "likely to be used"; or "to be used". Similar view has
been taken by the Bombay High Court (Nagpur Bench) in
Dineshkumar Gulabchand Agrawal [Dineshkumar
Gulabchand Agrawal v. CIT, 2003 SCC OnLine Bom 1289 :
(2004) 267 ITR 768] and it is observed and held that the
word "used" denotes "actually used" and not merely "ready
for use". It is reported that SLP against the said decision
has been dismissed [Dineshkumar Gulabchand Agrawal v.
CIT, 2004 SCC OnLine SC 13] by the Hon'ble Supreme
Court." (emphasis in original)
13. The learned Senior Advocate for the appellant would
however, contend that a strict interpretation as in the case of
taxing statutes would not be appropriate in the instant case
where the issue relates to jurisdiction. In that regard, the learned
Senior Advocate has referred to the Statement of Objects and
Reasons with which the Commercial Courts Act, 2015 is enacted
so as to provide speedy disposal of high value commercial
disputes so as to create the positive image to the investors world
about the independent and responsive Indian legal system.
Hence, he contends that a purposive interpretation be made. It is
contended that a wider purport and meaning is to be assigned
while entertaining the suit and considering the dispute to be a
commercial dispute. Having taken note of the submission we feel
that 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. In the instant
case, as already taken note neither the agreement between the
parties refers to the nature of the immovable property being
exclusively used for trade or commerce as on the date of the
agreement nor is there any pleading to that effect in the plaint.
Further the very relief sought in the suit is for execution of the
mortgage deed which is in the nature of specific performance of
the terms of Memorandum of Understanding without reference to
nature of the use of the immovable property in trade or commerce
as on the date of the suit. Therefore, if all these aspects are kept
in view, we are of the opinion that in the present facts the High
Court was justified in its conclusion arrived through the order
dated 1-3-2019 [K.S. Infraspace LLP v. Ambalal Sarabhai
Enterprises Ltd., 2019 SCC OnLine Guj 1926] impugned herein.
The Commercial Court shall therefore return the plaint indicating
a date for its presentation before the Court having jurisdiction.
37. A dispute relating to immovable property per se may not be a
commercial dispute. But it becomes a commercial dispute, if it
falls under sub-clause (vii) of Section 2(1)(c) of the Act viz. "the
agreements relating to immovable property used exclusively in
trade or commerce". The words "used exclusively in trade or
commerce" are to be interpreted purposefully. The word "used"
denotes "actually used" and it cannot be either "ready for use" or
"likely to be used" or "to be used". It should be "actually used".
Such a wide interpretation would defeat the objects of the Act
and the fast tracking procedure discussed above.
38. On 3-11-2017, a Memorandum of Understanding was
executed between the appellant-plaintiff, respondent-defendant
and Ketan Bhailalbhai Shah, second respondent. As per the
terms of MoU, parties executed a deed of conveyance of the land.
A mortgage deed was executed simultaneously along with the
MoU with respect to the part of the land admeasuring 15,000 sq
ft in favour of the plaintiff. It was understood between the parties
that Respondent 1 would apply for change of land use permission
for the land in question on signing of the MoU. Mortgage deed
was executed by Respondent 1 in favour of the appellant in order
to ensure performance of obligations under the MoU. But the said
mortgage deed was not presented for registration.
39. It appears that the trial court has proceeded under the footing
that the parties to the suit more particularly, the appellant-
plaintiff seems to be carrying on business as estate agent and to
manage land, building, etc. and the very object as enumerated in
Memorandum and Articles of Association of the appellant-plaintiff
company established that the property in question is being used
exclusively in trade or commerce rather in the business of the
plaintiff. As rightly pointed out by the High Court, there is nothing
on record to show that at the time when agreement to sell came to
be executed in 2012, the property was being exclusively used in
trade and commerce so as to bring dispute within the ambit of
sub-clause (vii) of Section 2(1)(c) of the Act. Merely because, the
property is likely to be used in relation to trade and commerce,
the same cannot be the ground to attract the jurisdiction of the
Commercial Court." (emphasis supplied)
110. The narrow and restrictive meaning was confined to the user of
the property exclusively for trade or commerce and there has to be a finding
of fact that the land is, in fact, in present time, being used for commercial
purpose. The aforesaid decision in paragraph 14 has made it clear that
"neither the agreement between the parties refers to the nature of the
immovable property being exclusively used for trade or commerce as on the
date of the agreement nor is there any pleading to that effect in the plaint.
Further the very relief sought in the suit is for execution of the mortgage deed
which is in the nature of specific performance of the terms of Memorandum of
Understanding without reference to nature of the use of the immovable property
in trade or commerce as on the date of the suit."
111. It was further clarified in paragraph 37 where it has been
emphasized that the agreement must be relating to immovable property used
exclusively in trade or commerce and also it would be the duty of the
commercial court to find out as to whether at the time when the agreement
was concluded, the property was being used exclusively in trade or commerce
so as to bring the dispute within the ambit of sub-section (vii) of Section
(2)(1)(c) of the Act. It only determines the date of the cause of action to decide
the jurisdiction of the commercial court. In our respectful view, the said
judgment, is not an authority for the proposition that if a right emanates from
a statute it cannot be considered to be a commercial dispute within Section
(2)(1)(c) of the Act. Merely because the commercial court may be required to
refer to Section 106 TPA and the lease is determinable by service of notice
under Section 106 Section TPA, with a prayer for recovery of possession if the
breach had occurred by not delivering the possession upon expiry of the
notice period, would denude the commercial court of its jurisdiction to try
and determine such suit.
112. The judgment of the Division Bench of Delhi High Court in
Jagmohan Behl (supra) 43 is relevant. The facts are fairly similar. In this
case, the Trial Court had held that the suit did not relate to commercial
dispute. No right under the agreement relating to immoveable property was
sought to be enforced in this suit. The suit was only for recovery of rent and
mesne profits. The trial court's judgment was set aside by the Division Bench,
and it was held to be a commercial suit after referring to the relevant
sections, including the Explanation under Section 2(1)(c) of the Commercial
Courts Act, 2015. The observation and findings of the Division Bench as are
relevant for the present purpose are reproduced below:
"8. Learned single Judge by the impugned order dated 1st March, 2016,
referring to Section 2(1)(c)(vii) of the Act has held that the suit has to be
transferred to the district court as it does not relate to a commercial dispute for
no right under an agreement relating to immoveable property was sought to be
enforced, inasmuch as the suit only seeks recovery of rent and mesne profits. It
would be a suit under Section 9 of the Act and not pursuant to an agreement.
9. In order to appreciate the controversy, we would first reproduce the relevant
definition clause, i.e. 2(1)(c)(vii), as also the explanation thereto:-- "Definitions.-
(1) In this Act, unless the context otherwise requires- (c) "commercial dispute"
means a dispute arising out of- (vii) agreements relating to immoveable property
used exclusively in trade or commerce; Explanation.-A commercial dispute shall
not cease to be a commercial dispute merely because- (a) It also involves action
for recovery of immoveable property or for realisation of monies out of
immoveable property given as security or involves any other relief pertaining to
immoveable property; (b) One of the contracting parties is the State or any of its
agencies or instrumentalities, or a private body carrying out public functions;"
2017 SCC Online Del 10706: MANU/DE/2930/2017 : 2017 DHC - DB
10. The explanation in the present case has to be read as part and parcel of
clause (vii), for the language of the explanation shows the purpose, and the
construction consistent with the purpose which should be placed on the main
provision. The main provision, therefore, has to be construed and read in the
light of the explanation and accordingly the scope and ambit of sub-clause (vii)
to clause(c), defining the expression "commercial dispute", has to be interpreted.
The explanation harmonises and clears up any ambiguity or doubt when it
comes to interpretation of the main provision. In S. Sundaran Pillai v. V.R.
Pattabiraman (1985) 1 SCC 591, it was observed that explanation to a statutory
provision can explain the meaning and intendment of the provision itself and
also clear any obscurity and vagueness to clarify and make it consistent with
the dominant object which the explanation seems to subserve. It fills up the gap.
However, such explanation should not be construed so as to take away the
statutory right with which any person under a statute has been clothed or to set
at naught the working of the Act by becoming a hindrance in the interpretation
of the same.
11. Clause (c) defines the "commercial dispute" in the Act to mean a dispute
arising out of different sub-clauses. The expression "arising out of" in the
context of clause (vii) refers to an agreement in relation to an immoveable
property. The expressions "arising out of" and "in relation to immoveable
property"1 have to be given their natural and general contours. These are wide
and expansive expressions and are not to be given a narrow and restricted
meaning. The expressions would include all matters relating to all agreements
in connection with immoveable properties. The immoveable property should form
the dominant purpose of the agreement out of which the dispute arises. There is
another significant stipulation in clause (vii) relating to immoveable property,
i.e., the property should be used exclusively in trade or commerce. The natural
and grammatical meaning of clause (vii) is that all disputes arising out of
agreements relating to immoveable property when the immoveable property is
exclusively used for trade and commerce would qualify as a commercial
dispute. The immoveable property must be used exclusively for trade or
business and it is not material whether renting of immoveable property was the
trade or business activity carried on by the landlord. Use of the property as for
trade and business is determinative. Properties which are not exclusively used
for trade or commerce would be excluded.
12. The explanation stipulates that a commercial dispute shall not cease to be a
commercial dispute merely because it involves recovery of immoveable property,
or is for realisation of money out of immoveable property given as security or
involves any other relief pertaining to immoveable property, and would be a
commercial dispute as defined in sub-clause (vii) to clause (c). The expression
"shall not cease", it could be asserted, has been used so as to not unnecessarily
expand the ambit and scope of sub -clause (vii) to clause (c), albeit it is a
clarificatory in nature. The expression seeks to clarify that the immoveable
property should be exclusively used in trade or commerce, and when the said
condition is satisfied, disputes arising out of agreements relating to immoveable
property involving action for recovery of immoveable property, realization of
money out of immoveable property given as security or any other relief
pertaining to immoveable property would be a commercial dispute. The
expression "any other relief pertaining to immoveable property" is significant
and wide. The contours are broad and should not be made otiose while reading
the explanation and sub-clause (vii) to clause (c) which defines the expression
"commercial dispute". Any other interpretation would make the expression "any
other relief pertaining to immoveable property" exclusively used in trade or
commerce as nugatory and redundant.
18. Lease of immoveable property is dealt with under the Transfer of Property
Act in Chapter V thereof. The said enactment vide section 105 defines what is
lease, lessor, lessee and rent and vide section 107 stipulates how leases are
made and can be terminated. Leases can be both oral or in writing. Noticeably,
sub-clause (vii) to clause (c) in Section 2 of the Act does not qualify the word
"agreements" as referring to only written agreements. It would include oral
agreements as well. The provisions of the Transfer of Property Act deal with the
effect of non-payment of rent, effect of holding over and most importantly the
determination of the leases or their termination. It cannot be disputed that
action for recovery of immoveable property would be covered under sub-clause
(vii) to clause (c) when the immoveable property is exclusively used in trade or
commerce. Read in this manner, we do not think that claim for recovery of rent
or mesne profit, security deposit etc., relating to immoveable property which
was used exclusively in trade or commerce should not be treated as a
commercial dispute in view of the language, ambit and scope of sub-clause (vii)
to clause (c) to Section 2 of the Act. These would qualify and have to be
regarded as commercial disputes. The use of expression"any other relief
pertaining to immoveable property" would mean disputes relating to breach of
agreement and damages payable on account of breach of agreement would be
covered under sub-clause (vii) to clause (c) to Section 2 of the Act when it is
arising out of agreement relating to immoveable property exclusively used in
trade and commerce." (emphasis supplied)
113. The aforesaid judgment has been recently followed in Kartar
Singh Kochhar v. ICICI Bank Limited 44in which in paragraphs 22 to 24 it
was observed:
"Petitioner strongly relies on Deepak Polymers Private
Limited v. Anchor Investments Private Limited, 2021 SCC
OnLine Cal 4323. In the above matter, though the suit was for
possession of a property let out for commercial purpose, learned
Single Judge of Calcutta High Court observed that if a suit is filed
for recovery of possession in respect of immovable property on
the ground of forfeiture for contravention of any of the terms and
conditions of the agreement, it could be said to be a dispute
"arising out of" such agreement. However, observing that, the
dispute therein had arisen out of refusal by the defendants to
2024 SCC Online Del 6987
comply with the notice issued by the lessor under Section 106 of
the Transfer of Property Act, 1882, which was based on a
statutory right, independent and irrespective of any clause of the
lease agreements. Thus, it was held that such suit would
squarely arise out of a statutory right conferred by Section 106 of
the Transfer of Property Act, having no direct nexus with the
lease agreements in respect of the immovable properties
concerned. Resultantly, it was held that the precondition of the
applicability of Section 2(1)(c)(vii), that is, the emanation of the
dispute out of the lease agreement, was not satisfied. It is argued
that since the SLP challenging the above order was eventually
withdrawn, the above findings cannot be ignored. However, mere
withdrawal of SLP would not, ipso facto, make it a binding
precedent.
23. Moreover, the bare definition and the Explanation say it all.
24. The Explanation, as already extracted above, stipulates that
a commercial dispute shall not cease to be a commercial dispute
merely because it also involves action for recovery of immovable
property or for realisation of monies out of immoveable property
given as security or involves any other relief pertaining to
immovable property. Therefore, in my humble opinion, no
advantage can be dug out from Deepak Polymers Private
Limited (supra) as it seems that the kind attention of said Court
was never drawn to the wordings used in said Explanation."
(emphasis supplied)
114. The observation in the aforesaid decision that SLP was
withdrawn is factually incorrect as only one of the SLPs was withdrawn as
noticed in paragraph 31 above.
115. Section 106 is a substantive piece of legislation. It cannot be
considered to be a standalone provision for the purpose of deciding the
mutual rights of the parties. It only lays down the procedure to be followed in
terminating the lease. It does not provide a remedy. The remedy is provided in
the Code of Civil Procedure read with the schedule. However, the Commercial
Courts Act, 2015 has curved out few disputes and classified them as
commercial disputes to be exclusively decided by the Commercial Division
subject to the fulfilling the requirement of specified value.
116. Section 2(1)(c) defines a "commercial dispute" which means "a
dispute arising out of" a class of mattes mentioned therein. A dispute in
simple terms would mean a controversy - something which has been
questioned. It is not the same thing as a cause of action or a mere incurring
of a liability. A dispute may mean an argumentative contention and difference
of opinion. It can be a dispute of law as well as of fact. It can be a conflict of
claims or rights; an assertion of a right, claim, or demand on one side, met by
contrary claims or allegations on the other. (see Black's Law dictionary, 6th
Edn.)
117. A dispute of a commercial nature arises out of an agreement
and is resolved with reference to such an agreement with the possible
exception where the issue arises as to whether there is a concluded contract.
The dispute cannot arise in vacuum. The construction of the lease agreement
is essential to understand the validity of the notice under Section 106 of the
TPA. Hence one cannot disregard the agreement even when it is determined
under Section 106 of the TPA as settled by the catena of decision of the
Hon'ble Supreme Court few of which we have referred earlier.
118. We have been reminded by Mr. Anindya Kumar Mitra, Senior
Advocate that "no one is wiser then a statute" a submission made by late Dr.
Atul Chandra Gupta, a legal doyen of the Calcutta Bar, almost sixty years ago
before a Division Bench in interpreting a statue. This is in the context of the
relevance of the explanation in interpreting Section 2(1)(c)(vii) of the
Commercial Court Act. In harmonising the section with the explanation it is
imperative to understand the legislative intent.
119. A commercial dispute is thus determined under Section 2(1)
(c)(vi) of the Act of 2015. Explanation clarifies that a dispute shall not cease to
be a commercial dispute, merely because this is an action for recovery of
possession of immoveable property.
120. Right to file a suit is governed by the Code of Civil Procedure,
1908 (Section 26 of CPC), The suit is to be filed in accordance with the Rules
of procedure contained in the Schedule of the Code of Civil Procedure, 1908.
121. In the instant case as rightly pointed out by the learned amicus
curiae the instant suit involves a lease of immoveable property by holding
over under Section 116 of the T. P. Act. In this case, there were two separate
Deeds of Lease between the plaintiff and the joint lessees, and the period of
such lease expired by efflux of time on January 30, 1990 and February 28,
1990 respectively. But thereafter, the lessee continued to pay rent and the
lessor continuously accepted such rent even after expiry of the lease till
December 24, 2010, when the plaintiff suddenly stopped issuing rent
receipts. But even thereafter the plaintiff continued to encash the rent
cheques till March 2011. These facts would appear from the light of dates and
notes of argument submitted by the defendant No.1. The effect of holding over
is renewal of the original lease from year to year, or from month to month,
according to the purpose for which property has been leased, as laid down in
Section 116 of the T. P. Act. Since the lease in this case was not granted for
manufacturing or agricultural purpose, the lease after termination of the
original lease would be a lease from month-to-month by reason of Section
106 of the T. P. Act. We only referred to these facts to show that reference to
lease agreement is necessary.
122. In view of the aforesaid discussion we accept the submission of
Mr. Anindya Kumar Mitra, the learned Amicus Curie and answer the
questions in the manner following:
Q. (a) Whether after issuance of notice under Section 106 of the
Transfer of Property Act, 1882, the defendant or the parties cannot
rely on the agreement/lease deed as the case may be?
Answer- The lease agreement is to be looked into and considered for
deciding the nature and character of jural relationship of landlord and
tenant between the parties, that is to say, whether the lease
agreement is for manufacturing or agricultural purpose, upon which
will depend validity of notice under Section 106 of T P Act. The answer
is in the negative.
Q.(b) Whether only on the basis of the case initiated under Section
106 of the Transfer of Property Act, 1882, it can be said that Court
cannot look into the agreement between the parties and thus, the suit
cannot be treated as commercial suit in terms of Section 2(1)(c)(vii) of
the Commercial Courts Act, 2015?
Answer - This question is included by necessary implication in
question (a) and is answered in the negative.
(c) Whether if the Explanation Clause of Section 2(1)(c) of the
Commercial Courts Act, 2015 taken into consideration along with the
Section 106 of the, 1882, the suit can be treated as commercial suit in
terms of the lease agreement/rent agreement entered between the
parties?
Answer- Yes. Explanation clause is an integral part and parcel of the
Section 2(1)(c)(vii) of the said Act and has to be taken into
consideration for deciding whether it is a commercial dispute or not.
Explanation is very relevant because it reflects legislative intent that a
commercial dispute will not cease to be commercial dispute, even if
recovery of immoveable property is claimed, which will not change the
character of a dispute if it has been held to be commercial dispute
under Section 2(1)(c) (vii) of the said Act.
123. The reference is thus disposed of on the basis of the aforesaid
answers.
124. We record our appreciation for the assistance received from Mr.
Anindya Kumar Mitra, Senior Advocate assisted by Mr. Satrajeet Sen,
Advocate, Mr. Ranjan Bachwat, Senior Advocate and Mr. Krishnaraj Thakker,
Senior Advocate.
I agree (Soumen Sen, J.)
(Smita Das De, J.)
