Karnataka High Court
Mr Sanjay Kumar vs Elior India Food Services Llp on 2 June, 2023
Bench: M.Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 02ND DAY OF JUNE, 2023 R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.2584 OF 2023 (GM - RES)
BETWEEN:
MR.SANJAY KUMAR
S/O MAHESH NARAYAN SAHAY
AGED ABOUT 56 YEARS
R/AT: NESTATES, PALLADIUM
NO.547, 16TH 'A' MAIN
3RD BLOCK, KORAMANGALA
BENGALURU - 560 034.
... PETITIONER
(BY SRI NISHANTH A.V., ADVOCATE)
AND:
1. ELIOR INDIA FOOD SERVICES LLP
INCORPORATED UNDER THE LIMITED
LIABILITY PARTNERSHIP ACT, 2008
HAVING ITS OFFICE AT:
001, CAMPUS 3B, ECOSPACE,
OUTER RING ROAD, BELLANDURU
BENGALURU - 560 103
REPRESENTEDBY ITS
DESIGNATE PARTNER/
AUTHORIZED SIGNATORY
MR.ROHIT SAWHNEY.
... RESPONDENT
(BY SRI K.G.RAGHAVAN, SR. COUNSEL FOR
SRI PRASHANTH V.G, ADVOCATE FOR R-1;
2
R-2 TO R-4 ARE DELETED VIDE ORDER DATED 02.02.2023)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO RESTRAINING THE HONBLE
LXXXV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
COMMERCIAL COURT AT BENGALURU (CCH-86) FROM PROCEEDING
FURTHER IN CASE BEARING COM.M.A.NO.01/2023 PENDING
BEFORE THE HON'BLE COURT VIDE ANNX-J.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 14.03.2023, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
The petitioner is before this Court seeking a writ in the nature
of prohibition restraining the LXXXV Additional City Civil and
Sessions Judge, Commercial Court, Bengaluru from proceeding
further in the case bearing Commercial Miscellaneous Appeal No.1
of 2023 filed by the respondent.
2. Heard Sri A.V. Nishanth, learned counsel appearing for the
petitioner and Sri K.G.Raghavan, learned senior counsel appearing
for the respondent.
3. Facts in brief germane are as follows:
The respondent/Elior India Food Services LLP (hereinafter
referred to as 'the firm' for short) employs the petitioner under an
employment agreement on 26-10-2016. The firm later designates
the petitioner as partner and minor partner with a particular share
in the firm. The firm owing to certain omissions and commissions
on the part of the petitioner initiates inquiry by issuance of a charge
sheet on 10-05-2022. Calling upon the said proceedings, the
petitioner files a Commercial Arbitration Application in
Com.AA.No.88 of 2021 invoking Section 9 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as 'the Act' for short)
in furtherance of an arbitration clause in the employment
agreement before the Commercial Court on 13-05-2021.
4. During the pendency of the proceedings invoked by the
petitioner under Section 9, the petitioner was terminated from
service by the firm. At that stage, on 08-06-2021, the petitioner
invokes arbitration under Section 21 of the Act and issues a notice
to the firm. During the pendency of further proceedings under
Section 21 of the Act, the application under Section 9 of the Act
filed before the concerned Court comes to be dismissed. The
petitioner then files a commercial appeal before this Court in
Com.A.P.No.161 of 2021 which also comes to be dismissed by an
order dated 22-10-2021 by a Division Bench affirming the order
passed by the concerned Court in a case that was filed by the
petitioner invoking Section 9 of the Act. The petitioner did not
challenge the said order passed by the Division Bench of this Court.
Therefore, a three member Arbitral Tribunal comes to be
constituted in furtherance of clause 24 of the Arbitration Clause
under the Employment Agreement.
5. The first hearing of the Arbitral Tribunal was scheduled to
be conducted on 08-12-2021. The parties were represented and the
Tribunal directed completion of pleadings. The Arbitral Tribunal on
15-12-2022 answering the claimant's application under Section 17
of the Act passed an order, against which the firm files a
Commercial Miscellaneous Application before the Commercial Court
in Commercial M.A.No.1 of 2023 in which the petitioner herein files
his objections contending that the Commercial Court has no
jurisdiction to entertain the application. The Commercial Court in
terms of its order dated 30-01-2023 directs the counsel for the
petitioner to furnish a copy of the objections filed to the application
under Order 7 Rule 10 of the CPC, to hear the matter on merits as
also on jurisdiction and posted it to 01-02-2023. The order which
directs that the matter would be heard both on jurisdiction and on
merits is what drives the petitioner to this Court in the subject
petition.
6. The learned counsel appearing for the petitioner submits
that in terms of Section 2(1)(c) of the Commercial Courts Act, 2015
(hereinafter referred to as 'the 2015 Act' for short) the Commercial
Court would get jurisdiction only if it is a commercial dispute.
Commercial dispute is also defined under the 2015 Act. In terms of
Section 2(1)(c)(i) thereof the Commercial Court does not get
jurisdiction to entertain a challenge to the order passed by the
Arbitral Tribunal as it is not a commercial dispute. The learned
counsel would contend that since the issue of jurisdiction goes to
the root of the matter, the concerned Court ought to have decided
the issue of jurisdiction and after holding that it has jurisdiction it
can proceed with the consideration of the case on its merits. The
Court has posted the matter on 01-02-2023 to hear both on merits
of the matter as well as jurisdiction, which is erroneous in law is
what the learned counsel for the petitioner would submit.
7. On the other hand, the learned senior counsel appearing
for the respondent/firm would vehemently refute the submissions
to contend that the petitioner himself invoked Section 9 of the Act
before the Commercial Court which came to be dismissed. Against
the order passed by the Commercial Court, the petitioner files an
appeal which also comes to be dismissed by a Division Bench of this
Court. He does not choose to challenge the order passed by the
Division Bench. But, when the same jurisdiction is invoked by the
firm, challenging the interim order passed by the Commercial Court,
the petitioner questions the jurisdiction of the Commercial Court. It
is his submission that the petitioner cannot blow hot and cold and
once having chosen to invoke the jurisdiction, he has acquiesced in
the jurisdiction of the concerned Court. Therefore, the petition be
dismissed and the concerned Court be directed to proceed further.
8. The learned counsel for the petitioner, in reply to the
submissions would submit that any amount of consent or erroneous
jurisdiction invoked by a particular party would not confer
jurisdiction on a Court. If the Court has no jurisdiction it cannot
entertain the petition. He would seek an order/decision on
jurisdiction at the outset by the Court and then on merits of the
matter.
9. I have given my anxious consideration to the submissions
made by the respective learned counsel and have gone through the
material on record.
10. The firm employs the petitioner as a Chief Executive
Officer with effect from 01-02-2017 under an employment
agreement dated 26-10-2016. On the same day the firm issues a
letter confirming terms of appointment of the petitioner and his
entitlement to long term incentive plan as CEO of the firm setting
out the framework for the potential award of an exceptional bonus
remuneration as a supplement. The firm terminates petitioner's
employment by a notice of termination dated 17-05-2021, against
which the petitioner causes a legal notice dated 08-06-2021
demanding payment of various amounts including termination
allowance as per employment agreement and amount towards long
term incentive plan. The firm refuses to pay. The petitioner then
invokes the arbitration clause in the agreement contending that the
notice of termination was illegal and seeks award of payment of
`42.90 crores towards long term incentive plan and termination
allowance. The relevant prayer before the Arbitral Tribunal reads as
follows:
(e) Direct the respondent No.1 to pay to the claimant a sum
of `42.90,00,000/- (Rupees forty two crore ninety lakhs
only) as per the Long Term Incentive Plan Agreement
dated 26-10-2016 along with interest at the rate of 18%
per annum from 01-04-2021 till the date of realization."
Just before the claim could be made through the legal notice,
apprehending that he would be removed from service, the
petitioner knocks the doors of the Commercial Court in
Com.A.A.No.88 of 2021 invoking Section 9 of the Act in furtherance
of Clause 24 of the Employment Agreement which dealt with
arbitration to be the mode of dispute resolution. This was
admittedly before the Commercial Court. The Commercial Court
rejects the application of the petitioner under Section 9 of the Act in
terms of its order dated 17-06-2021 which was called in question
before this Court in Commercial Appeal No.161 of 2021. This Court
rejected the appeal on 22-10-2021. The rejection of the appeal
becomes final as the petitioner does not challenge. Therefore, the
Arbitral Tribunal was constituted before which the petitioner filed an
application under Section 17 of the Act. The Arbitral Tribunal in
terms of its order dated 15-12-2022 issues certain directions to
secure the amount so claimed by the petitioner. The conclusion of
the order passed by the Arbitral Tribunal on 15-12-2022 reads as
follows:
"Conclusion
40) Thus, the requirements for issuing a direction to secure
the amount in dispute in arbitration is made out. The
application is therefore allowed in part and the following
direction is issued by way of an interim measure to secure the
amount in dispute in the arbitration:
i) The First Respondent is prohibited from alienating or
transferring its business/assests/contracts to any
party till the disposal of this arbitration;
ii) The said prohibition as per (i) above shall cease to
operate, if the First Respondent furnishes security by
way of a Bank Guarantee for a sum of Rs.9 Crores, to
be in force for a period of one year (and to be
extended till the expiry of a period of three months
from the date of final award in this case.
iii) Any finding recorded or observation made in this
order, is for the limited purpose of considering
whether any interim measures should be ordered
under Section 17 of the Act and will
iv) be subject to the final award. Nothing contained in
this order shall therefore be treated as a finding on
merits.
v) The costs of the application will be considered at the
time of determining the costs in the final award.
(Note: This order is issued under the signature of the Presiding
Arbitrator with the consent and concurrence of the other
Members of the Tribunal, as permitted under Para III of the
Proceedings of the First Meeting dated 08.12.2021)."
The Arbitral Tribunal directs allowing the application filed under
Section 17 in part and restrains the firm from alienating or
transferring its business/assets/contracts to any party till the
disposal of arbitration dispute. It further directs furnishing of a
bank guarantee by way of security for a sum of `9 crores which
should be in force for a period of one year. The firm becoming
aggrieved of this, knocks at the doors of the Commercial Court in
Commercial Miscellaneous Application No.1 of 2023 and seeks an
interim order of stay of the order passed by the Arbitral Tribunal.
The petitioner files his objections before the Arbitral Tribunal now
taking a different stand that the firm could not approach the
Commercial Court as it was not a commercial dispute between the
parties. The Commercial Court for hearing the matter both on
merits as well as on jurisdiction passed an order on 30-01-2023
which reads as follows:
"Business: Both counsels present. Petitioner counsel
filed objections to IA u/O 7 R 10 CPC. Copy
furnished to respondent counsel. To hear on
merits and also on jurisdiction by 01-02-
2023.
Next Purpose: ARGUMENTS
Next hearing date: 1-02-2023
CCH-86 LXXXV ADDL.CITY CIVIL & SESSIONS JUDGE."
As per the aforementioned extract, the Commercial Court posts the
matter for arguments on both merits as well as on jurisdiction. The
petitioner is now before this Court calling in question the very
proceedings before the Commercial Court on the ground that it is
without jurisdiction.
11. To consider the aforesaid submission of the petitioner it is
germane to notice certain provisions of the 2015 Act. Section
2(1)(c) reads as follows:
"2. Definitions.--(1) In this Act, unless the context
otherwise requires,--
... ... ... ...
(b) "Commercial Court" means the Commercial Court
constituted under sub-section (1) of Section 3;
(c) "commercial dispute" means a dispute arising out of--
(i) ordinary transactions of merchants, bankers,
financiers and traders such as those relating to
mercantile documents, including enforcement and
interpretation of such documents;
(ii) export or import of merchandise or services;
(iii) issues relating to admiralty and maritime law;
(iv) transactions relating to aircraft, aircraft engines,
aircraft equipment and helicopters, including sales,
leasing and financing of the same;
(v) carriage of goods;
(vi) construction and infrastructure contracts, including
tenders;
(vii) agreements relating to immovable property used
exclusively in trade or commerce;
(viii) franchising agreements;
(ix) distribution and licensing agreements;
(x) management and consultancy agreements;
(xi) joint venture agreements;
(xii) shareholders agreements;
(xiii) subscription and investment agreements pertaining
to the services industry including outsourcing
services and financial services;
(xiv) mercantile agency and mercantile usage;
(xv) partnership agreements;
(xvi) technology development agreements;
(xvii) intellectual property rights relating to registered
and unregistered trademarks, copyright, patent,
design, domain names, geographical indications
and semiconductor integrated circuits;
(xviii) agreements for sale of goods or provision of
services;
(xix) exploitation of oil and gas reserves or other natural
resources including electromagnetic spectrum;
(xx) insurance and re-insurance;
(xxi) contracts of agency relating to any of the above;
and
(xxii) such other commercial disputes as may be notified
by the Central Government.
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".
Section 2 deals with definitions. Section 2(b) defines a Commercial
Court to mean a Commercial Court constituted under sub-section
(1) of Section 3. Section 2(1)(c) which forms the fulcrum of the
issue in the lis defines what is commercial dispute. Section
2(1)(c)(i) defines commercial dispute inter alia to mean ordinary
transactions of merchants, bankers, financiers including
enforcement and interpretation of documents. Clause (xviii) of sub-
section (c) of Section 2(1) defines a commercial dispute to be
arising out of agreements for sale of goods or provision of services.
12. The learned counsel for the petitioner has contended that
the dispute that is brought before the Arbitral Tribunal nowhere
comes within the meaning of Section 2(1)(c) of whatever clauses
they would be.
13. The learned senior counsel appearing for the respondent
would submit that agreement for sale of goods or provision of
services, would be commercial dispute. The dispute in the case at
hand arises out of Employment Agreement between the firm and
the petitioner as it is an agreement for provision of services of the
petitioner and, therefore, it becomes a commercial dispute.
14. In the light of the aforesaid submission, it is germane to
notice the agreement/contract between the parties to consider
commercial nature of the agreement, if any. The contract is entered
into between the petitioner and the respondent on 26-10-2016.
The preamble to the contract is as follows:
"Further to our recent discussions, we are pleased to confirm
the terms of your long-term incentive plan (the "LTI Plan")
as the Chief Executive Officer ("CEO") of Elior India Catering
LLP ("Elior India").
The LTI Plan sets out a framework for the potential award of
an exceptional bonus remuneration in recognition of your
contribution to the value creation for Elior India.
This letter-agreement sets forth the mechanics of the
LTI Plan and the conditions under which you shall be
entitled, subject to the terms and conditions set forth
herein, to receive this exceptional bonus remuneration
and constitutes a supplement to your employment
contract effective as of 1st February 2017. (the
"Employment Contract"). It supersedes any previous
letter or document that you may have received or we
may have agreed to, during the preparation of the LTI
Plan or prior to the date hereof, and forms the basis of
the award of the LTI Plan exceptional bonus
remuneration. This letter agreement shall enter into
force as on the effective date of the Employment
Contract. Elior India and Mr. Sanjay Kumar are
hereinafter collectively referred to as "Parties" and
individually as "Party".
(Emphasis added)
Both the parties agreed to a plan - a long term incentive plan.
According to the said plan, the petitioner is entitled to receive
exceptional bonus remuneration which constitutes supplement to
the employment contract with effect from 1-02-2017. It is in
supersession of any previous letter or document with certain
conditions stipulated therein wherein clauses of the said contract
are germane to be noticed and they read as follows:
"1. Exceptional bonus remuneration awarded upon satisfaction
of the Bonus Conditions
1.1 Allocated Amount
a) In the event where the Bonus Conditions (as set forth in
paragraphs a) and b) of the definition below) are satisfied
on the Maturity Date (as defined below), you will be
allocated, subject to the terms and conditions set forth
herein, an exceptional gross bonus remuneration in India
Rupees (the "Allocated Amount") computed under the
following mechanism:
Equity Value x 0.1
Allocated Amount (INR) =------------------------x Coefficient
0.64465
The Allocated Amount shall be calculated as at the Maturity
Date and shall, with any amount received or to be received by
you? In any event, notwithstanding anything to the contrary
herein, in the aggregate not exceed the Indian Rupees
equivalent of EUR 5 million (bases on the exchange rate
applicable on the Maturity Date), net of any taxes.
For the purposes of this paragraph a), the Equity value shall
be calculated by the Expert within two months following the
date on which the annual accounts of Elior India relating to the
Financial Year ended on the Maturity Date have been certified
by the statutory auditors of Elior India.
b) Alternatively, in the event where (x) only the condition set
forth in paragraph a) (Continued employment with Elior
India) of the definition of "Bonus Conditions" is satisfied on
the Maturity Date, and (y) the Fair Market Value is higher
than the aggregate of the enterprise values of Megabite
and CRCL, as determined at the time of the completion of
their acquisition by Elior India (and as appearing in the
legal documentation relating to such acquisitions), you will
be allocated, subject to the terms and conditions set forth
herein, an exceptional gross bonus remuneration in Indian
Rupees (the "Base Bonus Amount") compared under the
following mechanism (provided that such Base Bonus
Amount is a positive amount).
Equity Value x 0.04
Base Bonus Amount (INR) =------------------------
0.64465
For the purposes of this paragraph b), the Fair Market Value
shall be calculated by the Expert within two months following
the date on which the annual accounts of Elior India relating in
the Financial Year ended on the Maturity Date have been
certified by the statutory auditors of Elior India (and such
determination of the Fair Market Value by the Expert shall be
final and binding upon the Parties, save in the case of fraud).
1.2 Payment
The Allocated Amount, if owed to you in accordance with
paragraph 1.1 a) above, shall be paid in you in full by Elior
India within one month following the date on which the Equity
Value has been determined by the Expert.
Alternatively, if the Allocated Amount is not due by Elior India,
the Base Bonus Amount shall, as the case may be, be paid to
you in fully by Elior India Within one month following the date
on which the Fair Market Value has been determined by the
Expert.
1.3 Award of the Allocated Amount in the event of a
Legitimate Departure
Notwithstanding anything to the contrary herein, in the event
of a Legitimate Departure after 31st March 2018, but prior to
31st March 2021 (or, as the case may be, prior to 31st March
2022 or 2023, in the event where you have elected to
postpone the Maturity Date), you shall be entitled to receive
the Allocated Amount as calculated in accordance with
paragraph 1.1 a) (provided that the Performance Target, as
adjusted in order not to take into account the Financial Years
not yet ended as at the date of the Legitimate Daparture, is
fulfilled) or, as the case may be, the Base Bonus Amount as
calculated in accordance with paragraph 1.1 b).
In this case, the Allocated Amount or, as the case may be, the
Base Bonus Amount, shall be paid to you in full by Elior India
within one month following the date on which the Equity Value
(in the event that the Allocated Amount is due by Elior India)
has been determined by the Expert.
1.7 Governing Law-dispute resolution
For the avoidance of doubt, any disputes arising under
or in connection with this letter-agreement shall be
resolved in accordance with clauses 19 (Governing Law
and Jurisdiction) and 24 (Arbitration) of the
Employment Contract."
(Emphasis added)
Clause 1.1 deals with satisfaction of performance of service/
contract. The petitioner is to be allotted gross bonus remuneration
in Indian rupees computed in terms of a particular mechanism. The
formula is also indicated. Clause 1.2 deals with payment. The
allotted amount if owed to the petitioner would be paid to the
petitioner within one month of the following date on which the
equity value has been determined by the expert. Clause 1.3 deals
with award of the allocated amount in the event of legitimate
departure. Therefore, the severance of relationship between the
parties is also envisaged in terms of Clause 1.3. Clause 1.7 deals
with dispute resolution. The dispute resolution would be by way of
arbitration as obtaining in Clauses 19 and 24 of the original contract
of employment. The contract also deals with definitions and it
reads as follows:
"2. Definitions
Allocated Amount has the meaning set out in paragraph 1.1
Base Bonus has the meaning set out in paragraph 1.1
Amount
Bonus Conditions means the two following conditions:
a) continued employment with Elior India
Mr.Sanjay Kumar's continued
employment as CEO with Elior India from
(1st February 2017) until the Maturity
Date; and
b) Achievement of the Performance
Target
The fulfillment of at least one of the two
following performance conditions by Elior
India (the "Performance Target"),
calculated as of the Maturity Date.
i) The annual Organic Growth for the
Financial Year ended on the Maturity
Date is at least equal to 7% and/or
ii) the EBITDA Margin for the Financial
Year ended on the Maturity Date is at
least equal to 6.1%.
Cash means, with respect to Elior India and its
Subsidiaries, the sum of :
i) any positive balances in any deposit,
current or savings accounts:
ii) any corporate income tax
receivables;
calculated on a consolidated basis in
accordance with Indian GAAP."
The percentage of amount for payment of incentive is also defined
under the term bonus conditions. This is the term by and
understood as an employment contract. A separate employment
agreement is entered into between the parties. The remuneration
fixed to the petitioner is `20,000,000/-(Rupees Twenty million) as
base salary per year. Clause 10 thereof deals with termination of
employment. Clause 24 deals with resolution of disputes by way of
arbitration. It reads as follows:
"24. Arbitration
All disputes and differences whatsoever arising out of, or in
connection with this Agreement, shall be referred to arbitration
under the Arbitration and Conciliation Act, 1996, to be held in
Bengaluru. Disputes shall be referred to sole arbitrator and if
the parties are unable to agree on the appointment of the sole
arbitrator within 15 (fifteen) days from the date a party raises
a dispute, then by reference to a panel consisting of 03 (three)
arbitrators, with the LLP and the Employee empowered to
appoint 01 (one) arbitrator each and the third arbitrator shall
be appointed by two of the arbitrators. Arbitration awards
rendered shall be final and binding. Arbitration shall be
conducted in the English language."
All disputes arising out of or in connection with the Employment
Agreement would be referred to the arbitration under the Act.
Therefore, the dispute between the parties is arbitrable is not in
dispute.
15. The afore-quoted employment contract between the
parties for long term incentive plan in furtherance of the
Employment Agreement, that is entered into indicating the
conditions and nuances of work by the petitioner in the firm. The
long term incentive plan is indicated to be applied to the petitioner
at a particular sum, for particular action, by the petitioner, in favour
of the firm. Therefore, it is an incentive plan that is generated,
foundation of which is the employment contract between the
parties. The two are inseparable. Arbitration clause is found in the
employment agreement. The percentage of amount for payment of
incentive is indicated in the Employment Agreement. Therefore,
the issue now, would be whether, an Employment Agreement would
come within the meaning of Section 2(1)(c)(xviii) of the 2015 Act,
for the agreement to become a commercial dispute. Interpretation
of whatever nature that can be placed to the definition of
commercial dispute, as obtaining under Section 2(1)(c)(xviii) will
not lead to the subject agreement, to become an agreement for
services, as obtaining under the afore-quoted provision. The
provision relates to agreements of sale of goods or provision of
services. They cannot be read in isolation. A pure and simple
employment contract cannot be given a colour of a commercial
dispute by dressing it to be a provision of services.
16. If every Employment Agreement of the kind that is the
subject matter in the case at hand is brought within the ambit of
commercial dispute, it would then be opening a pandoras' box or
will be opening flood gates of litigation before the commercial
Court/s that would clog the said Court. This in effect would defeat
the very reason why the commercial Court was constituted. The
view of mine, in this regard, is fortified by the judgment of the Apex
Court in the case of AMBALAL SARABHAI ENTERPRISES LTD. V.
K.S. INFRASPACE LLP1 where the Apex Court interprets what is
and what could be a commercial dispute within several
enumerations under Section 2(1)(c) of the Act. The Apex Court has
held as follows:
"6. At the outset, it is noticed that the consideration
required in the instant case is as to whether the transaction
between the parties herein which is the subject-matter of the
suit could be considered as a "commercial dispute" so as to
enable the Commercial Court to entertain the suit. In that
regard, it is necessary to take note of Section 2(1)(c)(vii) of the
(2020) 15 SCC 585
CC Act, 2015. The said provision to the extent relevant is
extracted here below for reference.
"2. Definition.--(1) In this Act, unless the context
otherwise requires--
(a)-(b) * * *
(c) "commercial dispute" means a dispute arising out
of--
(i)-(vi) * * *
(vii) agreements relating to immovable property used
exclusively in trade or commerce;
(viii)-(xxii) * * *"
From a perusal of the provision relied upon by the learned
Senior Advocates it is noticed that the disputes arising out of
agreements relating to immovable property used exclusively in
trade or commerce will qualify to be a commercial dispute to be
tried by Commercial Courts. The question therefore would be
that, in the instant case though the parties have entered into a
sale transaction of the immovable property and presently in the
suit the registration of a mortgage deed pertaining to the
immovable property is sought, whether the immovable property
involved could be considered as being used exclusively in trade
or commerce.
7. The learned Senior Advocate for the appellant has
made detailed submissions referring to the documents to
contend that the appellant was running an industry in the land
concerned which was acquired for that purpose and presently
Respondent 1 has purchased the same for developing the said
land and in that view the land is one which is used for trade and
commerce. The learned Senior Advocate for the respondents on
the other hand has contended to the contrary that the appellant
had ceased to function for the past several years and the
company being defunct, the land involved was not being used
for trade or commerce and even though Respondent 1 has
sought for change of land use and to develop the land, the same
would be subject to such change of land use that would be
granted and the use to which it would be put in future. Hence it
is contended that as on the date of transaction the land is not
being used for trade or commerce and a suit at present would
not be maintainable before the Commercial Court.
8. Though such rival contentions are put forth by
the learned Senior Advocate on either side, these aspects
cannot be dealt with in abstract. Instead the nature of
the dispute and the jurisdiction to try the same is to be
reflected in the suit itself since in a civil suit the
pleadings, namely, averments in the plaint would at the
outset be relevant to confer jurisdiction. Hence before
adverting to the other aspects it would be necessary to
carefully examine the plaint. The plaintiff has in detail
referred to the nature of the transaction between the
appellant and the respondents herein. In Para 5 thereof
the detail of the land bearing R.S. No. 122 corresponding
to City Survey Nos. 1101 and 1100/1 having land area of
9207 sq m at Mouje Subhanpura Reg. District, Vadodara
is referred. Further the schedule of the property is
indicated in Para 6 and reference is made to the
Memorandum of Understanding where again the
reference is made to the land. It is averred therein that it
would be the total responsibility of Respondent 1 herein
(Defendant 2 in the suit) to change the land use as well
as to pay the amount that may be required for the
permission. The amount to be paid as premium is referred
and the right of the plaintiff to secure the mortgage deed
in view of the terms of the MoU is stated. In the entire
plaint there is no reference to the nature of the land or
the type of use to which it was being put as on the date
of the agreement to sell/sale deed/memorandum of
understanding or as on the date of the suit.
9. Further on referring to the cause of action in Para 21,
the plaintiff has thereafter referred in Para 22 to the jurisdiction
of the Court to hear and decide the matter. It would be
appropriate to extract the same which reads as hereunder:
"22. Jurisdiction: The plaintiff states that the defendants
having their office at Vadodara land which is the subject-matter
of the instant suit is situated within the territorial jurisdiction of
this Hon'ble Court and hence this Hon'ble Court has the
jurisdiction to hear and decide the matter."
Even though in the paragraph describing jurisdiction the
plaintiff has stated with regard to the territorial jurisdiction since
the office and land being at Vadodara, there is no reference
indicating the reason for which the plaintiff pleads that the court
which is the Commercial Court exclusively constituted to try the
commercial disputes has jurisdiction to try the instant suit. In
that background, a perusal of the prayer made in the plaint
would essentially indicate that the suit is one seeking for specific
performance of the terms of MoU whereunder it is agreed that
the mortgage deed be executed. Even if the immovable property
under the mortgage deed was the subject-matter it was
necessary to plead and indicate that the same was being used in
trade or commerce due to which the jurisdiction of Commercial
Court is invoked. Without such basic pleadings in the plaint, any
explanations sought to be put forth subsequently would only
lead to a situation that if an objection is raised, in every suit a
consideration would be required based on extraneous material
even to ascertain as to whether the intended transaction
between the parties was of such nature that it is to be construed
as a commercial dispute.
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)
12. Though we are informed that the said decision is
assailed before this Court in a special leave petition we are
inclined to agree with the view expressed therein. This is for the
reason that this Court while examining the issue relating to
exclusive land use, though in the different context has laid
emphasis on the present user of the land either for agriculture
or non-agriculture purpose being relevant. In that regard, the
decision relied on by the learned Senior Advocate for the
respondent in Federation of A.P. Chambers of Commerce &
Industry v. State of A.P. [Federation of A.P. Chambers of
Commerce & Industry v. State of A.P., (2000) 6 SCC 550] is
noticed, wherein it is observed as under: (SCC pp. 552-53,
paras 6 & 9)
"6. Section 3 of the said Act speaks of "land is used for
any industrial purpose", "land is used for any commercial
purpose" and "land is used for any other non-agricultural
purpose". The emphasis is on the words "is used". For the
purposes of levy of assessment on non-agricultural lands at the
rate specified in the Schedule for land used for industrial
purposes, therefore, there has to be a finding as a fact that the
land is in fact in praesenti in use for an industrial purpose. The
same would apply to a commercial purpose or any other non-
agricultural purpose.
***
9. We are in no doubt whatever, therefore, that it is only
land which is actually in use for an industrial purpose as defined
in the said Act that can be assessed to non-agricultural
assessment at the rate specified for land used for industrial
purposes. The wider meaning given to the word "used" in the
judgment under challenge is untenable. Having regard to the
fact that the said Act is a taxing statute, no court is justified in
imputing to the legislature an intention that it has not clearly
expressed in the language it has employed."
(emphasis supplied)
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."
(Emphasis supplied)
The Apex Court holds that issues which not relate to commercial
disputes are filed before the commercial Courts merely because of
high value and with the intention of seeking early disposal. Such
issues brought before the commercial Court should not be
entertained, as it is not intended to bring in every dispute before
the commercial Court by the law makers. The Apex Court further
holds that the excluded class of litigation will, in any event be
entertained, in the ordinary civil Courts wherein the remedy always
existed to add, does always exist.
17. It is also germane to notice what the petitioner
understood of the employment contract. A legal notice is caused
upon the firm by the petitioner making certain demand. The
preamble to the notice reads as follows:
"Under the instructions from my client Mr.Sanjay Kumar,
S/o Mahesh Narayan Sahay, aged about 56 years, Residing at
Nestates, Palladlum, No.547, 16th 'A' Main, 3rd Block,
Koramangala, BENGALURU: 560 034, I issue this Legal Notice
invoking Clause 17 of the Long-term Incentive Plan letter
seeking appointment of the arbitrator to adjudicate the dispute
between my client and you, with the following facts which are
necessary for your information:"
Invoking Clause 24 of the Employment Agreement which concerns
arbitration and Clause 17 of the long term incentive plan seeking
appointment of an Arbitrator to adjudicate the dispute between the
parties, the notice is issued. In the notice, the petitioner claims the
following amount:
"7. My client hereby states as per the employment
agreement and long-term incentive plan letter my
client is entitled emoluments including but not
limited to:
a) Long Term Incentive Plan allowance in terms of
the communication dated 26.10.2016 which was
accepted by my client where under my client will
be entitled Long Term Incentive Plan upto
maximum of 5 million Euros maturingon
31.03.2021.
b) Gross fixed salary of INR 2 crores per annum.
("base salary"). The base salary was increased to
INR 2.42 crores per annum effective 1st October
2019 vide letter dated 16th December 2019.
Contributions to provident fund, gratuity,
superannuation fund shall be in addition to the
fixed gross salary and performance linked bonus.
Any additional benefits offered by the LLP, to its
employees, at its discretion, from time to time
will also be applicable.
c) My client will be entitled Chauffeurs driven car,
reimbursement of expenses of maintenance, fuel,
300 Euros per month and access to club
membership 1200 Euros per year.
d) Further, it is offered in the event my client is
made redundant by M/s.Elior India, a termination
allowance equal to 18 months salary will be
calculated as 1/12th of the actual remuneration
over the 12 months preceding the redundancy
including annual bonuses, if any. The said
amount is in addition to the legal redundancy
allowance under the applicable laws in India."
The amount claimed by the petitioner is in terms of the method of
calculation adopted in the long term incentive plan. The petitioner
claims that the base salary was `2/- crores per annum and would
be increased to `2.42 crores per annum effective from 1-10-2019
and the long term incentive plan which was accepted by the
petitioner, the entitlement is up to a maximum of 5 million Euros as
on 31-03-2021. Paragraph 51 of the notice reads as follows:
"51. THEREFORE, my client hereby invokes Clause-24 of
the employment agreement and Clause 17 of the long-term
incentive letter, call upon you to comply the demand made in
previous paragraphs within 30 days from the date of
receiving of Legal Notice. In the event of not making the
payment of the aforesaid amount claimed above, my client
hereby calls upon you to agree the appointment of anyone of
the Arbitrator suggested above as Sole Arbitrator to
adjudicate dispute between my client and M/s.Elior India.
Therefore, my client hereby calls upon you forthwith to
constitute the Arbitral Tribunal consisting of sole arbitrator to
decide the above disputes. In the event of M/s.Elior India not
agreeing for Sole Arbitrator to adjudicate the dispute
between my client and M/s. Elior India, my client hereby
nominates Hon'ble Justice Shivaraj.V.Patil as the Arbitrator
on the side of my client and call upon you to nominate your
Arbitrator enabling both Arbitrators to appoint the Presiding
Arbitrator to constitute the Arbitral Tribunal between my
client and M/s.Elior India.
53. My client reserves the liberty to modify or make
additional claims if need be at a later stage."
The claim of the petitioner is the amount as indicated in the notice
quoted hereinabove. Therefore, what the petitioner claims is, the
incentive that was assured in the agreement. The agreement is an
offshoot of the Employment Agreement. Therefore, it cannot but be
held to be a contract of employment or a contract of incentive. It is
a money claim arising out of an Employment Agreement.
Therefore, the submission that commercial Court gets jurisdiction in
terms of the afore-quoted provision is unacceptable, in the light of
what the Apex Court has held in AMBALAL (supra).
18. Insofar as the submission of the learned senior counsel
for the respondent that the petitioner himself chose the commercial
Court earlier, is concerned, it is no doubt true that the petitioner
invoked the jurisdiction of the commercial Court by filing an
application under Section 9 of the Act. The commercial Court
dismisses the claim. The petitioner then challenges the dismissal
by the commercial Court before this Court. This Court affirms the
finding of the commercial Court. The petitioner does not take the
issue further. The firm then invoked Section 34 of the Act and
instituted a commercial suit in Com.S.No.5/2022 before this Court
challenging interim award passed by the Arbitral Tribunal on
13-05-2022 quoted supra in the arbitration proceedings. This very
argument of jurisdiction of maintainability of the claim of the
petitioner before this Court in the commercial side was questioned.
The co-ordinate bench of this Court did not go into whether the
dispute between the parties would become a commercial dispute
within Section 2(1)(c)(xviii) of the Act. Therefore, if the petitioner
has invoked a wrong jurisdiction i.e., that of the commercial Court
in a dispute, it would not become a commercial dispute, unless it
comes within the definition of Section 2(1)(c) and the clauses
therein, as it is settled principle of law, no amount of consent of the
parties can confer jurisdiction on any Court or Tribunal and it is
equally settled principle of law that merely because a party invokes
a wrong jurisdiction and a determination is made by the concerned
Court without the parties objecting to it, will not clothe such Court
with jurisdiction dehors the statute and become binding on any
subsequent proceeding before this Court.
19. In view of the preceding analysis, I have no hesitation to
hold that the dispute between the parties is not a commercial
dispute within the meaning of Section 2(1)(c)(xviii) of the Act and
therefore, the commercial Court ought not to have entertained the
dispute.
20. For the aforesaid reasons, the following:
ORDER
(i) Writ Petition is allowed.
(ii) It is declared that the concerned LXXXV Additional City
Civil and Sessions Judge, Commercial Court, Bengaluru
has no jurisdiction to consider and adjudicate MA
No.1/2023 and therefore, the proceedings stand
obliterated.
(iii) The obliteration of the proceedings will not come in the
way of the parties agitating their respective rights
before the competent Civil Court.
(iv) In the event proceedings are instituted before the
competent Civil Court, the findings, observations if any,
made by the Commercial Court, will not influence or
bind the proceedings before the said Civil Court.
Sd/-
JUDGE
bkp
CT:MJ
