[Cites 18, Cited by 0]
Madras High Court
R. Sujatha @ Sujatha Kalla Gowder vs Kanaka Bhaskaran on 28 November, 2025
S.A.No.603 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 28.11.2025
CORAM
THE HONOURABLE MRS.JUSTICE K.GOVINDARAJAN
THILAKAVADI
S.A.No.603 of 2025 and C.M.P. No.20917 of 2025
R. Sujatha @ Sujatha Kalla Gowder ...Appellant
Vs.
Kanaka Bhaskaran
Represented by her
Power Agent Anandraj Bhaskaran ...Respondent
Prayer : Second Appeal filed under Section 100 CPC, 1908 against the
judgment and decree dated 23.09.2024 passed in A.S. No.18 of 2024, on
the file of the District Court, Nilgiris at Udhagamandalam, confirming
the Judgment and decree dated 29.01.2024 passed in C.O.S.No.02 of
2023, on the file of the Sub Court at Coonoor.
For Appellant : Mr. K.V. Sajeev Kumar
Page 1 of 30
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S.A.No.603 of 2025
for Ms. Reshmi Christy
For Respondent : Mr.N.R. Elango, Senior Advocate
for Mr. G.R.Deepak
JUDGMENT
This Second Appeal is preferred against the judgment and decree
dated 23.09.2024 in A.S. 18/2024 on the file of District Judge, Nilgiris at
Udagamandalam, confirming the judgment and decree dated 29.01.2024
in C.O.S.No. 2/2023 on the file of Sub Court, Coonoor.
2. The unsuccessful defendant is on appeal.
3. For the sake of convenience, the appellant has been described as
the 'defendant' and the respondent has been described as the 'plaintiff'.
The aforesaid suit pertains to recovery of possession (eviction) and
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recovery of money payable by the defendant as rental arrears and
compensation. It is not in dispute that the suit property was given on rent
to the defendant in the year 2022 for a monthly rent of Rs.1,00,000/-. 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.
4. The plaintiff has filed the above suit to direct the defendant to
quit and deliver the vacant possession of the suit property in Door
No.5/39 J “Anand Bhavan”, Corsley Thandhanad Road, Kothagiri,
described as Item No.1 and 2 in the schedule of property to the plaintiff;
to direct the defendant to pay a sum of Rs.2,80,000/- being dues payable
as on 20.11.2022 to the plaintiff; to direct the defendant to pay a sum of
Rs.2,00,000/- per month towards double the monthly rent as
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compensation for use and occupation of the suit property to the plaintiff
from 21.11.2022 till such date of vacating and handing over the vacant
possession of the suit premises and for costs.
5. The case of the plaintiff in brief:
5.1. The plaintiff and the defendant entered into a registered rental
agreement on 20.05.2022 in respect of the suit property for a period of 11
months at a monthly rent of Rs.1,00,000/-. According to the plaintiff, the
suit premises was let out for commercial purpose for running a hotel and
lodge under the name and style M/s. White House Resort. Since the
defendant defaulted in payment of rent willfully, the plaintiff issued a
legal notice terminating the rental agreement. In spite of termination of
rental agreement, the defendant neither paid the rent nor vacated the suit
property. Since the suit premises was let out for commercial purpose, he
was constrained to file a commercial suit. Hence, the suit in C.O.S. No.02
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of 2023.
6. The above suit is resisted by the defendant stating that there was
no breach of agreement and the rents are regularly paid by the defendant.
While so, the plaintiff enhanced the monthly rent from Rs.1,00,000/- to
Rs.2,00,000/-, exploiting the vulnerable position of the defendant. It is
further submitted that the defendant had spent a sum of Rs.6,00,000/- on
improvements based on the oral instructions from the plaintiff. It is
submitted that the above suit is a counter blast to her reimbursement
claim and hence, the same is liable to be dismissed.
7. The trial court, after analysing the oral and documentary
evidence, partly allowed the suit by directing the defendant to pay a sum
of Rs.1,40,000/- towards the rental arrears as on 20.11.2022 and a sum of
Rs.1,00,000/- per month towards compensation for the unauthorised use
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and occupation of the suit property from 21.11.2022 till handing over of
vacant possession of the same to the plaintiff. Aggrieved over the same,
the defendant filed the appeal suit in A.S. No.18 of 2024 before the
District Court, Nilgiris at Udhagamandalam. The first appellate court
dismissed the appeal suit vide its judgment and decree dated 23.09.2024
with cost of Rs.10,00,000/- to be paid by the defendant to the plaintiff.
Challenging the same, the present Second Appeal has been preferred by
the defendant.
8. Based on the order passed by the learned Single Judge in CRP
SR No.111684 of 2025, this Second Appeal is preferred before this Court.
9. Admittedly, the suit is registered as a commercial suit covered by
the Commercial Courts Act, 2015. However, there is a controversy
whether the suit ought to have been registered as a regular suit or as
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commercial suit.
9.1. In order to appreciate the controversy, the relevant definition
clause, i.e., 2(1)(c)(vii) of Commercial Courts Act, 2015, and the
explanation thereto is reproduced as under :
“Definitions.-(1) In this Act, unless the context otherwise
requires-
(c) “commercial dispute” means a dispute arising out of-
(vii) agreements relating to immovable 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 immovable
property or for realization 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;”
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9.2. 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 sub-serve. 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
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clothed or to set at naught the working of the Act by becoming a
hindrance in the interpretation of the same.
9.3. 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 immovable property. The expressions “arising out of” and
“in relation to immovable property” 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
immovable properties. The immovable 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 immovable
property, i.e., the property should be used exclusively in trade or
commerce. The natural and grammatical meaning of clause (vii) is that all
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disputes arising out of agreements relating to immovable property when
the immovable property is exclusively used for trade and commerce
would qualify as a commercial dispute. The immovable property must be
used exclusively for trade or business and it is not material whether
renting of immovable 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.
9.4. The explanation stipulates that a commercial dispute shall not
cease to be a commercial dispute merely because it involves recovery of
immovable property, or is for realization of money out of immovable
property given as security or involves any other relief pertaining to
immovable property, and would be a commercial dispute as defined in
sub-clause (vii) to clause (c). The expression “shall not cease”, it could be
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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 immovable property should be
exclusively used in trade or commerce, and when the said condition is
satisfied, disputes arising out of agreements relating to immovable
property involving action for recovery of immovable property, realization
of money out of immovable property given as security or any other relief
pertaining to immovable property would be a commercial dispute. The
expression “any other relief pertaining to immovable 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
immovable property” exclusively used in trade or commerce as nugatory
and redundant.
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9.5. Harmonious reading of the explanation with sub-clause (vii) to clause
(c) would include all disputes arising out of agreements relating to
immoveable property when used exclusively for trade and commerce, be
it an action for recovery of immoveable property or realization of money
given in the form of security or any other relief pertaining to immoveable
property.
10. In the context of the present case, it is not disputed that the
immovable property was being used for commercial purpose, i.e., for
running a hotel and a lodge by the defendant. The next question, which
arises for consideration, is whether a suit involving action for recovery of
rental arrears and compensation is a dispute arising out of agreements
relating to immovable property, is a commercial transaction. In the
present case, we are dealing with a property given on rent, for being
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exclusively used for trade and business. Order XX Rule 12 CPC
stipulates that when a suit is filed for recovery of possession and for rent,
the Court can pass a decree for possession of the property and also for
recovery of rents.
10.1. Lease of immovable 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
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action for recovery of immovable property would be covered under sub-
clause (vii) to clause (c) when the immovable 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 immovable 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 immovable 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 immovable property exclusively used in trade and
commerce.
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11. Now the question arises, whether this Second Appeal is
maintainable against the judgment and decree passed by a Commercial
Appellate Court.
11.1. When the Commercial Courts Act, 2015, came into force with
effect from 23.10 2015, it enactment contemplated a Commercial Court at
the level of the District Judge and a Commercial Division at the High
Court. In other words, there was no Commercial Court below the level of
the District Judge. Appeals from the orders of the Commercial Court
(District Judge) and the Commercial Division were to lie to the
Commercial Appellate Division (Division Bench) under Section 13 of the
Act.
11.2. Section 13 of the Commercial Courts Act, 2015 prior to its
amendment vide Central Act 28 of 2018 was as follows:
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"13 (1) Any person aggrieved by the decision of the
Commercial Court or Commercial Division of a
High Court may appeal to the Commercial Appellate
Division of that High Court within a period of sixty
days from the date of judgment or order, as the case
may be:
Provided that an appeal shall lie from such orders
passed by a Commercial Division or a Commercial
Court that are specifically enumerated under Order
XLIIl of the Code of Civil Procedure, I908, as
amended by this Act and section 37 of the
Arbitration and Conciliation Act, 1996.
(2) Notwithstanding anything contained in any
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other law for the time being in force or Letters
Patent of a High Court, no appeal shall lie from
any order or decree of a Commercial Division or
Commercial Court otherwise than in accordance
with the provisions of this Act."
Section l3(1), as it originally stood, was in two parts: Section 13(1)
contemplated appeals against decrees (though titled "decision") while the
proviso contemplated appeals against certain orders as enumerated in
Order 43 CPC. In either case, an appeal was to lie from decrees and
orders of the Commercial Division or Commercial Court (District Judge
level) to the Commercial Appellate Division of the High Court. Section
13(2) en grafted a bar that no appeal would lie from any decree or order
of the Commercial Court or Commercial Division otherwise than in
accordance with the provisions of the Act.
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11.3. The Commercial Courts Act, 2015 was amended by Central
Act 28 of 2018. Section 3(3) of the Act was amended to enable the State
Government, with the prior consultation of the High Court, to establish
Commercial Courts below the level of the District Judge. Simultaneously,
Section 3-A was introduced enabling the State Government to constitute
Commercial Appellate Courts at the level of the District Judge. These
Commercial Appellate Courts were to hear appeals against decrees and
orders of the Commercial Courts, below the level of the District Judge.
This was achieved by substituting a new Section 13(1) providing that an
appeal shall lie from a Commercial Court, below the level of the District
Judge, to the Commercial Appellate Court at the District Judge level. The
old Section 13(1) was now renumbered as Section 13(1-A) and provided
for appeals from the Commercial Court (DJ Level) and Commercial
Division to the Commercial Appellate Division of the High Court.
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11.4. Though Section 13(1) was amended, Parliament did not
correspondingly make any amendment to Section 13(2) of the Act.
Section 13(2) remains as it originally was and states that "no appeal shall
lie from any order or decree of a Commercial Division or Commercial
Court otherwise than in accordance with the provisions of this Act." It is
clear that the Bar under Section 13(2) applies only to a decree of a
"Commercial Court" and "Commercial Division" does not apply to a
decree of a Commercial Appellate Court (DJ Level)", presumably
because had such a bar been there the only remedy would have been to
challenge the decree of the Commercial Appellate Court (DJ Level)
before the Supreme Court under Article 136 leading to a spate of such
appeals, bypassing the High Court.
11.5. Therefore, the bar under Section 13(2) is not directed against
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the decree of a Commercial Appellate Court, and there would, therefore,
be no bar to entertain a second appeal under Section 100 if the matter
raises a substantial question of law.
12. The next question arises for consideration is that, whether the
cost awarded for the defendant under Section 35 of CPC by the first
appellate court is correct.
12.1. The appellant has challenged the judgment and decree both
on merits and costs, however, the learned counsel for appellant /
defendant restricted his arguments only to the question of costs.
Therefore, the only question for consideration is the legality and validity
of the order passed by the first appellate court directing the defendant to
pay a cost of Rs.10,00,000/- to the plaintiff, holding that there is no
contestable defence for the appellant / defendant in the proceedings and
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the same is vexatious. The first appellate court, applying the principle laid
down in La Fin Financial Services Pvt. Ltd., vs. Multi Commodity
Exchange of India Limited dated 21.09.2021, held that, the appellant /
defendant is squatting over the property without paying the rent and
therefore, the case has to be dealt with under Section 35 CPC (as
amended by Commercial Courts Act, 2015 (Central Act 4 of 2016)),
which has no limits in awarding costs.
12.2. The commercial suits are governed by Commercial Courts,
Commercial Division and Commercial Appellate Division of High Courts
Act, 2015. With respect to Commercial Suits, the provision of costs
under Section 35 CPC stands amended, and the provision of costs with
respect to commercial cases is now to be dealt with by the Commercial
Courts as per Section 35 CPC amended and as applicable to Commercial
Courts as under:
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"Section 35. Costs.— (1) In relation to any commercial
dispute, the Court, notwithstanding anything contained in any
other law for the time being in force or Rule, has the
discretion to determine:
(a) whether costs are payable by one party to another;
(b) the quantum of those costs; and
(c) when they are to be paid.
Explanation.—For the purpose of clause (a), the expression
“costs” shall mean reasonable costs relating to—
(i) the fees and expenses of the witnesses incurred;
(ii) legal fees and expenses incurred;
(iii) any other expenses incurred in connection with the
proceedings."
A reading of Section 35 CPC as applicable to Commercial Courts shows
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that costs can be imposed at different stages of the suits as provided under
Sub-section (4) of Section 35 CPC. In making an order of payment of
costs, Courts have to take note of the conduct of the parties. Section 16
of the Commercial Courts Act, 2015, states that the provisions of the CPC
will apply to commercial disputes, subject to the provisions of the
Commercial Courts Act itself. This includes Section 35 CPC. In essence,
the Commercial Courts Act builds upon the foundational principles of
Section 35 CPC to ensure a most robust and predictable frame work for
awarding costs that reflects the commercial nature of the litigation.
Therefore, Section 35 of the Civil Procedure Code, 1908, can be invoked
to award costs in Commercial Suits, as the Commercial Courts Act, 2015,
explicitly incorporates the provisions of the CPC regarding costs. The
Court has broad discretion under Section 35 to determine by whom and to
what extent costs are to be paid. If the Court decides to make an order for
payment of costs, the general rule is that the unsuccessful party shall be
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ordered to pay the costs of the successful party. Therefore, the awarding
of costs under Section 35 of CPC is sustainable in commercial suits, as
the Courts have discretion to determine costs and have been encouraged
to award realistic and deterrent costs especially in commercial cases. The
Commercial Courts Act, 2015, reinforces this by granting Court's broad
discretion to decide who pays, how much, and when costs should be paid
in commercial disputes. In La Financial Services Pvt Ltd vs Multi
Commodity Exchange Of India Ltd dated 21.09.2021, the Hon'ble High
Court of Bombay has held as follows :
“19. Because this is clearly a vexatious and mischievous
proceeding that has unnecessarily wasted the Court's time, I
can think of no reason to withhold an order of costs against
the Plaintiffs. The quantum of costs cannot be trivial.
Amended Section 35 clearly intends the power of ordering
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costs to be used as a deterrent to prevent parties from making
such frivolous applications. It would be meaningless to order
a paltry amount. Plaintiffs such as this one will understand
that Courts are not playgrounds, and litigation is not a
pastime.
20. There will, therefore, be an order of costs against the
Plaintiff and in favour of the Defendant to be paid within two
weeks from today in the amount of Rs.25 lakhs. If not paid in
that time, the costs will carry interest at 9% per annum, and
the Defendant is entitled to put this order into execution
against the Plaintiff for recovery of these costs.”
The first appellate court, following the principles laid down in the case
cited supra, has awarded Rs.10,00,000/- as costs to the defendant for
squatting in the property even after termination of agreement. In the case
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cited supra, the facts of the case is different. In the above said judgment,
it was observed that the suit filed by the plaintiff is clearly vexatious and
mischievous. In the present case, the first appellate court has award cost
of Rs.10,00,000/- considering the fact that the appellant is squatting over
the property, and considering the legal fees and other expenses quantified
at Rs.10,00,000/- as costs.
12.3. Unlike in general Civil Suits where awarding costs is more
discretionary, the amended Section 35 makes it a general rule that the
unsuccessful party shall be ordered to pay the costs of the successful
party. However, the costs awarded must be actual and reasonable. In the
present case, the appellant has every right to prefer an appeal against the
order passed by the trial court, which does not mean that the appellant has
initiated a frivolous appeal suit. Hence, this Court is under impression
that awarding cost of Rs.10,00,000/- is highly improbable and exorbitant,
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particularly when compensation was awarded for use and occupation of
the suit premises by the defendant. Though awarding of costs in
commercial disputes generally treated as mandatory, costs should be
assessed according to rules in force. Costs can be imposed after taking
into the expenses incurred, which includes, court fee, process fee, the
Advocate's fee, expenses of witness and other expenses allowable under
the Rules. However, there is nothing on record to show on what basis the
first appellate court has calculated the costs of Rs.10,00,000/- for the
defendant, which requires consideration by this Court. Therefore, this
Court is inclined to reduce the cost imposed by the first appellate court
from Rs.10,00,000/- to Rs.3,00,000/-.
13. In view of the above, the judgment and decree passed by the
first appellate court is modified. This Second Appeal is disposed of in the
above said terms. The judgment and decree of the first appellate court is
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upheld in all other aspects. Consequently connected miscellaneous
petition is closed.
28.11.2025
Index: Yes/No
Internet: Yes/No
Speaking/Non-Speaking order
bga
To
1. The District Judge, Nilgiris at Udhagamandalam.
2. The Subordinate Judge,Coonoor.
3. The Section Officer, VR Section, High Court, Madras.
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K.GOVINDARAJAN THILAKAVADI,J
bga
S.A.No.603 of 2025 and
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28.11.2025
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