M/S. Kamadhenu Enterprises vs Mrs. Zara Ahmad And 4 Others
2022 Latest Caselaw 3955 Tel

             HIGH COURT FOR THE STATE OF TELANGANA

                             ********

CIVIL MISCELLANEOUS APPEAL NO.270 OF 2022

Between:

M/s. Kamadhenu Enterprises, Having its Regd.Office at H.No.10-1-473, West Marredpally, Secunderabad, Rep.by its Managing Partner & Authorized Signatory, Mr. B.Jagath Kumar, s/o. B.Balram, Aged about 61 years, occu: Business, r/o.10-1-473, West Marredpally, Secunderabad.

.... Appellant Vs.

Mrs Zara Ahmad, w/o. Zaki Ahmed, Aged about 54 years, occu: Housewife, r/o.Flat No.102, Harmany Apartments, Street No.19, Himayat Nagar, Hyderabad and others.

                                                           ....Respondents

JUDGMENT PRONOUNCED ON                           :   29.07.2022


              HONOURABLE SRI JUSTICE P.NAVEEN RAO
                                &
             HON'BLE SRI JUSTICE SAMBASIVARAO NAIDU

1. Whether Reporters of Local Newspapers may : YES be allowed to see the Judgments ? :

2. Whether the copies of judgment may be marked: YES to Law Reporters/Journals :

3. Whether Their Ladyship/Lordship wish to : No see fair Copy of the Judgment ? :

PNR,J & SSRN,J CMA No.270 OF 2022

* HONOURABLE SRI JUSTICE P.NAVEEN RAO & HON'BLE SRI JUSTICE SAMBASIVARAO NAIDU

+ CIVIL MISCELLANEOUS APPEAL NO.270 OF 2022

% 29‐07‐2022

Between:

# M/s. Kamadhenu Enterprises, Having its Regd.Office at H.No.10-1-473, West Marredpally, Secunderabad, Rep.by its Managing Partner & Authorized Signatory, Mr. B.Jagath Kumar, s/o. B.Balram, Aged about 61 years, occu: Business, r/o.10-1-473, West Marredpally, Secunderabad.

.....Appellant and

$ Mrs Zara Ahmad, w/o. Zaki Ahmed, Aged about 54 years, occu: Housewife, r/o.Flat No.102, Harmany Apartments, Street No.19, Himayat Nagar, Hyderabad and others.

....Respondents

!Counsel for the Appellant: Sri Nikunj Dugar

Counsel for the Respondents: Sri Damodar Mundra for respondents 2 to 4

<Gist :

>Head Note:

? Cases referred:

(2020) 15 SCC 585 PNR,J & SSRN,J CMA No.270 OF 2022

HONOURABLE SRI JUSTICE P.NAVEEN RAO & HON'BLE SRI JUSTICE SAMBASIVARAO NAIDU

CIVIL MISCELLANEOUS APPEAL NO.270 OF 2022

JUDGMENT: (Per Hon'ble Sri Justice P.Naveen Rao)

Heard Sri Nikunj Dugar learned counsel for the appellant and Sri

Damodar Mundra learned counsel for the respondents 2 to 4.

2. The brief facts of the appeal are that the appellant is a registered

partnership firm under the provisions of the Indian Partnership Act,

1932. The appellant is the owner and possessor of the property being Plot

Nos.1 to 4 and 13 to 16 in Sy.Nos.322, 323 and 326 of Quthbullapur

village and Mandal, Medchal-Malkajgiri district, admeasuring 4444.44

square yards. The respondents are carrying business of real estate and

development of immovable properties. The appellant initially entered into

registered Development Agreement-cum-General Power of Attorney vide

document no.1435/2014 dated 08.09.2014 registered at Sub-Registrar at

Balanagar. In terms thereof, the respondents 1 to 3 were authorized to

carryon the development of the above property. Agreement envisaged 43%

of the built-up and saleable area on all the floors including the stilt/cellar

together with all the general amenities, facilities etc. to the appellant and

57% to the developer. The agreement also envisaged completion of the

project within 27 months with a grace period of 3 months from the date of PNR,J & SSRN,J CMA No.270 OF 2022

obtaining permission for construction from GHMC. The respondents 1

to 3 gave refundable security deposit without interest for a sum of

30,00,000/-. The respondents 1 to 3 obtained building permit

No.52714/HO/NZ/Cir-15/2016, dated 03.12.2016.

3. During the subsistence of this agreement, respondent no.1 retired

from the firm and respondent no.4 was admitted as partner of the

respondent no.5. The appellant and the respondents entered into a

supplementary agreement on 04.11.2017, wherein it was mutually agreed

to reduce the ratio of the share of the owners from 43 % to 42% and the

ratio of share of the builder increased from 57% to 58%. In accordance

with new sharing ratio, the owner is entitled to 28 flats and the builder is

entitled to 38 flats. Subsequently, the parties executed supplementary

agreement dated 02.01.2019 to divide and distribute the constructed

areas between the parties as per the ratio of 42% to owner and 58% to

builder respectively. Subsequently, another supplementary agreement

dated 17.01.2019 was entered into between the appellant and the

respondents, whereby it was agreed to share the ground floor commercial

space of 8000 square feet as per their sharing ratio of 42% and 58%

respectively and it was also agreed to share the car parking in the same

ratio.

PNR,J & SSRN,J CMA No.270 OF 2022

4. Disputes arose between the parties on various aspects. There was

exchange of correspondence between the appellant and developer. In

notice dated 03.09.2021, appellant invoked Arbitration clause nominating

an Arbitrator. In reply notice dated 08.09.2021 developer has not agreed

to the arbitrator nominated by the appellant and proposed alternative

name which was not acceptable to the appellant. Pending reference to

arbitration, appellant invoking Section 9 of the Arbitration and

Conciliation Act, 1996 (for short, Act, 1996) by filing Arb.O.P.No.5 of 2022

in the Court of XVI Additional District and Sessions Judge, Malkajgiri, old

Ranga Redd District, presently Medchal Malkajgiri district, claiming that

appellant is entitled to 3,09,78,000/- as rental damages, whereas he

has only 1,00,00,000/- as security deposit, whereas the appellant

apprehends that the respondents may walkout of the project without

completing the project in all respects and in such an eventuality, it would

be difficult to ensure from the developer completion of all the pending

works and recovery of rental dues. He, therefore, prayed for order of

attachment of suit schedule flats. He has also prayed to direct developer

to complete the pending works as detailed in schedule 'B' and to appoint

Advocate-Commissioner for local inspection to note physical features.

5. To note, a few grievances ventilated by the appellant in the

Arb.O.P., are that the project was not completed by 03.04.2019 as agreed;

that even before project was completed occupancy certificate was obtained PNR,J & SSRN,J CMA No.270 OF 2022

from GHMC; that several civil and other works are pending; that the flats

delivered to the appellant are incomplete; that rent for the delayed period

is not paid. The developer was required to pay 3,09,78,880/- after

deducting 20,00,000/- already paid towards rental arrears and so on.

6. The developer has denied all the allegations. He has asserted that

the entire project is completed in all respects and that the appellant's

share of flats were already handed over and that the appellant is making

false claims.

7. Vide order dated 18.04.2022, the Court below refused to grant the

relief no.1 sought by the appellant and directed the matter to be listed on

20.06.2022 to consider reliefs 2 and 3.

8. Challenging the said decision, this Appeal is preferred.

9. Extensive submissions are made by learned counsel appearing for

the appellant and learned counsel appearing for the respondents on

various aspects touching upon merits of the claims and cause for inter se

disputes. However, the learned counsel for respondents raised preliminary

objection on maintainability of Arb.O.P.No.5 of 2022 in the Court of XVI

Additional District and Sessions Judge, Malkajgiri.

9.1. According to learned counsel, inter se dispute is a commercial

dispute and all matters arising out of commercial transactions should be PNR,J & SSRN,J CMA No.270 OF 2022

filed before the Commercial Court only and the ordinary Civil Court has

no jurisdiction. Learned counsel has taken us through the definition in

Section 2(1)(c)(vii), provisions in Sections 10 and 12 of the Commercial

Courts Act, 2015 (for short, Act, 2015).

9.2. Learned counsel pointed out that issue of maintainability ought to

have been considered as a preliminary issue before going into the merits.

10. Per contra, according to learned counsel for appellant, not all

contracts are commercial in nature and only such of those disputes which

are commercial in nature alone have to be resolved by the commercial

Court. That, in the instant case, it was only a development agreement

and project is not completed, commercial activity has not commenced and

property is not put to use, therefore the dispute involved inter se is not a

commercial dispute and A.O.P is maintainable before the Civil Court. In

support of said contention, learned counsel for appellant placed reliance

on decision of the Supreme Court in Ambalal Sarabhai Enterprises Limited

Vs. K.S. Infraspace LLP and another .

11. As the issue of application of Commercial Courts Act, 2015 goes to

the root of the matter, the Court has taken up the same as a preliminary

issue.

(2020) 15 SCC 585 PNR,J & SSRN,J CMA No.270 OF 2022

12. Section 2(1)(c) of the Act, 2015 defines what is meant by 'commercial

dispute' and instances are mentioned in various clauses incorporated

therein. In so far as this case is concerned, 'commercial dispute' means a

dispute arising out of agreements relating to immovable property used exclusively in trade

or commerce [Section 2(1)(c)(vii)2]. Thus, a dispute arising out of agreement

relating to a property is a commercial dispute, if such immovable property

is used exclusively for trade or commerce.

13. According to Section 10(3) of the Act, 2015, if subject matter of an

arbitration is a 'commercial dispute' of a 'specified value', all applications or

appeals arising out of arbitration clause of contract filed under the

provisions of the Act, 1996 would ordinarily lie before any principal civil

Court of original jurisdiction in a district and heard and disposed of by

the Commercial Court exercising territorial jurisdiction over such

arbitration where such Commercial Court has been constituted. Section

12 prescribes mechanism to determine what is 'specified value'.

14. On a cumulative reading of Section 2(1)(c)(vii), Section 103 and

Section 124, it is apparent that if a dispute arising out of an agreement

Section 2. Definitions.-- (1) In this Act, unless the context otherwise requires, -- (a) & (b) xxx

(c) "commercial dispute" means a dispute arising out of -- (i) to (vi) xxxx

(vii) agreements relating to immovable property used exclusively in trade or commerce;

10. Jurisdiction in respect of arbitration matters.--Where the subject-matter of an arbitration is a commercial dispute of a Specified Value and--

(1) If such arbitration is an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed in a High Court, shall be heard and disposed of by the Commercial Division where such Commercial Division has been constituted in such High Court.

PNR,J & SSRN,J CMA No.270 OF 2022

concerning immovable property which is exclusively used in trade or

commerce and whose 'specified value' is more than one crore, then, it is a

'commercial dispute' and only the commercial Court has jurisdiction to deal

with application filed under Section 9 of the Act, 1996.

15. In this backdrop of statutory scheme, it is necessary to ascertain

whether the property is already put to use. The developer obtained

building permission from GHMC on 03.12.2016 to construct multistoried

apartments building. The developer obtained Occupancy Certificate on

18.12.2020, which is issued after construction of a building and

mortgaged flats were also released. On 26.03.2021 the purchasers

complained that even though few purchasers are living till water

connection and electricity are pending and quality is not maintained. On

13.07.2021 the appellant acknowledged receipt of keys of apartments

(2) If such arbitration is other than an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed on the original side of the High Court, shall be heard and disposed of by the Commercial Division where such Commercial Division has been constituted in such High Court.

(3) If such arbitration is other than an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that would ordinarily lie before any principal civil court of original jurisdiction in a district (not being a High Court) shall be filed in, and heard and disposed of by the Commercial Court exercising territorial jurisdiction over such arbitration where such Commercial Court has been constituted.

12. Determination of Specified Value.--(1) The Specified Value of the subject-matter of the commercial dispute in a suit, appeal or application shall be determined in the following manner:--

(a) where the relief sought in a suit or application is for recovery of money, the money sought to be recovered in the suit or application inclusive of interest, if any, computed up to the date of filing of the suit or application, as the case may be, shall be taken into account for determining such Specified Value;

(b) where the relief sought in a suit, appeal or application relates to movable property or to a right therein, the market value of the movable property as on the date of filing of the suit, appeal or application, as the case may be, shall be taken into account for determining such Specified Value;

(c) where the relief sought in a suit, appeal or application relates to immovable property or to a right therein, the market value of the immovable property, as on the date of filing of the suit, appeal or application, as the case may be, shall be taken into account for determining Specified Value; 1[and] (d) where the relief sought in a suit, appeal or application relates to any other intangible right, the market value of the said rights as estimated by the plaintiff shall be taken into account for determining Specified Value; 2* * *3* * * * * (2) The aggregate value of the claim and counterclaim, if any as set out in the statement of claim and the counterclaim, if any, in an arbitration of a commercial dispute shall be the basis for determining whether such arbitration is subject to the jurisdiction of a Commercial Division, Commercial Appellate Division or Commercial Court, as the case may be. (3) No appeal or civil revision application under section 115 of the Code of Civil Procedure, 1908 (5 of 1908), as the case may be, shall lie from an order of a Commercial Division or Commercial Court finding that it has jurisdiction to hear a commercial dispute under this Act.

PNR,J & SSRN,J CMA No.270 OF 2022

mentioned in their letter dated 13.07.2021 (page 226 of the appeal paper

book) showing taking possession of those apartments. A day later the

appellant complained that lot of work is pending and listed out works

required to be attended. There has been exchange of correspondence

between the owner and developer on various aspects of development of

the property. All this clearly point out that the property is no more open

land, but land was put to use by constructing multistoried apartment

building and some families are living.

16. To contend that subject land is 'not put to use'/'not actually used'

therefore, Commercial Court has no jurisdiction, learned counsel for

respondents placed reliance on the decision of Hon'ble Supreme Court in

Ambarlal Sarabhai Enterprises Ltd., (supra). We have carefully gone

through the said decision. The decision concerns immovable property

which was not actually used/put to use for commercial purposes.

17. There is no quarrel with the proposition of law on scope of Section

2(1)(c)(vii). But looking at the facts of the case, on hand, it is seen that

the suit schedule land was already 'put to use' / 'used' for commercial

purpose. The apartments are constructed. Owner's share of the

apartments was handed over. Some flats were sold and being occupied.

Thus, the subject land was already put to 'use'/ 'actual use' for commercial

purposes and therefore the definition of 'commercial dispute' as PNR,J & SSRN,J CMA No.270 OF 2022

incorporated in Section 2(1)(c)(vii) of the Act, 2015 is attracted in the

instant case.

18. It is not in dispute that 1,00,00,000/- was paid by the developer

as security deposit. The arrears of rent claimed by appellant was more

than 3,00,00,000/-. The entire development activity runs into crores of

rupees. Therefore, the 'specified value' of the subject dispute is more than

one crore. In view of specific provision in Section 10 read with Section 12

of the Act, 2015, application under Section 9 of the Act, 1996 has to be

filed in a designated Commercial Court only and Civil Court has no

jurisdiction to deal with such applications.

19. In the result, Appeal is disposed of. It is held that Arb.O.P.No.5 of

2022 is not maintainable before civil Court. As Arb.O.P., is not

maintainable before the Civil Court, the appellant is not entitled to any

relief.

20. As the preliminary issue on jurisdiction is answered, there is no

expression of opinion on merits. All issues are left open to be urged in

appropriate proceedings. It is made clear that it is open to appellant to

withdraw the Arb.O.P.No.5 of 2022 pending in the Court of XVI Additional

District and Sessions Judge, Malkajgiri, old Ranga Reddy District

presently Medchal Malkajgiri district. It is open to appellant to avail PNR,J & SSRN,J CMA No.270 OF 2022

appropriate remedy that may be available under the Commercial Courts

Act, 2015. Pending miscellaneous applications, if any, stand closed.

__________________________ P.NAVEEN RAO,J

__________________________ SAMBASIVARAO NAIDU,J

Date: 29.07.2022 KKM PNR,J & SSRN,J CMA No.270 OF 2022

HONOURABLE SRI JUSTICE P.NAVEEN RAO & HON'BLE SRI JUSTICE SAMBASIVARAO NAIDU

CIVIL MISCELLANEOUS APPEAL NO.270 OF 2022

Date : 29.07.2022

kkm