Loan Recovery Suit May Qualify As Commercial Dispute Even Without Express Reference To Written Contract: Calcutta High Court
The Calcutta High Court has held that a suit seeking recovery of money advanced by a company cannot be summarily rejected at the threshold merely on the ground that the plaint does not expressly refer to a written agreement or mercantile document to establish that the dispute is commercial in nature.
Justice Aniruddha Roy observed that where the nature and character of the financial transaction pleaded in the plaint require factual examination, the issue of maintainability must be decided at trial and the plaintiff cannot be non-suited summarily if an arguable and triable case has been made out.
The Court accordingly dismissed an application filed by Ashoka Hawai and Shoes Pvt Ltd seeking rejection of the plaint in a ₹65 lakh recovery suit instituted by Divij Mercantiles Private Limited.
The Court was hearing an application under Order VII Rule 11 of the Code of Civil Procedure, in which the defendant contended that the suit was not a commercial suit within the meaning of the Commercial Courts Act, 2015. It was also argued that the suit was barred under the Bengal Money-Lenders Act, 1940, since the plaintiff had not pleaded or disclosed that it possessed the requisite money-lending certificate.
The plaintiff had pleaded that it was engaged, among other activities, in financial intermediation and financial activities. According to the plaint, the defendant approached the plaintiff in January 2020 for funds and, following discussions, the plaintiff agreed to advance money repayable with interest at 12% per annum.
The plaintiff claimed that it advanced ₹65 lakh to the defendant through bank transfers between January 18 and September 18, 2020. The plaint relied upon the plaintiff's ledger, bank statements and Form 26AS. It further stated that the defendant had made a part-payment of ₹1,37,650 towards interest and had deposited TDS amounts relating to the interest payable.
The defendant argued that the plaint did not contain any averment regarding a mercantile document or written agreement supporting the transaction and therefore failed to disclose a commercial dispute under the Commercial Courts Act.
Rejecting the contention at the threshold, Justice Roy noted that the definition of "commercial dispute" under Section 2(c) of the Commercial Courts Act did not stipulate that the relevant transaction must necessarily be founded upon a written contract.
The Court observed:
“On a conjoint and harmonious reading of these two provisions of CC Act in the light of the averments made in the plaint, this Court finds that the financial transaction between the parties, as pleaded in the plaint on the basis of the available documents disclosed and mentioned in the plaint, the nature of transaction between the parties is required to be ascertained first.”
The Court held that, on the basis of the plaint, it could not be said ex facie that the transaction was not commercial in nature.
“From the case made out in the plaint, it cannot be summarily said that the transaction between the parties, ex facie, is not a commercial transaction or that the dispute stated in the plaint, ex facie, is not a commercial dispute within the meaning of CC Act, unless a proper trial takes place on the issue,” the Court said.
Justice Roy further explained the scope of Order VII Rule 11 CPC, observing that although a plaint can be rejected where, on a meaningful reading, it is found to be barred by law, the provision does not warrant summary rejection where an arguable case requiring factual determination is disclosed.
“Plaintiff cannot be non-suited, at the threshold, in a summary manner so loosely and hastily if an arguable and a triable case is pleaded in the plaint,” the Court observed.
On the objection under the Bengal Money-Lenders Act, the Court relied upon its earlier decision in Dutta Vinimay Private Limited v. Dinesh Singh, where it had held that the statutory provision enabling a money lender to cure the defect by payment of penalty meant that an opportunity should be granted before rejecting the plaint.
The defendant had relied upon orders of the Supreme Court in Raj Kumar Santoshi v. Prashant Malik concerning the requirement of a money-lending certificate. However, Justice Roy distinguished the said proceedings, noting that the Supreme Court orders had been passed in connection with a criminal proceeding and did not concern a challenge to the maintainability of a civil suit or an application seeking rejection of the plaint.
The Court also distinguished the Calcutta High Court's decision in Prime Hitech Textiles LLP v. Manish Kumar and the Delhi High Court's decision in Meena Vohra v. Master Hosts Pvt. Ltd., observing that in those cases the Courts had found an unimpeachable case for rejection of the plaint, whereas the present case required a properly constituted trial.
The Court ultimately held that the plaint must stand for trial and that the defendant would remain at liberty to raise all questions concerning maintainability during the trial.
The Court clarified that it had not expressed any opinion on the merits of the defendant's objections under the Bengal Money-Lenders Act and that the issue could be raised and adjudicated during trial.
The Court also left open the question concerning the written statement filed by the defendant beyond 120 days from service of summons. The plaintiff had separately sought to have the written statement taken off the record, and that application remains pending.
Case: DIVIJ MERCANTILES PRIVATE IMITED VS ASHOKA HAWAI AND SHOES PVT LTD
Case No: GA-COM/11/2025