Jurisdictional Maze Of Commercial Courts Act, 2015: A Critical Analysis Of Definition Of 'Commercial Dispute'

The Indian judicial system has long struggled with a backlog of civil cases. This often results in litigation dragging on for decades. This delay acts as a significant deterrent to foreign investment and domestic economic dynamism. The Commercial Courts Act, 2015, was enacted to address this systemic inefficiency by creating a specialised class of courts equipped with distinct procedural mechanisms such as mandatory pre-institution mediation, case management hearings, summary judgments, and strict timelines for filings.

However, the creation of a fast track for commercial litigants creates a privilege gap. Litigants in the ordinary civil track face delays, while those in the commercial track enjoy expedited justice. Consequently, there is a natural incentive for litigants to dress up ordinary civil disputes, such as family property partitions, employment grievances, or simple debt recoveries, as commercial disputes to access this privileged forum.

The section of the Act provides an exhaustive list of 22 clauses (i to xxii) defining what constitutes a commercial dispute. The judiciary is tasked with interpreting these clauses to balance competing interests. This tension has resulted in a voluminous body of case law where courts have had to define the boundaries of commerce in the context of employment, real estate, and banking.

The Employment Paradox: Contract Of Service vs. Contract For Service

One of the most litigated areas under Section 2(1)(c) involves employment contracts. Disgruntled senior executives often seek to enforce high-value incentive plans or severance packages through Commercial Courts, invoking Section 2(1)(c)(xviii), which covers agreements for the sale of goods or the provision of services.

The judiciary has firmly rejected the notion that employment constitutes a “provision of services” in the commercial sense. In Ekanek Networks Private Limited vs. Aditya Mertia, the Delhi HC provided a definitive ruling on this issue. The case involved a high-stakes dispute arising from a contract of personal service. The plaintiff argued that the high value of the contract and the professional nature of the services rendered brought it within the ambit of a commercial dispute. The Court's reasoning was rooted in the disjunctive but contextual interpretation of Section 2(1)(c)(xviii). While the clause separates provision of services from the sale of goods, the overall theme of the Act mandates that these expressions be understood in a commercial sense. It implies a B2B (Business-to-Business) relationship rather than a Master-Servant relationship.

A sophisticated variation of this problem arises when employees attempt to separate Incentive Plans or Stock Option Agreements from their core employment contract, arguing that these specific agreements are commercial contracts for services. This argument was rejected by the Karnataka HC in Sanjay Kumar vs. Elior India Food Services LLP(2023(4)KarLJ692). The petitioner sought to enforce a Long-Term Incentive Plan, arguing it was an independent agreement. The Court analysed the foundation of the incentive plan and found it to be inseparable from the Employment Agreement. The Court used the metaphor of dressing up, stating that a pure and simple employment contract cannot be given the colour of a commercial dispute by dressing it to be a provision of services.

Immovable Property: The Strict “Actual User” Doctrine

Section 2(1)(c)(vii) defines a commercial dispute as one arising out of “agreements relating to immovable property used exclusively in trade or commerce.” This clause has generated the most significant volume of interpretative litigation, primarily regarding the tense of the word “used”.

The interpretative anchor for this section is the Supreme Court's decision in Ambalal Sarabhai Enterprises Ltd. vs. K.S. Infraspace LLP. The legal problem here was whether a dispute over land intended to be developed into a commercial complex qualified as a commercial dispute. The HC had taken a liberal view, focusing on the corporate nature of the parties and their intent. The Supreme Court reversed this, enforcing a strict, literal interpretation. It held that the phrase used exclusively in trade or commerce must be interpreted in praesenti. A property that is merely likely to be used for commerce, or is bought with a commercial intent, does not qualify if it is not currently being used for trade or commerce at the time of the agreement or cause of action. The Court reasoned that a liberal interpretation would defeat the fast-track object of the Act by flooding Commercial Courts with every land dispute involving a developer.

Following Ambalal, High Courts (“HC”) have applied this Actual User test with rigour, though some nuances regarding “arising out of” have emerged. In Shashank Gupta vs. Vatika Nirman Private Limited(2023:AHC-LKO:79267), the Allahabad HC applied the Ambalal doctrine to Builder-Buyer Agreements. The plaintiff sought a declaration that the agreements were null and void. Since the flats were not yet in existence or being used for commerce, the Court held this was not a commercial dispute. The potential for future commercial use (renting out the flats) was irrelevant.

While the status of the property is strictly construed, the nexus of the dispute is interpreted broadly once that status is established. In Mamta Kapoor vs. Vinod Kumar Rai(2024:AHC:96148), the Allahabad HC held that the expression arising out of is expansive. If a property (like a hotel or resort) is admittedly used exclusively for trade, any dispute arising from agreements connected to it (management, operations, etc.) is a commercial dispute. This creates a two-step test: Step 1: Is the property currently and exclusively used in trade? Step 2: If yes, does the agreement relate to this property?

The word exclusively in Section 2(1)(c)(vii) is a high bar. In New Okhla Industrial Development Authority (NOIDA) vs. Pathik Software(2024:AHC:186621), the Allahabad HC reiterated that the statute is unambiguous. The property must be exclusively put to use in trade or commerce. This effectively excludes disputes over residential properties where a home office might exist, or mixed-use stratas, unless the specific unit in dispute is purely commercial.

Banking and Finance: The Fraud Exception

Section 2(1)(c)(i) covers “ordinary transactions of merchants, bankers, financiers, and traders.” While this seems broad, a conflict has emerged regarding transactions tainted by fraud. In Bombay Iron and Steel Labour Board vs. State Bank of India, the Bombay HC held that a dispute over the non-payment of Fixed Deposit Receipts qualifies as a commercial dispute. The relationship of creditor and debtor between a customer and a bank falls squarely within ordinary transactions of bankers.

However, when fraud is alleged, courts have taken divergent paths based on the nature of the fraud. In IHHR Hospitality vs. Seema Swami, the Delhi HC held that a dispute involving fraudulent withdrawals via forged cheques was not a commercial dispute. The Court reasoned that “fraudulent withdrawal... and falsification of accounts” is not an ordinary transaction of a banker; it is a tortious/criminal act. Similarly, in Kantubhai vs. Harshadlal(2024:GUJHC:6417), the Gujarat HC ruled that a fraudulent land deal by a Power of Attorney holder lacked the element of a commercial transaction and was primarily a fraud case.

Conversely, in Sivasubramaniam vs. Dhanalakshmi Spinntex Pvt., the Madras HC held a bank vicariously liable for the illegal handling of accounts by its employees, categorising it as a commercial dispute. The distinction likely lies in the pleading. If the plaintiff pleads breach of contract or duty of care against the bank (as in Sivasubramaniam), it remains a commercial banking dispute. If the plaintiff pleads Fraud or Forgery as the primary cause of action (as in IHHR), the court may view it as a civil/criminal matter outside the ordinary course of commerce.

Intellectual Property Rights: Valuation and Global Reach

Section 2(1)(c)(xvii) covers disputes arising out of IPR. Two major issues dominate this sector: Valuation and the definition of “Arising Out Of”. Commercial Courts have a specified value threshold. In IPR suits, plaintiffs often seek injunctions (intangible relief) rather than damages. How does one value an injunction?

In Vishal Pipes Limited vs. Bhavya Pipe Industry, the Delhi HC addressed this. It held that the plaintiff has the discretion to estimate the market value of the intangible right. If the plaintiff values the right (e.g., a trademark) at Rs. 3 Lakhs or more, the Commercial Court has jurisdiction. However, to prevent forum shopping (undervaluing to pay less court fee or overvaluing to access specific courts), the Court retains the power to review the valuation if it is arbitrary and whimsical.

A landmark interpretation appeared in Phillips 66 Company vs. Raaj Unocal Lubricants Limited. The plaintiff sought to enforce a US District Court judgment for trademark infringement in India. The defendant argued that the infringement happened in the USA, so it wasn't a commercial dispute in India. The Delhi HC rejected this, giving a literal and expansive meaning to arising out of. It held that the suit arose out of IPR infringement even if foreign, and thus fell under Section 2(1)(c)(xvii). This confirms that Indian Commercial Courts can be used to enforce foreign commercial judgments via fresh suits for non-reciprocating territories.

Critical Analysis: The Jurisprudence of Exclusion

The judiciary's approach to defining a 'commercial dispute' is best articulated by the words of Justice V.R. Krishna Iyer in T. Arivandandam vs. T.V. Satyapal(1977 AIR 2421): “If clever drafting has created the illusion of a cause of action, it should be nipped in the bud at the first hearing.”

Hence, the evolving jurisprudence around Section 2(1)(c) reveals a judicial effort to restrict the Commercial Courts against the generalisation of civil litigation. By enforcing a strict 'Actual User' doctrine in property disputes (as seen in Ambalal Sarabhai) and definitively rejecting employment relationships as provision of services (Ekanek Networks), the courts are engaging in an exercise that discourages attempts by litigants to dress up ordinary civil grievances as commercial causes. This restrictive interpretation suggests a judicial philosophy that the fast-track privileges of the 2015 Act must be reserved strictly for active commerce (B2B transactions and current trade usage) rather than disputes that merely possess an economic under current or future commercial potential. Consequently, the privilege gap described in the introduction is not an accidental byproduct but a judicially created necessary evil; without this exclusion of mixed-use property disputes and employment claims, the Commercial Courts would inevitably succumb to the same docket explosion that paralyses the ordinary civil mechanism. This may defeat the Act's primary objective of accelerating economic justice.

In conclusion, the definition of commercial dispute has become a dense and contested area. Courts now play an imperative role in drawing clear boundaries, ensuring that only genuine commercial matters are considered in this fast-track system. The case law shows a steady push for precision: employment disputes stay outside the Act, immovable-property matters must satisfy a strict present-use test, banking disputes depend on how fraud is framed, and IPR cases turn on valuation and broad jurisdictional reach. The overall trend is clear: courts aim to protect the commercial docket from over-expansion while keeping genuine business disputes within its fold. This balance shapes how the Act works in practice and will continue to determine its effectiveness in reducing delays and improving commercial certainty.

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