Allowed

M/S. Rhea Healthcare Pvt. Ltd., v. M/S. Raj Alkaa Park

Karnataka HC26 Jun 2024WP/3939/2023

Case brief

AI extract

What is this about?

The High Court allowed the writ petition, quashing the lower court's order dismissing a commercial suit for breach of lease. It distinguished the Supreme Court's ruling in Ambalal Sarabhai, holding that a dispute over a lease for actual commercial use (a hospital) constitutes a commercial dispute.

What did the court decide?

The order dated 08/04/2022 of the LXXXII Additional City Civil and Sessions Judge is set aside; Commercial Court is directed to hear the suit.

M/S. Rhea Healthcare Pvt. Ltd., Vs M/S… — Contract and Commercial Disputes | Karnataka HC (2024)

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1 - NC: 2024:KHC:23458 WP No. 3939 of 2023

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26^TH DAY OF JUNE, 2024

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BEFORE

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THE HON'BLE MR JUSTICE M.I.ARUN WRIT PETITION NO. 3939 OF 2023 (GM-CPC)

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BETWEEN:

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M/S. RHEA HEALTHCARE PVT. LTD., A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT 3^RD FLOOR, EAST WING, RAHEJA TOWERS, M.G. ROAD, BANGALORE - 560 001, REPRESENTED BY ITS AUTHORIZED SIGNATORY, SRI. SATHISH KUMAR, SR. MANAGER-LEGAL.

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…PETITIONER

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(BY SRI. SUBRAMANYA S. UPASANA, ADVOCATE)

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Digitally signed by V MANJUSHA BAI Location: High Court of Karnataka

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AND:

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M/S. RAJ ALKAA PARK A REGISTERED PARTNERSHIP FIRM HAVING ITS OFFICE AT 9/2-2, 1^ST FLOOR, PURUSHOTHAM LAYOUT, SBI ROAD, BEHIND INDIAN GARAGE, OFF SAINT MARK'S ROAD, BENGALURU - 560 001, REPRESENTED BY ITS MANAGING DIRECTOR.

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…RESPONDENT

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(BY SRI. R.A. CHANDRASHEKARA REDDY, ADVOCATE FOR SRI. DWARAKA NATH H.S, ADVOCATE)

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NC: 2024:KHC:23458 WP No. 3939 of 2023

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THIS WP IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING i) TO-CALL FOR RECORDS. ii) ALLOW THE ABOVE WP. (iii) ISSUE A WRIT OF CERTIORARI QUASHING THE ORDER DATED 08/04/2022 OF THE HONBLE LXXXII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT BENGALURU (CCH-83) ON IA NO. III IN COM. OS NO. 390/2019 AT ANNEXURE-A AND ETC.,

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THIS PETITION, COMING ON FOR ORDERS, THIS DAY THROUGH VIDEO CONFERENCING / PHYSICAL HEARING, THE COURT MADE THE FOLLOWING:

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ORDER

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Aggrieved by the order passed on I.A.No.3 filed in Commercial O.S.No.390/2019 dated 08.04.2022, by the LXXXII Additional City Civil and Sessions Judge, Bengaluru, the plaintiff therein has preferred this writ petition.

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The petitioner for the purposes of establishing a Hospital and to run other allied healthcare services, took on lease a commercial property from the respondent. It is submitted that he took possession of the said property. However, before he could commence business activities,

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on the ground that there was a title dispute regarding the property which was taken on lease and also for the reason that the respondent did not build the required infrastructure within the agreed time for the petitioner to run its business, the petitioner terminated the contract. Subsequently, the petitioner also demanded that the respondent compensate the petitioner for the loss that he has sustained from the alleged breach of contract by the respondent. For that reason, the petitioner filed Commercial O.S.No.390/2019 before the Commercial

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Court to recover a sum of Rs.4,07,80,500/- (Rupees Four Crores Seven Lakhs Eighty Thousand Five Hundred Only) from the respondent along with interest.

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3. The respondent entered appearance before the

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Commercial Court, filed its written statement, denied all the allegations made by the petitioner and prayed for dismissal of the suit. In addition to it, the respondent preferred an application under Order XIII-A of the Commercial Courts Act, 2015 with the following prayers:

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"The Defendant prays that for the reasons set-forth in the enclosed Affidavit, this Hon'ble Court may be pleased to pass summary judgment as follows, in the interest of justice and equity:

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I. Reject prayer (a) for declaration

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II. Reject prayer (b) for alleged payment of Rs.4,07,80,500/- as damages/compensation.

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III. Reject prayer (c) for interest at 18% p.a."

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However, during the course of the arguments before the Commercial Court, the respondent confined his submission only about the commercial nature of the dispute involved in the suit. In the light of the submissions made by the parties, the Commercial Court has examined whether the dispute involves a commercial dispute or not and came to the conclusion that there is no commercial

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dispute and has passed the following order:

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"It is ordered to return the Plaint filed by the Plaintiff for presentation before the Jurisdictional Court under Order VII Rule 10 of the Civil Procedure Code.

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It is further ordered that after allotment to

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the particular court by the Hon'ble Principal City Civil and Sessions Judge, both parties are directed to appear before the said court, without expecting any fresh summons or notice, on 30.06.2022.

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The Office is directed to send copy of this Orders to Plaintiff and Defendant to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.

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Accordingly, I.A.No.III is disposed of as per the above orders."

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Aggrieved by the same, the plaintiff therein has preferred this writ petition.

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The case of the plaintiff is that the property which is the subject matter of the suit is a commercial property, the same is taken on lease for establishment of a Hospital and other allied healthcare services which is for commercial purposes and that there was breach of contract by the respondent, because of which, the petitioner was constrained to terminate the contract and

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the actions of the respondent in breaching the terms of the contract made the commercial property unusable for which the property was taken on lease because of which, the petitioner has suffered injuries and hence, it has filed the commercial suit for recovery of a sum of Rs.4,07,80,500/- (Rupees Four Crores Seven Lakhs Eighty Thousand Five Hundred Only) along with the interest thereon and the said sum is above the specified value as contemplated under Commercial Courts Acts and hence as the dispute is a commercial dispute and the specified value is much morethan what is specified in the Commercial Courts Acts, the Commercial Court gets the jurisdiction and that the Commercial Court erred in holding the same into the contrary.

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Per contra, the respondent submits that though the value involved in the suit is much morethan the specified value, the dispute involved is not a commercial dispute and for that reason, justifies the order passed by the trial Court and prays for dismissal of the writ petition.

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The question that arises for consideration in the instant writ petition is, given the facts and circumstances of the case can it be considered that the dispute between the parties as a commercial dispute as per Section 2(1)(c)(vii) of the Commercial Courts Act, 2015.

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A dispute arising out of agreements relating to immovable property used exclusively in trade or commerce will have to be considered as a commercial dispute as per Section 2(1)(c)(vii) of the Commercial Courts Act.

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The trial Court based on the decision of the Hon'ble Apex Court reported in ( 2020) 15 SCC 585 (Ambalal

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Sarabhai Enterprises Limited vs. K.S.Infraspace LLP

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and Another) , has held as under:

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"9. In the said background, the above mentioned decision reported in 2020(15)-

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S.C.C.-585 (Ambalal Sarabhai Enterprises Limited vs. K.S.Infraspace LLP and Another), is to be considered. According to the said decision a dispute

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relating to immovable property per se may not be a Commercial dispute, that but it becomes a commercial dispute, if it falls under sub-clause (vii) of Section 2(1) (c) of the Commercial Courts Act, viz., "the agreements relating to immovable property used exclusively in trade or commerce", that the words "used exclusively in trade or commerce are to be interpreted purposefully, that the word "used" denotes "actually used" and it cannot be either "ready for use" or "likely to be use" or "to be sued". As per the said decision it should be "actually used". When such being the case, as per the ratio of the said decision, the present case is not a Commercial Dispute. Hence, I answer this Point in Negative ."

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and consequently returned the plaint to be presented before the regular Court, as the trial Court is of the opinion that the dispute is not a commercial dispute.

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It is contended by the petitioner that the facts of the

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case relied upon by the trial Court is not applicable to the present case on hand.

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The facts in the decision of the Apex Court are recorded in Paragraph Nos.3 and 4 of the judgment, which

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reads as under:

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"3. The brief facts which led to the present situation is that the appellant herein executed an agreement to sell dated 14.02.2012 in favour of the respondent No. 2 in respect of the land which is described in the agreement. The respondent No.2 assigned and transferred all his rights under the said agreement to sell in favour of respondent No.1 by executing an assignment deed dated 12.10.2017. In that view, the respondent No. 1 herein was to purchase the lands which were the subject matter of the agreement from the appellant herein. Accordingly, the sale was made under a Deed of Conveyance dated 03.11.2017. Since certain other aspects were to be completed regarding the change relating to the nature of the use of the land for conclusion of the transaction, the right of the appellant in respect of the land was to be protected. In that view a Memorandum of Understanding dated 03.11.2017 was entered into between the appellant and the respondents herein. As per

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the same, a Mortgage Deed was required to be executed by respondent No.1 herein in favour of the appellant.

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4. Accordingly, a Mortgage Deed dated 03.11.2017 was executed but the same had not been registered. It is in that light the appellant herein filed the Commercial Civil Suit No. 41/2018 so as to enforce the execution of a Mortgage Deed. Consequently, the relief of permanent injunction and other related reliefs were sought. It is in the said suit, summon was issued to respondents herein who are the defendants in the suit, wherein on filing the written statement the application under Order VII Rule 10 of CPC was filed. The Commercial Court while rejecting the application had referred to the Memorandum and Articles of Association of the appellant company and in that light taking note of the business that they were entitled to undertake has arrived at the conclusion that the plaintiff seems to be carrying on the business as an estate agent and in that circumstance has further arrived at its conclusion that it is a commercial dispute. The High Court on the other hand had found fault with the manner in which the Commercial Court had rested its

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consideration on the Memorandum and Articles of Association and had examined the matter in detail to come to a conclusion that the immovable property in the instant case was not being used for trade or commerce. In that regard, the legal position enunciated by the various decisions was referred to and had accordingly directed the return of the plaint to be presented in an appropriate Court which is assailed herein."

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Based on the aforementioned facts, the Apex Court

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by holding that the dispute cannot be considered as a commercial dispute, has held as under:

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"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 the case of Vasu Healthcare Private Limited vs. Gujarat Akruti TCG Biotech Limited , AIR 2017 Gujarat 153 wherein a detailed consideration has been made and the conclusion reached therein by taking note of an earlier

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decision is that on a plain reading of Clause 2(1)(c) of 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;

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“Therefore, if the dispute falls within any of the clause 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 section 2(c)(ii) and 2(c)(xx) of the Commercial Courts Act only. Learned Counsel appearing on behalf of the original plaintiff has candidly admitted and/or conceded that the case shall not fall within clause 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 case would fall within section 2(c)(vii) of the learned Commercial Court. Despite the above we have considered on merits whether even

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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

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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 No. 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 No. 1 has failed to provide any infrastructural facilities and develop the plots and therefore, a civil suit for specific performance of the agreement has

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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 pharseology 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

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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 the case of Dineshkumar Gulabchand Agrawal (Supra) 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 by the Hon'ble Supreme Court.”

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Thus, as per the Apex Court in the above referred judgment, merely because the property is likely to be used in relation to, trade or commerce, a suit filed in respect of the said property cannot be necessarily considered as a commercial dispute. Thus, there is a requirement for the Commercial Court to consider whether the dispute itself is a commercial dispute as defined under Section 2(1)(c) of the Commercial Courts Acts.

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In the judgment of the Apex Court, the dispute pertains to the enforcement of the execution of a mortgage deed pertaining to the property concerned. It did not pertain to an agreement relating to an immovable property used exclusively in trade or commerce.

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In the light of the same, based on the pleadings made in the plaint, in the instant case, it is necessary to analyze whether the dispute pertains to an agreement relating to immovable property used exclusively in trade or commerce.

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As per the averments made in the plaint, the petitioner entered into a registered Lease Deed with the respondent to take on lease a commercial space for a specified period for running the Hospital and other allied healthcare services, which is a commercial activity. The petitioner has alleged breach of terms and conditions of the Lease Deed on the part of the respondent, because of which the petitioner could not use the property for the purpose it was taken on lease and it is further alleged that

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the petitioner sustained a legal injury and he has filed the instant suit for recovery of damages. Thus, the cause of action for the petitioner to file the present suit is that he entered into an agreement relating to an immovable property to use the same for commercial purposes and he was prevented from using the same for commercial purposes and because of the breach of the terms and conditions of the lease by the respondent, he suffered injuries in his business and he has filed a suit for recovery of money. Under the circumstances, it has to be considered as a commercial dispute arising out of an agreement relating to the immovable property used exclusively in trade or commerce.

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For the aforementioned reasons, in my opinion, the facts of the case dealt with by the Hon'ble Apex Court, reported in ( 2020) 15 SCC 585 (Ambalal Sarabhai Enterprises Limited vs. K.S.Infraspace LLP and Another) being different from the facts of the present case and the ratio in the said case is not applicable to the

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present facts and circumstances. The trial Court erred in returning the plaint relying on the said judgment.

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For the aforementioned reasons, the Writ Petition is hereby allowed . The order passed on I.A.No.3 in Commercial O.S.No.390/2019 is hereby set aside. It is hereby held that the Commercial Court has the necessary jurisdiction to try the case and the Commercial Court is directed to hear the Commercial O.S.No.390/2019 in the manner known to law. The parties shall appear before the trial Court on 29.07.2024, without any further notice.

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Sd/JUDGE

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List No.: 1 Sl No.: 2 CT: BHK

M/S. Rhea Healthcare Pvt. Ltd., v. M/S. Raj Alkaa Park

Case brief

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M/S. Rhea Healthcare Pvt. Ltd., v. M/S. Raj Alkaa Park

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