Bombay High Court Rejects Transfer Application, Holds Debt Assignment Not a Commercial Dispute under Commercial Courts Act; Imposes ₹5 Lakh Cost on Defendant for Delay Tactic

Court’s Decision

The Bombay High Court rejected the Defendant’s application to return the Plaint and transfer the case to the Commercial Division. The court held that the debt assignment transaction between the parties did not qualify as an “ordinary transaction” of a merchant, banker, financier, or trader under Section 2(1)(c)(i) of the Commercial Courts Act, 2015. Consequently, the dispute was not classified as a commercial dispute within the Act’s scope, and the Summary Suit was properly filed in the ordinary civil jurisdiction of the court.

Facts

The Plaintiffs, engaged in leasing services, assigned a secured financial debt of ₹800 Crores to the Defendants, who are in the information technology business. The Defendant failed to pay the agreed sum, leading the Plaintiffs to file a Summary Suit for debt recovery based on a breached agreement dated July 7, 2023.

Issues

1. Whether the debt assignment dispute qualifies as a commercial dispute as defined by Section 2(1)(c)(i) of the Commercial Courts Act.
2. Whether the suit should be returned and refiled in the Commercial Division as a Commercial Summary Suit.

Petitioner’s Arguments

The Petitioner argued that the Plaintiff’s actions fit within the expansive definition of a commercial dispute under the Commercial Courts Act. They contended that the assignment of debt was an activity falling under “ordinary transactions” for financiers, as per dictionary interpretations and judicial precedents.

Respondent’s Arguments

The Respondent opposed this view, asserting that the Plaintiff was not ordinarily in the business of financing or trading, and the debt assignment was not an ordinary transaction. Therefore, the dispute should not fall under the Commercial Courts Act’s jurisdiction. They argued that this application was a tactic to delay the main suit.

Analysis of the Law

The court scrutinized the definitions and scope under Section 2(1)(c)(i) of the Commercial Courts Act. It concluded that the statutory framework of the Act aims at facilitating the quick disposal of genuine commercial disputes, not cases that do not meet the specific criteria of “ordinary transactions.”

Precedent Analysis

The court referenced prior judgments, including Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP and Ladymoon Towers Pvt. Ltd. v. Mahendra Investment Advisors Pvt. Ltd., to emphasize that a singular or isolated transaction does not constitute an ordinary business activity, particularly for parties whose primary business does not include lending or financing.

Court’s Reasoning

The court observed that the Plaintiff’s primary business activity was leasing, not financing or trading. Hence, assigning a debt in this isolated transaction could not be classified as an ordinary financier’s transaction under the Act. Moreover, the court found the Defendant’s application for transferring the case to the Commercial Division as a tactic to delay the suit.

Conclusion

The court dismissed the application, affirming that the dispute did not fall within the Commercial Courts Act’s jurisdiction. It also imposed exemplary costs of ₹5 Lakhs on the Defendant for attempting to delay the case.

Implications

This decision clarifies the threshold for classifying disputes as “commercial” under the Commercial Courts Act, emphasizing that not all high-value financial transactions automatically qualify. The ruling underscores the court’s intent to curb tactical delays in cases improperly claimed as commercial disputes.

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