Disputes From Business Operation & Management Agreements Of Immovable Properties In Commercial Real Estate Are 'Commercial Disputes': Allahabad HC
The Allahabad High Court observed that disputes over business operation and management agreements for immovable properties, like hotels and commercial real estate, fell within the definition of a commercial dispute under Section 2(c)(vii) of the Commercial Courts Act.
The Bench noted that despite several opportunities, the respondent failed to argue their case. The Court stated that the Petitioners' fate cannot be left "at the mercy" of a disinterested respondent, whose absence suggested disregard for the Court's process and time. Consequently, the Court proceeded to adjudicate the case on its merits without the respondent's arguments.
A Single Bench of Justice Shekhar B. Saraf observed, “It is evident from the nature of the agreement that the primary purpose was to facilitate and manage commercial activities related to the Hotel. Therefore, the argument that the Hotel was not "actually used" for trade or commerce lacks merit, as the very purpose of the agreement was to engage in commercial activities related to the operation of the Hotel. The Commercial Court's narrow interpretation overlooks the broader commercial context of the agreement and fails to recognize the commercial nature of the dispute.”
Advocate Ujjawal Satsangi represented the petitioners.
A business agreement was signed between the parties for the operation and management of a hotel. As part of the agreement, the petitioners had paid security money and assumed possession of the hotel. Following this, they faced issues with electricity supply, necessitating the installation of a separate transformer. Disagreements arose over this requirement, leading the petitioners to seek relief from the Commercial Court.
The Commercial Court dismissed the suit stating that since the hotel was not being used for trade or commerce, it did not fall under the jurisdiction of Section 2(1)(c)(vii) of the Commercial Courts Act, 2015 (the Act). The petitioners to file an application under Article 227 to challenge the decision.
The Bench noted that the agreement between the parties was exclusively for the business operation and management of the Hotel, which would make any dispute arising out of the said agreement fall within the definition of a commercial dispute. “Disputes arising out of business operation and management agreements of immovable properties, such as hotels, resorts, office buildings, shopping centres, and other commercial real estate, fall within the definition of a commercial dispute as outlined in Section 2(c)(vii) of the CC Act,” the Court remarked.
The Bench explained that the expression “used” in Section 2(c)(vii) of the Act made it clear that the immovable property must be actually used or being used for the purpose of trade or commerce and not “likely to be used” or “to be used”. “In legal parlance, “used” generally implies active and current utilization rather than hypothetical or intended future use. This interpretation aligns with the principle that a legislation is designed to address present conditions and real-world applications rather than speculative scenarios,” the Bench noted.
The Court held, “A perusal of the factual matrix of the instant case would show that the Commercial Court, Varanasi was not justified in dismissing the suit filed by the Petitioners which would warrant the exercise of this Court’s powers under Article 227 of the Constitution of India. The Hotel was actually being used for trade and commerce, and the agreement between the parties was for the purpose of business management and operations exclusively.”
Accordingly, the High Court allowed the application.
Cause Title: Mamta Kapoor & Anr. v. Vinod Kumar Rai (Neutral Citation: 2024:AHC:96148)
