Civil Procedure Law

Ambalal Sarabhai Enterprise Ltd. v. K.S. Infraspace LLP

(2020) 15 SCC 585

Facts

Agreements concerning immovable properties were entered into between the parties.
K.S. Infraspace filed civil suits before the Principal Civil Judge at Vadodara seeking relief including specific performance and injunction.
The defendants argued that the disputes were “commercial disputes” under Section 2(1)(c)(vii) of the Commercial Courts Act.
That provision covers agreements relating to immovable property used exclusively in trade or commerce.
Applications were filed seeking transfer of the suits to the Commercial Court.
The defendants relied upon:
The commercial status of the parties;
Their business intentions; and
The proposed commercial development or utilisation of the properties.
The question was whether the land was already being used exclusively in trade or commerce when the suits were instituted.
The Supreme Court examined whether the mere commercial character of the transaction or intended future use was sufficient to attract the special procedure of the Commercial Courts Act.

Whether every commercial agreement concerning immovable property constitutes a commercial dispute.
What is meant by property “used exclusively in trade or commerce.”
Whether intended or proposed future commercial use is sufficient.

The Commercial Courts Act creates a special and expedited procedure and must be applied only when the statutory definition is satisfied.
Section 2(1)(c)(vii) does not include every dispute arising from an agreement relating to immovable property.
The property must be:
Actually used;
Exclusively; and
In trade or commerce.
The word “used” indicates present or existing use, not:
Intended use;
Possible future development;
Commercial potential; or
The business identity of the contracting parties.
Courts must examine the plaint and the material facts constituting the dispute.
A party cannot invoke the commercial-court procedure merely by describing an ordinary property dispute in commercial language.
At the same time, the definition should not be interpreted so narrowly that genuine business-use property disputes are excluded.

The dispute concerned agreements relating to land, but that fact alone was insufficient.
The defendants relied mainly upon the purpose for which the properties were proposed to be developed or acquired.
However, the statutory expression is not:
“Intended to be used”; or
“Capable of being used.”
The legislature deliberately used the present expression “used exclusively.”
The pleadings did not establish that, on the date the suits were filed, the properties were being exclusively employed for an existing commercial or trading activity.
An agreement to purchase land for future development remains an immovable-property transaction unless the additional statutory requirement of actual commercial use is met.
The Court distinguished:
The commercial nature of the parties or their motive; from
The statutory commercial use of the property itself.
If proposed use were enough, almost every land transaction involving a company, developer or businessperson could be transferred to a Commercial Court.
That would expand the Act beyond its language and remove ordinary civil disputes from their proper forum.
The Court therefore required a concrete connection between the existing use of the property and trade or commerce.

The Supreme Court held that the suits did not constitute commercial disputes merely because the agreements or proposed use had a commercial purpose.
Actual and exclusive use of the immovable property in trade or commerce had not been established.
The matters were therefore to continue as ordinary civil suits rather than commercial suits.
Use this case for: A property dispute becomes commercial under Section 2(1)(c)(vii) only when the property is actually and exclusively used in trade or commerce, not merely intended for such use.