Muskaan Dewan, Ad v. SANJAY JETHWANI

Judgment

2. None appears for the Respondent. The present Petition has been filed under Section 115 read with Section 151 of the Code of Civil Procedure, 1908 (CPC) impugning the order dated 02.08.2023 [hereinafter referred to as “Impugned Order”] passed by the learned ADJ-08/West/Tis Hazari Courts, Delhi. By the Impugned Order, two Applications, one under Order VII Rule 11 of the CPC filed by the Petitioner and the other Application under Order VII Rule 10 and 10A read with Section 151 of the CPC, filed by the Respondent have been dismissed by the learned Trial Court by a composite order.

3. Since this Petition has been filed by the Petitioners (Defendants before the learned Trial Court), the only aspect which requires examination by the Court is the Application under Order VII Rule 11 of the CPC which was filed by the Petitioners wherein it has been averred that the suit is not maintainable. The Impugned Order, so far as it decides the Application under Order VII Rule 10 of the CPC as filed by the Respondent (Plaintiff) has not been challenged by the Respondent and is not subject matter of Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 examination in the present Petition.

4. A Coordinate Bench of this Court by its order dated 09.02.2024

directed that the proceedings before the learned Trial Court shall remain in abeyance. The matter has continued as is till today. Given the directions passed by the Coordinate Bench of this Court, this Court deems it apposite to hear and decide the matter today.

5. Learned Counsel for the Petitioners raises only one contention. He submits that the dispute between the parties is a commercial dispute. This contention was raised by the Petitioners before the learned Trial Court as well. The learned Trial Court analysed the definition of a commercial dispute as set out in the Commercial Courts Act, 2015 [hereinafter referred to as the “CC Act”] and the nature of the case, and found that the dispute between the parties is not a commercial dispute.

5.1 The learned Trial Court held that the suit filed is a simpliciter case of specific performance of Agreement dated 09.04.2018 and for other reliefs which arise out of a building contract agreement entered into between the parties and thus, it was contended since the Agreement is a building contract agreement and was thus a commercial contract and governed by the CC Act.

6. Briefly, the facts are that the Respondent/Plaintiff filed a “suit for specific performance/recovery of due amount with interest and for permanent injunction”. It is the case of the Respondent/Plaintiff in the Plaint that the Petitioners/Defendant Nos. 1 to 3 were the joint owners of property bearing address J5/9, Rajouri Garden, New Delhi – 110027 [hereinafter referred to as “suit property”]. An Agreement dated 09.04.2018 termed as a building contract agreement was entered into between the Respondent and Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 Petitioner No.1 [hereinafter referred to as “Agreement”]. The Agreement was for completion of building works including installation of lift, interior work i.e., electrical, sanitary, plumbing, wood work, flooring, POP and other works. It further stated therein that Petitioner No.1 has approached the Respondent to complete the pending work of suit property within a specified period and in lieu thereof, consideration shall be paid to the Respondent by Petitioner No.1.

7. It the case of the Respondent/Plaintiff that although Respondent/Plaintiff completed his entire part of the Agreement and had notified the Petitioners/Defendants that he is ready and willing to complete anything which remains, but the Petitioners/Defendants chose not to respond to the Respondent/Plaintiff.

7.1 It is in these circumstances that the Respondent/Plaintiff filed a suit for specific performance of the Agreement. It is apposite to set out the relevant extract of the Plaint in this behalf is reproduced below: “3. That the defendants were completing the construction of the suit property from their Personal Finances but were unable to complete the entire building and the construction was left incomplete and the defendants were looking for a contractor cum builder who could complete the building from his personal finances for the defendants. Thereafter, the plaintiff was approached by the defendants to complete the construction of their building.

7. That as per the terms of the agreement, the construction was to be completed within 6 months from date of the agreement, i.e., by 08.10.2018, and the entire payment was to be released to the plaintiff within two months thereafter, i.e., 08.12.2018. It was also agreed that if the defendants failed to make the payment to the plaintiff by the said date, defendant no. 1 shall sell the upper second floor of the property at prevalent market rates to make good the payment due to the plaintiff. Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023

9. That the plaintiff completed the entire building work on time and there was no complaint from any of the defendants regarding any balance work at any time. After completion of the entire work from his own sources and finances to the entire satisfaction of the defendants, the plaintiff asked the defendants to make good the payment due to the plaintiff. However, the defendants failed to make the agreed payment in time to the plaintiff and the plaintiff was constrained to send a legal notice to defendant No.1 on 17.02.2019 asking for repayment of the amount due to the plaintiff. Copy of the notice dated 17.02.2019 and courier receipt of the same are annexed to the plaint. After the receipt of the said notice, defendant no.1 met the plaintiff and requested for some more time stating that he will have to sell the upper second floor of the suit property to make good the payment of the plaintiff as he will not be able to manage the payment through his personal finances. The defendant no.1 also requested the plaintiff to find prospective buyer for the said upper second floor of the suit property.

14. That when the defendants did not come forward to make good the payment of the plaintiff, the plaintiff met defendants in the first week of August 2021 requesting them to either perform their part of the agreement or else plaintiff threatened legal action against all the defendants. When the defendants did not seem to be moved at the threat of legal action at the hands of the plaintiff, the plaintiff sent a legal notice to all the three defendants through his counsel on 10.08.2021, but all the three defendants refused to accept the said notice and returned the notice back since they were aware that plaintiff will be initiating legal action. All the three original envelopes containing the original notices are annexed with the plaint. On account of refusal and / or avoidance of the service of the said notice, it became clear to the plaintiff that the defendants have no intentions to perform their part of the agreement.

15. That the plaintiff has completed his entire part of the agreement and has clearly notified to the defendants that he is ready and willing to complete anything which remains as per the agreement dated 09.04.2018, even though nothing remains to be performed on part of the plaintiff, but the defendants chose not to accept the notice and refused the same. The plaintiff is left with no other remedy except to approach this Court for performance of defendant's part of the agreement which is yet to be performed and for recovery of payment due to be paid by the defendants to the plaintiff. It is clear that the defendants have no intentions to honor their part of the agreement.” [Emphasis Supplied] Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023

7.2. The prayers in the Plaint were for specific performance of the Agreement or in the alternate, a decree for recovery of money due with interest and damages. The prayers in the Plaint are set out below: “a. Pass a decree of specific performance in favor of plaintiff and against the defendant no. 1 thereby directing the defendant no. 1 to perform the sale of upper second floor of the property and pay the due amount of Rs. 1,15,00,000/- (One Crore Fifteen Lakh only) to the plaintiff alongwith interest at a rate of 1.75% per month from 09.12.2018 onwards; OR IN THE ALTERNATIVE b) Pass a decree of recovery in favor of plaintiff and against the defendant no. 1 thereby directing the defendant no. 1 to pay the due amount of Rs. 1,15,00,000/- (One Crore Fifteen Lakh only) to the plaintiff alongwith interest-at a rate of 1.75% per month from 09.12.2018 onwards from his accounts and assets; c) Pass a decree of recovery in favor of the plaintiff as against the defendants thereby directing the defendants to pay any due amount left balance out of total amount of Rs. 1,15,00,000/- (One Crore Fifteen Lakh only) plus interest as ordered by the Hon'ble Court to the plaintiff in the event that the upper second floor of the suit property is sold at a price less than the total decreed amount, from their personal accounts and assets; d) Pass a decree of permanent injunction in favor of plaintiff as against the defendants, their agents, representatives, assignees, heirs and attorneys etc. from disposing or creating any third party rights in any portion (basement, stilt parking, upper ground, upper first, upper second, upper third and roof of upper third floor) of the suit property bearing no. J 5/9, Rajouri Garden, New Delhi attached; 27, shown in RED in site plan e) Award cost of the suit to the plaintiff; f) Award damages to the plaintiff as the Hon'ble Court may deem fit and proper given the circumstances of the suit; g) Any other relief or order that the Hon'ble Court may deem fit and proper under the facts and circumstances of the case may also be passed in favor of the plaintiff as against the defendants.”

8. It is settled law that in an Application under Order VII Rule 11 of the CPC, the Court is required to examine the plaint and the documents filed Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 along with the plaint. It is the contention of the Petitioner that the Agreement is a commercial agreement in view of the Agreement being a construction contract between the parties. However, a careful perusal of the Agreement does not reflect the same. The Agreement is clearly between two individuals and the recitals of the Agreement state that the Agreement is a pure building contract agreement where construction of a residential building needs to be completed which was left incomplete by an earlier person.

8.1 The Supreme Court in the case of Sushil Kumar Agarwal v. Meenakshi Sadhu1, has clarified the difference between a construction contract and a collaboration agreement where there is a transfer of some part of the land as well. It was held that an agreement wherein the owner of the immovable property engages someone to carry out the work of construction on the property for monetary consideration, such a contract is a pure construction contract. It has further been explained that the contractor has no interest in either the land or the construction which is carried out in a construction contract. The relevant extract of the Sushil Kumar Agarwal case is reproduced below: “17. The expression “development agreement” has not been defined statutorily. In a sense, it is a catch-all nomenclature which is used to be describe a wide range of agreements which an owner of a property may enter into for development of immovable property. As real estate transactions have grown in complexity, the nature of these agreements has become increasingly intricate. Broadly speaking, (without intending to be exhaustive), development agreements may be of various kinds:

17.1. An agreement may envisage that the owner of the immovable property engages someone to carry out the work of construction on the property for monetary consideration. This is a pure construction contract; 1 (2019) 2 SCC 241 Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023

17.2. An agreement by which the owner or a person holding other rights in an immovable property grants rights to a third party to carry on development for a monetary consideration payable by the developer to the other. In such a situation, the owner or right holder may in effect create an interest in the property in favour of the developer for a monetary consideration;

18. When a pure construction contract is entered into, the contractor has no interest in either the land or the construction which is carried out. But in various other categories of development agreements, the developer may have acquired a valuable right either in the property or in the constructed area. The terms of the agreement are crucial in determining whether any interest has been created in the land or in respect of rights in the land in favour of the developer and if so, the nature and extent of the rights. [Emphasis Supplied]

8.2 A perusal of the Agreement entered between the parties shows that the Agreement does not grant any interest to the Respondent in the suit property and the Agreement only provides for the Respondent to complete the construction of the suit property. Thus, the Agreement is a pure construction contract.

9. In order to ascertain whether the transaction between the parties which is the subject matter of the suit could be considered as a “commercial dispute”, it is relevant to examine the provisions of Section 2(1)(c) of the CC Act which provides for the definition of “commercial disputes”. Section 2(1)(c) of the CC Act is reproduced below: “ 2. Definitions.— (1) In this Act, unless the context otherwise requires,— … (c) “commercial dispute” means a dispute arising out of— (i) ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents; (ii) export or import of merchandise or services; (iii) issues relating to admiralty and maritime law; Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 (iv) transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same; (v) carriage of goods; (vi) construction and infrastructure contracts, including tenders (vii) agreements relating to immovable property used exclusively in trade or commerce; (viii) franchising agreements; (ix) distribution and licensing agreements; (x) management and consultancy agreements; (xi) joint venture agreements; (xii) shareholders agreements; (xiii) subscription and investment agreements pertaining to the services industry including outsourcing services and financial services; (xiv) mercantile agency and mercantile usage; (xv) partnership agreements; (xvi) technology development agreements; (xvii) intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits; (xviii) agreements for sale of goods or provision of services; (xix) exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum; (xx) insurance and re-insurance; (xxi) contracts of agency relating to any of the above; and (xxii) such other commercial disputes as may be notified by the Central Government… Explanation.––A commercial dispute shall not cease to be a commercial dispute merely because— (a) it also involves action for recovery of immovable property or for realisation of monies out of immovable property given as security or involves any other relief pertaining to immovable property;…” [Emphasis Supplied]

9.1 Section 2 (1) (c) of the CC Act, provides for a wide range of disputes which have been recognized by the legislature as commercial disputes and Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 which are incorporated from clause (i) to (xxii). It includes ordinary transactions of merchants and bankers to export and import of merchandise, admiralty and carriage of goods, license agreements etc. The definition of commercial disputes under this provision is thus exhaustive and detailed and covers each kind of commercial transaction and a wide range of categories.

9.2 Section 6 read with Section 2(1)(i) of the CC Act provides that in order to be categorized as a commercial dispute under Section 2 (1) (c) of the CC Act, only a commercial suit of the specified value where the subject matter exceeds Rs. 3 lacs, would fall within the definition of a commercial dispute. In addition, Section 11 of the CC Act also provides that Commercial Court shall not entertain or decide any suit, application or proceedings relating to any commercial dispute in respect of which the jurisdiction of the civil court is either expressly or impliedly barred under any other law.

10. At its core, a commercial dispute arises when the terms or consequences of an agreement extend beyond a purely private arrangement between the contracting parties and generate broader commercial activity between them. The specific types of agreements listed under Section 2(1)(c) of the CC Act suggest that not every dispute can automatically be classified as commercial dispute. It is essential to examine the substance and detailed provisions of the agreement to determine whether it aligns with any of the categories outlined the sub-clauses of Section 2(1)(c). A key consideration is whether the parties, at the time of entering into the contract, recognized and intended for the agreement to fall within the scope of sub- clauses (i) to (xxii) of Section 2(1)(c) of the CC Act. Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023

10.1 It is no longer res integra that the provisions of CC Act have to be construed and interpretated in a narrow sense in order to fulfil the object of the Act. In Ambalal Sarabhai Enterprises Limited v. K.S. Infraspace LLP2, the Supreme Court observed that the question of whether the suit falls within the scope of a ‘commercial dispute’, as defined under the Commercial Courts Act, cannot be dealt with in abstract. Instead, the nature of the dispute and the jurisdiction to try the same is to be reflected in the suit itself, since in a civil suit, the pleadings, namely, averments in the plaint would, at the outset, be relevant to confer jurisdiction. It was further held that the very purpose for which the Commercial Courts Act has been enacted is to expedite the adjudicatory process and to place the trial of the suits relating to Commercial Dispute on a fast track. The provisions of the Act are, therefore, required to be strictly construed, as if the provisions are given a liberal interpretation, the object behind the Act will be defeated. The relevant extract of the Ambalal Sarabhai case is below: “8. Though such rival contentions are put forth by the learned Senior Advocate on either side, these aspects cannot be dealt with in abstract. Instead the nature of the dispute and the jurisdiction to try the same is to be reflected in the suit itself since in a civil suit the pleadings, namely, averments in the plaint would at the outset be relevant to confer jurisdiction. Hence before adverting to the other aspects it would be necessary to carefully examine the plaint. The plaintiff has in detail referred to the nature of the transaction between the appellant and the respondents herein. In Para 5 thereof the detail of the land bearing R.S. No. 122 corresponding to City Survey Nos. 1101 and 1100/1 having land area of 9207 sq m at Mouje Subhanpura Reg. District, Vadodara is referred. Further the schedule of the property is indicated in Para 6 and reference is made to the Memorandum of Understanding where again the reference is made to the land. It is averred therein that it would be the total responsibility of Respondent 1 herein (Defendant 2 in the suit) to change the land use as well as to pay the amount that may be required for the permission. The amount to be paid as premium is referred and the right of 2 (2020) 15 SCC 585 Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 the plaintiff to secure the mortgage deed in view of the terms of the MoU is stated. In the entire plaint there is no reference to the nature of the land or the type of use to which it was being put as on the date of the agreement to sell/sale deed/memorandum of understanding or as on the date of the suit.

36. A perusal of the Statement of Objects and Reasons of the Commercial Courts Act, 2015 and the various amendments to the Civil Procedure Code and insertion of new rules to the Code applicable to suits of commercial disputes show that it has been enacted for the purpose of providing an early disposal of high value commercial disputes. A purposive interpretation of the Statement of Objects and Reasons and various amendments to the Civil Procedure Code leaves no room for doubt that the provisions of the Act require to be strictly construed. If the provisions are given a liberal interpretation, the object behind constitution of Commercial Division of Courts viz. putting the matter on fast track and speedy resolution of commercial disputes, will be defeated. If we take a closer look at the Statement of Objects and Reasons, words such as “early” and “speedy” have been incorporated and reiterated. The object shall be fulfilled only if the provisions of the Act are interpreted in a narrow sense and not hampered by the usual procedural delays plaguing our traditional legal system.” [Emphasis Supplied]

11. The commercial dispute is defined in Section 2(c)(vii) of the CC Act as a dispute which is arising out of an agreement relating to immovable property exclusively used in trade or commerce. The words that are used by the Legislature in this sub-Section must be regarded as having been used deliberately, and thus, the intention that where there are contracts or agreements relating to immovable property which are being used only in trade and commerce, disputes arising out of such agreements and contracts are to be included as commercial disputes. The emphasis has been laid on the words “exclusively in trade or commerce” thus keeping out of its ambit transactions which are other than trade and commerce.

12. Section 2(1)(c)(vi) includes commercial disputes relating “construction and infrastructure contracts, including tenders”. Relying on Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 Section 2 (1) (c) (vi) of the CC Act, the Respondent was contended that the Agreement is a commercial dispute.

12.1 Both terms “construction” and “infrastructure” are defined separately. To gain a clearer understanding of these terms, it is apposite to refer to the definitions of the term “construction” and “infrastructure,”. Black’s Law dictionary3 defines the terms “construction” and “infrastructure” in the manner set out below: “BLACK’S LAW DICTIONARY Construction 1. The act of building by combining or arranging parts or elements; the thing so built. 2. The act or process of interpreting or explaining the sense or intention of a writing (usu. a constitution, statute, or instrument); the ascertainment of a document's meaning in accordance with judicial standards. Infrastructure. The underlying framework of a system; esp., public services and facilities (such as high- ways, schools, bridges, sewers, and water systems) needed to support commerce as well as economic and residential development.”

12.2 The Oxford Advanced Learners Dictionary4 and Merriam Webster Dictionary5 also defines these two terms in the following manner: “OXFORD ADVANCED LEARNERS DICTIONARIES: Construction- (1) The action or manner of constructing (2) a thing constructed (3) a sense in which words, statements, etc are to be understood (4) the way in which words are put together to form a phrase, clause or sentence: 3 Black’s Law Dictionary, Eight Edition 4 Oxford Advanced Learner’s Dictionary Fifth Edition 5 Webster’s New Collegiate Dictionary Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023 Infrastructure- The basic structures and facilities necessary for a country or an organisation to function efficiently, for example buildings, transport and water and energy resources and administrative systems. MERRIAM WEBSTER DICTIONARY: Construction- (1) The arrangement and connection of words or groups of words in a sentence: syntactical arrangement (2) The process, art, or manner of constructing; also : a thing constructed (3) The act or result of construing, interpreting, or explaining (4) A sculptural creation that is put together out of separate pieces of often disparate materials Infrastructure- (1) The underlying foundation or basic framework (as of a system or organisation) (2) The permanent installations required for military purposes.”

12.3 Thus, what can be construed from the above is that construction is an activity while infrastructure is the outcome of that activity. The term construction would essentially mean building while infrastructure would relate to creating public facilities needed to support commerce.

13. It is settled law that where wordings of a statute are absolutely clear and unambiguous, only a literal interpretation may be given. In the case of B. Premanand v. Mohan Koikal6, the Supreme Court has discussed the principles of interpretation of statutory interpretation. The relevant extract of the B. Premanand case is below: “9. It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief rule, purposive interpretation, etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or if 6 (2011) 4 SCC 266 Signature Not Verified Digitally Signed By:RAHUL Signing Date:27.05.2025 15:15:35 C.R.P. 275/2023