SRI R.J. DAYANANDA v. SMT. NARASAMMA & Ors

FATHER AND NATURAL GUARDIAN SRI. SAMPANGIRAMAIAH ALL ARE RESIDING AT HOUSE NO.5, KUNCHIGARAPALYA, (GULIKAMALE DHAKALE), TARALU POST, UTTARAHALLI HOBLI, BANGALORE SOUTH TALUK, BANGALORE-560 060 (BY SMT. CHETANA S.V., ADVOCATE FOR CAVEATORS/RESPONDENT NOS.1 AND 2; SRI. NAGARAJ JAIN, ADVOCATE FOR RESPONDENT NOS.1 AND 2) …RESPONDENTS THIS WP IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR RECORDS PERTAINING TO DISPOSAL OF I.A.NO.4 DISMISSED BY THE HON'BLE X ADDL. DISTRICT AND SESSIONS JUDGE, (DEDICATED COMMERCIAL COURT), BENGALURU RURAL DISTRICT, BENGALURU IN COMMERCIAL O.S.NO.216/2024 ORDER DATED 20.09.2024 WHICH IS PRODUCED AS ANNEXURE-F AND QUASH THE IMPUGNED ORDER FOUND AT ANNEXURE-H TO THIS WRIT PETITION PASSED VIDE ORDER DATED 20.09.2024 ON I.A.NO.4 FILED BY THIS PETITIONER HEREIN ON THE FILE OF THE HON'BLE X ADDL. DISTRICT AND SESSIONS JUDGE, (DEDICATED COMMERCIAL COURT) BENGALURU RURAL DISTRICT, BENGALURU IN COMMERCIAL O.S.NO. 216/2024 ORDER DATED 20.09.2024 AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: - 3 - NC: 2024:KHC:43534 WP No. 28536 of 2024 CORAM: HON'BLE MR JUSTICE R. NATARAJ ORAL ORDER The defendant in O.S. No.216/2024 on the file of X Additional District and Sessions Judge, Bengaluru Rural District, Bengaluru (henceforth referred to as ‘the Commercial Court’) has filed this petition challenging an order dated 20.09.2024 by which an application (I.A No.4) under Order VII Rule 10 read with Section 151 of the Code of Civil Procedure, 1908 (for short, ‘CPC’) was rejected.

The parties shall henceforth be referred to as they were arrayed before the Trial Court. The petitioner herein was the defendant while the respondents herein were the plaintiffs before the Commercial Court.

The suit in Commercial O.S No.216/2024 was filed for the following reliefs: “b. Decree the suit of the plaintiffs. c. Joint Development Agreement dated 25.04.2022, registered in the office of the sub registrar office Jayanagar vide document No.JAY-1-00612-2022- 23 Stored in CD No.JAYD1217 Book-1 executed - 4 - NC: 2024:KHC:43534 WP No. 28536 of 2024 between the plaintiffs and defendant be declared as cancelled. d. The General Power of Attorney

25.04.2022, registered in the office of the sub registrar office Jayanagar vide document No.JAY- 4-00114-2022-23 Stored in CD No.JAYD1217 Book-4 executed between the plaintiffs and defendant be declared as cancelled. e. The Sharing Agreement dated 5th June 2022 executed between the plaintiffs and defendant be declared as cancelled. f. Directing the Sub Registrar Jayanagar Bengaluru to remove the registered Joint Development Agreement dated 25.04.2022 registered in the office of the sub registrar office Jayanagar vide document No.JAY-1-00612-2022-23 Stored in CD No.JAYD1217 and General Power of Attorney dated 25.04.2022 registered in the office of the sub registrar office Jayanagara vide document No.JAY-4-00114-2022-23 Stored CD No.JAYD1217 Book-4. g. granting a permanent injunction restraining the Defendant or their agents, representatives or any persons claiming through or on their behalf, from interfering with the peaceful possession and - 5 - NC: 2024:KHC:43534 WP No. 28536 of 2024 enjoyment of the suit schedule properties by the Plaintiff; h. For costs and such other reliefs as this Hon'ble court may deem facts and circumstances of the case, in the interest of justice and equity.” The reliefs sought for in the suit were premised on the claim of the plaintiffs that they were the absolute owners of the suit properties which were converted from agricultural to non- agricultural residential use. Later, the plaintiffs entered into a Joint Development agreement (‘JDA’ in short) with the defendant and executed a contemporaneous General Power of Attorney (GPA) dated 25.04.2022 for the purpose of forming a layout of residential sites in the suit properties.

The defendant had agreed to pay a refundable security deposit of Rs.28,00,000/- to the plaintiffs which he did under various cheques mentioned in the agreement as consideration to form a residential layout, The defendant was entitled to 40% of the developed area. The defendant and the plaintiffs entered into a sharing agreement on 05.06.2022. The defendant was bound to complete the project within 12 months - 6 - NC: 2024:KHC:43534 WP No. 28536 of 2024 from the date of the JDA. The plaintiffs claimed that even after several months, the defendant was dodging the formation of the layout on one or the other pretext. The plaintiffs approached the defendant on many occasions and compelled him to obtain the required permission and approvals from the competent Authority for the purpose of forming the layout and to commence the project. Despite that, the defendant failed to comply the terms and conditions mentioned in the JDA. Since the defendant did not complete the project within the time stipulated, the plaintiffs returned the refundable deposit through various cheques mentioned in paragraph No.12 of the plaint. After returning the refundable security deposit, the plaintiffs filed the suit for cancellation of JDA dated 25.04.2022 as well as the GPA dated 25.04.2022 and the sharing agreement dated 05.06.2022 and to direct the Sub-Registrar, Jayanagar, Bengaluru, to remove the entries concerning the aforesaid JDA and GPA in the encumbrance register. They sought for perpetual injunction to restrain the defendant from interfering with their peaceful possession of the suit schedule properties. - 7 - NC: 2024:KHC:43534 WP No. 28536 of 2024

The defendant entered appearance and filed a written statement. Later, the defendant filed an application under Order VII Rule 10 read with Section 151 of CPC for return of plaint and to direct the plaintiffs to present the suit before the Court having competent jurisdiction on the ground that the JDA entered into between the plaintiffs and the defendant was not a commercial transaction and therefore, the Commercial Court did not have jurisdiction to entertain the suit.

This application was contested by the plaintiffs who contended that the suit properties were the subject matter of the JDA and therefore, there was a commercial contract between the parties and hence, Commercial Court had the jurisdiction to try the suit.

The Commercial Court after considering contentions urged by the learned counsel for the parties, held in terms of the impugned order that under Section 2(1)(c)(xi) of the Commercial Courts Act, 2015, (for short ‘the Act, 2015’) that any dispute arising out of a Joint Venture Agreement would constitute a commercial dispute. It referred to the terms of the JDA dated 25.04.2022 and held that the JDA entered into - 8 - NC: 2024:KHC:43534 WP No. 28536 of 2024 between the parties clearly fell within the definition of ‘commercial dispute’ and therefore, it had the jurisdiction to decide the suit.

Being aggrieved by the same, the defendant is before this Court in this writ petition.

The learned counsel for the defendant / petitioner contended that the JDA is for the purpose of developing of a residential layout and not for commercial purpose and therefore, the suit properties were not used exclusively for trade or commerce. Hence, he contends that the dispute was not arising out of a commercial contract. Hence, he contends that the dispute was not a commercial dispute. In addition, he contends that the joint venture agreement referred to a different set of transactions and are different from the one on hand. He contends that the joint venture agreements referred in Section 2(1)(c)(xi) of the Act, 2015 are infrastructure projects and since the agreement between the plaintiffs and the defendant related to development of a layout of residential sites, the agreement did not partake the character of a joint venture agreement. In support of his - 9 - NC: 2024:KHC:43534 WP No. 28536 of 2024 contentions, he relied upon the judgment of the Hon’ble Apex Court in the case of Ambalal Sarabhai Enterprises Limited v. K.S. Infraspace LLP and Another [(2020) 15 SCC 585]. He also relied upon the judgment of the High Court for the State of Telangana in Civil Revision Petition No.1622/2024 (decided on 16.07.2024).

Per contra, learned counsel for the plaintiff Nos.1 and 2 /respondent Nos.1 and 2 contended that the suit properties were immovable properties which were subject matter of a JDA. He contends that the terms of the JDA evidenced that the defendant had to expend money to develop the property by forming a layout of residential sites and in return, he would derive 40% of the developed sites towards his share of the development. He, therefore, contends that there is trade and commerce between the plaintiffs and defendant relating to an immovable property and therefore, Commercial Court was right in holding that the dispute was a commercial dispute. - 10 - NC: 2024:KHC:43534 WP No. 28536 of 2024

I have considered the submissions of the learned counsel for the defendant/petitioner and the learned counsel for the plaintiff Nos.1 and 2 / respondent Nos.1 and 2.

A ‘commercial dispute’ is defined under Section 2(1)(c) of the Act, 2015 as one arising out of a contract inter alia relating to (vi) construction and infrastructure contracts, including tenders. Therefore, any dispute arising out of any transaction entered into between two individuals or two entities relating to construction of infrastructure contracts is a commercial dispute. In the case on hand, the plaintiffs and the defendant had entered into a JDA dated 25.04.2022 to develop residential sites for mutual gain on terms agreed upon between them. Therefore, it cannot be contended that the JDA related to development of a "residential layout" and therefore, was not a commercial venture and hence, the JDA was not a commercial contract and the dispute arising therefrom was not referable to Section 2(1)(c)(vi) of the Act, 2015. Therefore, the Commercial Court was right in construing the dispute between the plaintiffs and the defendant as a commercial dispute and was right in rejecting the application (I.A. No.4) filed by the defendant under Order VII Rule 10 read with - 11 - NC: 2024:KHC:43534 WP No.