Jagmohan Behl vs State Bank Of Indore

Sanjiv Khanna, J

This intra-Court appeal raises an interesting issue on interpretation of Section 2 (1) (c) (vii) of the Commercial Courts, Commercial Division and

Commercial Appellate Division of High Courts Act, 2015 (Act, for short).

Facts in brief relevant for the present controversy may be noted. The appellant, Jagmohan Behl, has instituted CS (OS) No. 2008/2010 against the

tenant, State Bank of Indore, who is respondent before us.For the sake of convenience, the appellant has been described as the “plaintiff†and the

respondent has been described as the “defendantâ€​ in the present order and judgment.

The aforesaid suit pertains to recovery of mesne profits of Rs.1.08 crores for the period between 1st September, 2007 till 30th August, 2010 along

with interest from the defendant in respect of property No.M-46, Connaught Circus, New Delhi (hereinafter referred to as “the propertyâ€). The

said property was given on lease to the defendant in the year 1986 for a period of five year on a monthly rent of Rs.40,000/- with renewal clause for

two further terms with enhancement of rent by 15%. The defendant bank had also sanctioned a loan of Rs.24 lakhs with interest @ 17.5% per annum

to the plaintiff which was agreed to be paid by way of adjustment against the rent.

The plaintiff had earlier filed a civil suit seeking possession (sic ejectment) on 27th October, 2001 being Suit No.340/2001 in which a decree under

Order XII Rule 6 of the Code of Civil Procedure, 1908 (Code, for short) was passed on 1st May, 2002.However, in RFA No.361/2002 preferred by

the defendant Bank the execution was stayed. For the sake of completeness, we would also record that the plaintiff has also sought decree of

mandatory injunction and mesne profits with effect from 1st September, 2010 till the date of decree @ Rs.18,000/- per day. Interest on the amounts

due was claimed.

In RFA No. 361/2002, the defendant on 25th August, 2011 had given an undertaking to vacate the premises within one year. The undertaking was

accepted on the term that the defendant would pay Rs.1 lakh per month to the plaintiff towards rent/mesne profit for the period the defendant had

remained in occupation along with interest and water charges. According to the said undertaking, the defendant was to vacate the premises by 24th

August, 2012. However, on 4th August, 2012, defendant had filed C.M. No.13656/2012 for extension of time. This application was allowed, granting

six months’ further time to vacate the property, subject to the defendant paying Rs.2,75,000/- towards rent/mesne profit for the period it continued

to remain in occupation along with water and electricity charges.

It appears that possession of the property has been handed over to the plaintiff. However, the plaintiff has persisted with his suit CS (OS)

No.2008/2010.

CS(OS) NO. 2008/2010 was filed in the Delhi High Court in view of the pecuniary jurisdiction. However, vide office order dated 24th November,

2015, issued by the Chief Justice in exercise of power conferred under Section 4 of the Delhi High Court (Amendment) Act, 2015, pecuniary

jurisdiction for ordinary suits, which were not “commercial disputesâ€​, was raised to Rs.2 crores. Suits below Rs.2 crores were to be transferred to

district courts. However, in cases of “commercial disputes†as defined under the Act, suits of specified value as determined vide Section 12

thereof, of not less than Rs.1 crore were to be tried by the High Court and were not to be transferred.

Learned single Judge by the impugned order dated 1st March, 2016, referring to Section 2 (1) (c) (vii) of the Act has held that the suit has to be

transferred to the district court as it does not relate to a commercial dispute for no right under an agreement relating to immoveable property was

sought to be enforced, inasmuch as the suit only seeks recovery of rent and mesne profits. It would be a suit under Section 9 of the Act and not

pursuant to an agreement.

In order to appreciate the controversy, we would first reproduce the relevant definition clause, i.e. 2 (1) (c) (vii),as also the explanation thereto:-

“Definitions.-(1) In this Act, unless the context otherwise requires-

(c) “commercial disputeâ€​ means a dispute arising out of-

(vii) agreements relating to immoveable property used exclusively in trade or commerce;

Explanation.-A commercial dispute shall not cease to be a commercial dispute merely because-

(a) It also involves action for recovery of immoveable property or for realisation of monies out of immoveable property given as security or involves

any other relief pertaining to immoveable property;

(b) One of the contracting parties is the State or any of its agencies or instrumentalities, or a private body carrying out public functions;â€​

The explanation in the present case has to be read as part and parcel of clause (vii), for the language of the explanation shows the purpose, and

the construction consistent with the purpose which should be placed on the main provision. The main provision, therefore, has to be construed and read

in the light of the explanation and accordingly the scope and ambit of sub-clause (vii) to clause(c), defining the expression “commercial disputeâ€,

has to be interpreted. The explanation harmonises and clears up any ambiguity or doubt when it comes to interpretation of the main provision. In S.

Sundaran Pillai and Ors. Vs. V.R. Pattabiraman & Ors. (1985) 1 SCC 591, it was observed that explanation to a statutory provision can explain the

meaning and intendment of the provision itself and also clear any obscurity and vagueness to clarify and make it consistent with the dominant object

which the explanation seems to sub-serve. It fills up the gap. However, such explanation should not be construed so as to take away the statutory right

with which any person under a statute has been clothed or to set at naught the working of the Act by becoming a hindrance in the interpretation of the

same.

Clause (c) defines the “commercial dispute†in the Act to mean a dispute arising out of different sub-clauses. The expression “arising out

of†in the context of clause (vii) refers to an agreement in relation to an immoveable property. The expressions “arising out of†and “in

relation to immoveable property†have to be given their natural and general contours. These are wide and expansive expressions and are not to be

given a narrow and restricted meaning. The expressions would include all matters relating to all agreements in connection with immoveable properties.

The immoveable property should form the dominant purpose of the agreement out of which the dispute arises. There is another significant stipulation

in clause (vii) relating to immoveable property, i.e., the property should be used exclusively in trade or commerce. The natural and grammatical

meaning of clause (vii) is that all disputes arising out of agreements relating to immoveable property when the immoveable property is exclusively used

for trade and commerce would qualify as a commercial dispute. The immoveable property must be used exclusively for trade or business and it is not

material whether renting of immoveable property was the trade or business activity carried on by the landlord.Use of the property as for trade and

business is determinative. Properties which are not exclusively used for trade or commerce would be excluded.

The Supreme Court in Doypack Systems (P) Ltd. vs Union of India (1988) 2 SCC 299 went into the meaning of the phrases ""pertaining to"", ""in

relation to"" and ""arising out of"". The court in the said case observed -

.....The expressions ""pertaining to"", ""in relation to"" and ""arising out of"", used in the deeming provision, they are used in the expansive sense, as per

decisions of the court, meanings found in standard dictionaries and principles of broad and liberal interpretation in consonance with Article 39 (b) and

(c) of the Constitution.

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The expression ""in relation to"" (so also ""pertaining to""), is a very broad expression which presupposes another subject matter. These are words of

comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context…..

The explanation stipulates that a commercial dispute shall not cease to be a commercial dispute merely because it involves recovery of

immoveable property, or is for realisation of money out of immoveable property given as security or involves any other relief pertaining to immoveable

property, and would be a commercial dispute as defined in sub-clause (vii) to clause (c). The expression “shall not ceaseâ€, it could be asserted,

has been used so as to not unnecessarily expand the ambit and scope of sub-clause (vii) to clause (c), albeit it is a clarificatory in nature. The

expression seeks to clarify that the immoveable property should be exclusively used in trade or commerce, and when the said condition is satisfied,

disputes arising out of agreements relating to immoveable property involving action for recovery of immoveable property, realization of money out of

immoveable property given as security or any other relief pertaining to immoveable property would be a commercial dispute. The expression “any

other relief pertaining to immoveable property†is significant and wide. The contours are broad and should not be made otiose while reading the

explanation and sub-clause (vii) to clause (c) which defines the expression “commercial disputeâ€.  Any other interpretation would make the

expression “any other relief pertaining to immoveable propertyâ€​ exclusively used in trade or commerce as nugatory and redundant.

Harmonious reading of the explanation with sub-clause (vii) to clause (c) would include all disputes arising out of agreements relating to

immoveable property when used exclusively for trade and commerce, be it an action for recovery of immoveable property or realization of money

given in the form of security or any other relief pertaining to immoveable property.

In the context of the present case, it is not disputed that the immoveable property was being used exclusively in trade and commerce. The said

issue does not arise for consideration.

The next question, which arises for consideration, is whether a suit involving action for recovery of mesne profits is a dispute arising out of

agreements relating to immoveable property. Answer to our mind would be in favour of the appellant when we read Order XX, Rule 12 of the Code

and keep in mind the nature of the claim for mesne profits.

The expression “mesne profit†has been defined in sub-section(12) to Section 2 to the Code to mean those profits which a person in wrongful

possession of such property actually received or might with the ordinary diligence have received together with interest on such profits but would not

include profits due to improvements made by the person in wrongful possession. Mesne profits can be also claimed in suits for partition and possession

from other co-owners and joint-holders. However, in the present case, we are dealing with a property given on rent, for being exclusively used for

trade and business.

The Supreme Court in Corporation of Madras Vs. M.K. Buhari (2000) 9 SCC 497 has held that mesne profit cannot be less than the rent payable

in respect of the property given on rent. Mesne profits are in the form of damages which are payable by a person in wrongful possession. It protects

the interest of the owner/landlord and is payable equivalent to the market rent by the person who has failed to deliver the possession and is holding

over the property [See Marshal Sons and Co. Ltd. Vs. Sahi Oritrans(P). Ltd.& Anr. (1999) 2 SCC 325 . Claim for mesne profit can be joined with a

suit for recovery of immoveable property under Order II Rule 4 of the Code and for this no leave of the Court is required. Order XX Rule 12

stipulates that when a suit is filed for recovery of possession and for rent or mesne profits, the Court may pass a decree for possession of the

property. It can also pass a decree for mesne profits or direct an enquiry as to the mesne profits. Such enquiry can be from the date of institution of

suit till delivery of possession to decree holder, relinquishment of possession by the judgment debtor with notice to the decree holder through court or

expiration of three years from the date of decree, whichever occurs first. A decree of mesne profits under clauses (b) and (c) would be a final

decree, which would be passed after the enquiry.

Lease of immoveable property is dealt with under the Transfer of Property Act in Chapter V thereof. The said enactment vide section 105 defines

what is lease, lessor, lessee and rent and vide section 107 stipulates how leases are made and can be terminated. Leases can be both oral or in

writing. Noticeably, sub-clause (vii) to clause (c) in Section 2 of the Act does not qualify the word “agreements†as referring to only written

agreements. It would include oral agreements as well. The provisions of the Transfer of Property Act deal with the effect of non-payment of rent,

effect of holding over and most importantly the determination of the leases or their termination. It cannot be disputed that action for recovery of

immoveable property would be covered under sub-clause (vii) to clause (c) when the immoveable property is exclusively used in trade or

commerce.Read in this manner, we do not think that claim for recovery of rent or mesne profit, security deposit etc., relating to immoveable property

which was used exclusively in trade or commerce should not be treated as a commercial dispute in view of the language, ambit and scope of sub-

clause (vii) to clause (c) to Section 2 of the Act. These would qualify and have to be regarded as commercial disputes. The use of expression“any

other relief pertaining to immoveable property†would mean disputes relating to breach of agreement and damages payable on account of breach of

agreement would be covered under sub-clause (vii) to clause (c) to Section 2 of the Act when it is arising out of agreement relating to immoveable

property exclusively used in trade and commerce.

In view of the aforesaid discussion, we find merit in the present appeal and the same is allowed. The impugned order dated 1st March, 2016,

transferring the suit to the district court and holding that the dispute raised is not a commercial dispute under the Act is set aside. The suit, if it has

been already transferred, will be returned/transferred to the High Court to be tried in accordance with law. No costs.