Dispute Over Lease Of Land For Petrol Pump Is Commercial Dispute Even If Pump Not Operational: Karnataka High Court

The Karnataka High Court has recently held that a dispute arising from a lease of land for a petrol pump qualifies as a “commercial dispute” under the Commercial Courts Act, even if the business has not commenced and the project is still under construction.

A Division Bench of Chief Justice Vibhu Bakhru and Justice C.M Poonacha was considering an appeal challenging an order of the Commercial Court returning the plaint on the ground that the dispute did not fall within the definition of a “commercial dispute” under the Commercial Courts Act, 2015.

The appellants had instituted a suit seeking ejectment of the respondents from the suit property, recovery of ₹8,10,000 towards arrears of rent, and mesne profits. The property, converted for commercial use, had been leased to the respondent under a lease deed dated March 6, 2021 for a term of 29 years and 11 months, for setting up a petrol pump/retail outlet, at a monthly rent of ₹30,000.

According to the appellants, the respondent failed to pay rent and breached the terms of the lease. They issued legal notices terminating the lease and seeking possession. The respondent, in reply, stated that efforts were being made to establish the petrol bunk and the delay was due to non-receipt of necessary approvals.

The appellants filed the commercial appeal challenging an order of the Commercial Court directing return of the plaint on the ground that the dispute did not qualify as a “commercial dispute” under the Act.

The Court observed that the lease deed expressly recorded that the purpose of the suit property was for “commercial purposes”. The Court rejected the respondent's contention that the dispute would not qualify as a commercial dispute merely because, although the property was leased for commercial purposes, the business had not commenced.

“The fact that the petrol pump was not operational or was in a construction phase does not detract from the fact that the suit property was used for the business of establishing a petrol pump, which is clearly a part of the respondent's commercial enterprise. The fact that a business is in its gestation period does not mean that its resources are not used for commercial purposes.” it observed

Referring to the Statement of Object and Reasons of the Commercial Courts Act, the Bench said:

“A plain reading of the above indicates that the immovable property which is used in trade or commerce is also one of the resources used for commerce, and the disputes arising from the agreements of those properties are sought to be covered under the definition of a "commercial dispute".”

It further noted:

“If the respondent's contention is accepted, the immovable property must physically be used for revenue operations only and use in all other facets is to be excluded; it shall yield results which are neither contemplated under the CC Act nor serve its principal object.”

Observing that the suit property had been converted for petrol pump purposes and leased for the said business, the Court allowed the appeal, set aside the impugned order and restored the plaint before the Commercial Court.

For Appellants: Advocate Chandan Gowda Patil

For Respondents: Advocates Samarth S Murthy, Muniswamy Gowda S.G and R Gopal Krishna