Requirement To File Commercial Suits Before Commercial Division Applies To Applications Too: Calcutta High Court

The Calcutta High Court has held that the requirement to institute commercial disputes before its Commercial Division applies not only to suits but also to applications involving the specified value.

A Division Bench of Justices Debangsu Basak and Md. Shabbar Rashidi clarified that Section 7 of the Commercial Courts Act, 2015 governs not only commercial suits but also applications, including petitions under Section 9 of the Arbitration and Conciliation Act, 1996.

It accordingly set aside the Single Judge's June 15, 2023 judgment after holding that the court lacked jurisdiction to receive and decide the Section 9 petitions. The Bench also dismissed the underlying Section 9 proceedings.

The Court observed, "Filing of the suits in Commercial Division is governed by Section 7 of the Act of 2015. Section 7 also governs the filing of applications relating to commercial dispute of a Specified Value. Section 7 of the Act of 2015, therefore, should not be dissected to mean that, so far as filing of suits are concerned, suits involving commercial dispute of a Specified Value must be filed in the Commercial Division while, an application under the Act of 1996 relating to a commercial dispute of a Specified Value can be filed either in the non-Commercial Division or in the Commercial Division."

The appeals arose from disputes between partners of Kedarnath Tradecomm LLP and Omkar Tradecomm LLP.

On December 20, 2022, the appellants approached the non-Commercial Division of the Calcutta High Court under Section 9 of the Arbitration and Conciliation Act, seeking interim protection.

The respondents challenged the maintainability of the petitions, arguing that the disputes were commercial disputes of the specified value and, therefore, fell within the exclusive jurisdiction of the Commercial Division.

The appellants, however, maintained that the Single Judge was assigned commercial matters when the interim orders were passed. They also relied on the Supreme Court's decision in Shri Balaji Industrial Engineering Ltd.

Rejecting the contention, the court held that once a Commercial Division is constituted, all courts other than the Commercial Division lose jurisdiction to receive, try and entertain commercial disputes of the specified value. It added that the procedural mechanisms introduced under the Commercial Courts Act are available exclusively before Commercial Courts and Commercial Divisions.

On the issue of jurisdiction, the Court held that failure to seek return of the proceedings could not confer jurisdiction on a court that inherently lacked it. It observed that consent of parties cannot create jurisdiction where none exists.

The court observed, "In the facts and circumstances of the present case, the Court passing the impugned judgment and order, did not have the jurisdiction to receive the proceedings under Section 9 of the Act of 1996. Parties could have applied for return of such proceedings to be filed before the appropriate forum. Parties had not done so. Failure of the parties to do so does not vest jurisdiction on the Court which it did not possess. Consent of the parties cannot confer jurisdiction upon a Court which it does not otherwise possess."

The court also rejected the appellants' reliance on the Supreme Court's decision in Shri Balaji Industrial Engineering Ltd. It held that the "same Judge" principle did not apply because the Section 9 petitions were filed after the Commercial Division had already been constituted and before a court that lacked jurisdiction on the date of institution.

Referring to the Calcutta High Court Commercial Courts Practice Directions, 2021, the Court said they supplement Chapter II of the Commercial Courts Act and govern the institution and hearing of commercial disputes of or above the notified specified value.

The court observed, "Such Practice Directions in Clause 1.3 has specified that, the Practice Directions were to supplement the provisions of Chapter II of the Act of 2015 and the Code of Civil Procedure, 1908 insofar as such provisions apply to the hearing of commercial disputes of or above the value as notified by the State Government from time to time."

Accordingly, the court set aside the Single Judge's June 15, 2023 judgment for want of jurisdiction, disposed of the appeals and cross-objections, and dismissed the underlying Section 9 petitions. 

For Appellants: Dhruba Ghosh, S.N. Mookherjee, Senior Advocates, Ankan Rai, Ajeya Chowdhury, Ayan Rai, Ratnesh Kr. Rai, Nabanita Manna, Yash Singhi, Dhruv Chada, Ratnesh Kr. Rai, Advocates 

For Respondents: Sakya Sen, Krishnaraj Thaker, Senior Advocates, Chayan Gupta, Tanay Agarwal, Chitresh Saraogi, Payel Mishra, Advocates