Karnataka HC Directs Return Of Plaint In ₹60 Lakh Recovery Suit Over 'Financial Help' To Agarbatti Firm

The Karnataka High Court recently ordered the return of plaints in three recovery suits after allowing a plea by Shalimar Incense Pvt Ltd seeking return of the plaints on the ground that the dispute is not a commercial dispute in relation to claims arising from about ₹60 lakh advanced as financial assistance to a business originally carried out by a partnership firm, Shalimar Agarbatti Company, and later transferred to the company.

A Bench of Justice H.T. Narendra Prasad said, “The writ petitions are allowed. ,,,,The applications filed by the defendant No.4 under Order VII Rule 10 of CPC in respective suits, are allowed. The Commercial Court is directed to return the plaint to the plaintiff to present the same before the appropriate court within 30 (thirty) days from the date of receipt of the certified copies of the plaint from the Commercial Court.”

The court was dealing with a challenge to a common order passed by the Commercial Court, Bengaluru, which had rejected applications filed by Shalimar Incense Pvt. Ltd. seeking return of the plaints in three suits. By setting aside that order, the High Court accepted the plea seeking return of plaints.

The dispute arose from suits filed by Nitin Kanji Shah (HUF) seeking recovery of about Rs. 60 lakh advanced to Shalimar Agarbatti Company, a partnership firm engaged in the manufacture and sale of agarbattis. According to the plaint, the firm would approach the plaintiff whenever it required funds, and the plaintiff advanced money on multiple occasions as financial assistance with an understanding that it would carry interest at 12 percent per annum.

The plaint further states that the karta of the HUF is the brother of Vinod Kanji Shah, one of the partners, and that disputes later arose, following which the karta was expelled from the firm and the amounts were not repaid. It is also stated that the business of the partnership firm was later transferred to Shalimar Incense Pvt Ltd, which was subsequently impleaded as a party to the suits.

Before the Commercial Court, the plaintiff argued that the firm was a business concern and had accepted deposits in the course of its activities, making the dispute a commercial one. Accepting this line of reasoning, the Commercial Court had held, “On reading of the Plaint as a whole, it is clear that, the suit is filed for recovery of deposit amounts taken by the defendant No.1, which is a business concern or trader, in the ordinary course of its business. Therefore, on analysis of the plaint averments, it is clear that the suit involves commercial dispute.”

Shalimar Incense Pvt Ltd contended before the High Court that the transactions did not amount to disputes arising out of ordinary transactions of merchants and therefore would not fall within the scope of a commercial dispute.

The High Court set aside the Commercial Court's order and directed that the plaints be returned for presentation before the appropriate court. It further directed, “If such suits are filed, the trial court is directed to dispose of the same as expeditiously as possible".

All the contentions of the parties are kept open

For Petitioner: Advocate Varun S

For Respondent: Advocates Swaroop S.