Once Commercial Courts Designated, Civil Courts Can't Decide Specified-Value Disputes: Kerala High Court

The Kerala High Court on 10 August held that a civil court cannot adjudicate a commercial dispute of specified value that falls within the jurisdiction of a designated Commercial Court.

Justice Easwaran S allowed an appeal filed by BRD Finance Limited, a kuri company, against the dismissal of its recovery suit by the Munsiff Court, Chavakkad. He held:

“Without transferring the same, the act of the Munsiff Court in proceeding to consider the suit on merits is clearly unsustainable and without jurisdiction.”

BRD Finance had filed the suit before the Munsiff Court seeking recovery of Rs. 3.47 lakh from Santhosh P and Sujisha M.K. on the basis of a promissory note executed by them.

While the suit was pending, the Kerala Government issued a notification on 24 February 2020 designating Sub Courts as Commercial Courts for recovery of amounts exceeding Rs. 3 lakh under the Commercial Courts Act, 2015.

BRD Finance contended that Section 15 of the Commercial Courts Act required the suit to be transferred to the designated Sub Court. However, the Munsiff Court proceeded to adjudicate the suit on merits and dismissed it. The Sub Court subsequently affirmed the dismissal in A.S. No. 24/2024.

The High Court noted that BRD Finance itself had not raised the jurisdictional objection when it filed the first appeal before the Sub Court. However, it held that the Sub Court's failure to notice the jurisdictional defect resulted in the illegality being perpetuated at the appellate stage. It admitted the second appeal and framed the question of whether a civil court could adjudicate a commercial dispute of specified value that was required to be tried by a Commercial Court.

The Bench noted that once the State Government had designated Sub Courts as Commercial Courts for recovery of amounts exceeding Rs. 3 lakh, the Munsiff Court was required to transfer the suit to the designated Sub Court. It further held that the Sub Court failed to notice that an appeal against an order rendered without jurisdiction was not maintainable before it.

The respondents, did not appear before the High Court despite notice. The Bench therefore heard the second appeal on the arguments advanced by BRD Finance's counsel, Sri. G. Krishnakumar. It set aside the judgment and decree of the Munsiff Court and the judgment of the Sub Court, without entering into the merits of the findings recorded by either court.

It directed the Principal District Court, Thrissur to pass consequential orders on the administrative side for transferring the suit from the Munsiff Court, Chavakkad to the Principal Sub Court, Thrissur. It also directed the Principal Sub Court, Thrissur to issue fresh notices to BRD Finance and the defendants after receiving the transferred suit and thereafter adjudicate the matter on its merits. Thus, the Bench left the dispute over the alleged debt open for fresh consideration.

Lastly, the Bench also held that BRD Finance was entitled to a refund of the court fees paid for both the second appeal before the High Court and the first appeal before the Sub Court, Chavakkad.

For Appellant: Advocates G Krishnakumar, Nina P Augustine, Athuliya P and Sooraj Sunil P