JATIN JAIN & ORS. vs ANUJ JAIN & ORS.
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 06th March 2024
+ CS(OS) 176/2024 and I.A. 4814/2024, I.A. 4815/2024
JATIN JAIN & ORS. ….. Plaintiffs
Through: Mr. Siddharth Yadav, Sr. Advocate with Ms. Nitika Mangla and Mr. Ankit Chadha, Advocates.
versus
ANUJ JAIN & ORS. ….. Defendants
Through:
HON’BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI
J U D G M E N T
ANUP JAIRAM BHAMBHANI J.
The present suit has been filed as an ordinary civil suit.
2. Vide last order dated 29.02.2024, Mr. Siddharth Yadav, learned senior counsel appearing for the plaintiffs was queried as to why the present suit should not be treated as a commercial suit under the provisions of the Commercial Courts Act 2015 (Commercial Courts Act), since the claims made by way of the suit appear to arise from a partnership agreement. Mr. Yadav was heard in the matter on 29.02.2024; and had sought further time to cite certain judicial precedents.
3. Mr. Yadav argues that the suit is maintainable as an ordinary civil suit.
4. It is the submission of learned senior counsel, that the subject matter of the present suit are the sale proceeds of property bearing No.249-A, Udyog Vihar, Phase-IV, Gurugram, Haryana which property was at one stage property of the partnership firm. He submits however, that once the sale proceeds were credited to the personal account of the plaintiffs father/husband (who was one of the partners of the partnership firm), the character of the funds changed, and it can no longer be said that the funds relate to the partnership firm or that the claims have arisen from a partnership agreement. These funds, it is argued, became the personal money of the plaintiffs father/husband; and that since by way of the present suit the plaintiffs are seeking recovery of those funds from the defendants alongwith damages arising therefrom, the dispute in question is not a dispute arising out of a partnership agreement within the meaning of the Commercial Courts Act.
5. In this behalf, Mr. Yadav places reliance on the following paragraphs of the plaint :
27. Thus Defendant no. 1&2 were always aware of Sh. Mukesh Jains intentions to close his account with Defendant no. 4, still they connived & transferred the amounts from the personal account of Sh. Mukesh Jain which was supposed to be closed. In this way, the Defendant no. 1 and his father Sh. Vijay Jain, Defendant no. 2 and his wife, Defendant no. 3 have siphoned away the amount of Rs. 8,44,85,000/- (Rupees Eight Crores Forty-Four Lakhs Eighty-Five Thousand Only) from Sh. Mukesh Jains Andhra bank account.
28. That it is submitted that there was no occasion for Sh. Mukesh Jain to transfer Rs. 8,44,85,000/- (Rupees Eight Crores Forty-Four Lakhs Eighty-Five Thousand Only) in favour of Defendant no. 1 and his Wife Defendant no. 3. Sh. Mukesh Jain owed no money whatsoever to Defendant no. 1 and/or Defendant no. 3, and neither is the said transfer out of free will or upon any written instructions. The same is neither a Gift from Sh. Mukesh Jain to Defendant no. 1 and Defendant no. 3. Infact Sh. Mukesh Jain never transferred any amount to the accounts of Defendant no. 1 and Defendant no. 3 in the past. Thus, the entire transaction is fraudulent and an act of Cheating committed by Defendant no. 1 and his Wife Defendant No.3, in conspiracy with his father, Sh. Vijay Jain, Defendant no. 2.
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30. That it is further stated that despite having knowledge that Sh. Mukesh Jain has appointed his son i.e., Plaintiff no. 1 as his lawful attorney and legal representative to look after his business, the Defendant no. 1 and his father Defendant no. 2 in order to Cheat Sh. Mukesh Jain and his family, fraudulently operated his bank account, and further misguided the staff members of Andhra Bank Karol Bagh not to entertain/act on any enquiries/requests from Plaintiff no. 1. The Plaintiffs have all reasons to believe that the bank officials were operating in connivance with the Defendants since the Defendant no. 2 is the landlord having leased his premises 17A/53 WEA Karol bagh New Delhi to Andhra bank vide lease deed dated 27.04.2018 registered on 01.05.2018 wherein Defendant No. 1 is one of the witnesses. The plaintiffs reserve the right to file separate criminal proceedings against the bank officials, in accordance with the law.
6. The essential thrust of Mr. Yadavs argument is that the present suit arises from embezzlement committed by the defendants in collusion with each other, in particular by defendants Nos. 2, 3 and 4, who were in any case, not partners of the partnership firm; and that therefore, the basis of the suit is not the partnership agreement between the parties.
7. Mr. Yadav has drawn attention inter-alia to the decision of a Co-ordinate Bench of this court in IHHR Hospitality (Andhra) Pvt. Ltd. vs. Seema Swami & Ors.1 in support of his contention.
8. At this point, it would be beneficial to first refer to the relevant portions of the plaint and of the Commercial Courts Act.
9. The claims made by way of the plaint read as follows :
1. Pass a decree for recovery against Defendant no. 1, 2 & 3, jointly and severally, for a sum of Rs 11,36,32,325/- (eleven crores thirty-six lakhs thirty-two thousand three hundred and twenty-five only)
2. Pass a decree for pendente lite and future interest @12% p.a, till the date of realization of the suit amount;
3. Pass a decree for award of Damages against Defendant no. 4 to the tune of Rs. 1,00,00,000 (Rupees One Crore Only);
4. Pass any other /further orders which this Honble Court may deem fit and proper in the facts and circumstances of the case.
10. The allegations contained in the plaint that are relevant for purposes of the present decision are the following :
1. That the Plaintiffs are the class I legal heirs of Late Sh. Mukesh Jain, being his wife and sons. The Defendant no. 1 was a partner with Sh. Mukesh Jain in an unregistered partnership firm namely M/s. Perfect Assets. Defendant no. 2 is the father of Defendant no. I. Defendant no. 3 is the wife of Defendant no. I. The present disputes arise amongst the Parties for fraudulently operating Sh. Mukesh Jain Andhra Bank (now Union Bank of India) Account No. 030711100004395 from the period April-May 2021 even when the said account was requested to be closed vide letters dated 09.03.2021 and 03.04.2021 and for illegally transferring a sum of 8,44,85,000/- (Rupees Eight Crores Forty-Four Lakhs Eighty-Five Thousand Only) from the said account without the knowledge and permission of Sh. Mukesh Jain. Whereas,Defendant no. 4 is the bank, who in spite of written instructions has permitted operation and misuse of the aforementioned bank account, hence is party to the fraudulent withdrawal of money by the Defendants from the bank account of Sh. Mukesh Jain, thereby causing monetary loss to Sh. Mukesh Jain and the Plaintiffs.
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21. That without prior knowledge or written consent of Sh. Mukesh Jain and more importantly in breach of the terms and conditions of the Partnership Deed, Defendant No.1 executed a Sale Deed dated 31.03.2021 for the Gurugram Property in favor of Company of his father-in-law, Jain Buildcon & Estates Pvt Ltd. for a paltry profit of Rs. 2,76,400/-(Rupees Two lakh seventy-six thousand four hundred only) (the amount as shown in the financial statements of the partnership firm). The Sale of Guru gram Property was fraudulent; contrary to the terms and conditions of Partnership Deed; without permission from Sh. Mukesh Jain; carried out in a clandestine manner only to usurp funds from Sale & Purchase of the Gurgaon Property, so as to benefit Defendant no. 1 thereby causing loss & damage to Sh. Mukesh Jain and Debraj Supplier LLP.
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23. That thereafter, the Plaintiff no. 1 with Sh. Mukesh Jain obtained the copy of his Bank Accounts and after obtaining the bank account statement, a shocking affair of serious fraud & money rotation/routing committed by the Defendants came to the light of the Plaintiffs and Sh. Mukesh Jain. A sum of Rs. 13.95 crores was credited in the account of partnership firm after the sale deed of Gurugram Property was executed. Thereafter Defendant no.1 transferred the amount from the account of partnership firm in the accounts of Sh. Mukesh Jain, Deepak Jain and in his own account but never transferred any amount whatsoever into the account of the fourth partner, Debraj Supplier LLP. Transactions were executed in haste by the Defendants and without knowledge of Sh. Mukesh Jain, itself gives rise to a sense of their malafide intentions.
24. That to elaborate further, from ·the sale proceeds credited in the partnership account, Rs. 1.15 crores were transferred to the account of Deepak Jain, Rs. 8.47 crore to the account of Sh. Mukesh Jain and Rs. 4.25 crore to the account of Anuj Jain (Defendant no. 1).
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31. That In fact, upon coming to know about the fraudulent transaction, Sh. Mukesh Jain and Plaintiff no. 1 sent an email dated 28.05.2021 to Defendant no. 1 questioning his authority to sell the Gurugram property and misappropriation of the sale proceeds. Another email dated 31.05.2021 was sent by Sh. Mukesh Jain to Defendant no. 1 categorically objecting that the decisions have been taken in the partnership firm without his consent and further giving authority to Plaintiff no. 1 to initiate legal proceedings against Defendant no. 1.
(emphasis supplied)
11. Section 2(1)(c)(xv) of the Commercial Courts Act defines a commercial dispute to mean:
2 . Definition.(1) In this Act, unless the context otherwise requires,
(a) – (b) *****
(c) commercial dispute means a dispute arising out of
(i) – (xiv) *****
(xv) partnership agreements.
(xvi) – (xxii) *****
Explanation.A commercial dispute shall not cease to be a commercial dispute merely because
(a) it also involves action for recovery of immovable property or for realisation of monies out of immovable property given as security or involves any other relief pertaining to immovable property;
(b) *****
12. The jurisdiction of a Commercial Court or a Commercial Division of the High Court is attracted when a suit relates to a commercial dispute of a Specified Value2. In the present case, there is no dispute that the value of the subject-matter of the suit is above the specified value3. The contention however, is that the suit does not relate to a commercial dispute.
13. In T.V. Today Network Ltd vs. News Laundry Media Pvt Ltd. & Ors.4, a Co-ordinate Bench of this court had the opportunity to examine as to when a suit could be said to relate to a commercial dispute. This is what the Co-ordinate Bench said :
43. The words used in a statute are to be read and understood in their ordinary meaning. Section 2(1)(c) does comprise of a list. But, it would be incorrect to hold that it sets out an exhaustive list of disputes that qualify as commercial disputes. If that was the intent, the words used would simply have been the following are commercial disputes. Instead, the words used are arising out of. That is, the source of the dispute must be one of the clauses listed in Section 2(1)(c) of the Act. The clauses do not limit the contours of the dispute that may arise. What would be the actual dispute in respect of ordinary transactions of merchants, or export and import of merchandise, or carriage of goods, or construction and infrastructure, and so on and so forth, would remain what would arise in ordinary course between two parties in the course of these engagements and activities. Thus, such a dispute could be a breach of contract or the enforcement of terms of contract entailing recovery not only of the price, but possibly damages; disputes may relate to mutual rights or obligations under joint venture agreements or rights and obligations in respect of consultancy agreements; disputes arising out of technology development agreements could entail rights to the sharing of the know-how and/or confidentiality, and so on and so forth. In short, if the disputes were relatable to any of the clauses, the disputes would be clothed with the additional adjective of being commercial in nature. The classification has been given to make available a special procedure for trial and speedy disposal of such disputes that impact economic activity.
(emphasis supplied)
14. The next question is as to what the dispute in the present case is; and whether the dispute can be said to be arising out of a partnership agreement.
15. In ANZ Grindlays Bank Ltd vs. Union of India,5 the Supreme Court has explained the meaning of the word dispute in the following manner :
11. ….. The definition uses the word dispute. The dictionary meaning of the word dispute is: to contend any argument; argue for or against something asserted or maintained. In Black’s Law Dictionary the meaning of the word dispute is: a conflict or controversy, specially one that has given rise to a particular lawsuit. In Advanced Law Lexicon by P. Ramanatha Aiyar the meaning given is: claim asserted by one party and denied by the other, be the claim false or true; the term dispute in its wider sense may mean the wranglings or quarrels between the parties, one party asserting and the other denying the liability. In Gujarat State Coop. Land Development Bank Ltd. v. P.R. Mankad [(1979) 3 SCC 123 : 1979 SCC (L&S) 225] it was held that the term dispute means a controversy having both positive and negative aspects. It postulates the assertion of a claim by one party and its denial by the other.
(emphasis supplied)
16. Furthermore, in Renusagar Power Co. Ltd. vs. General Electric Co.,6 the Supreme Court enunciated the import of the expression arising out of in the following manner :
16. In Government of Gibraltar v. Kenney [(1956) 3 All ER 22 : (1956) 2 QB 410 : (1956) 3 WLR 466 (QBD)] the arbitration clause covered:
… any dispute or difference (which) shall arise or occur between the parties hereto in relation to any thing or matter arising out of or under this agreement….(emphasis supplied)
and Sellers, J. has observed at p. 26 of the Report (All ER) that
the distinction between matters arising out of and under the agreement is referred to in most of the speeches in Heyman v. Darwins Ltd [1942 AC 356 : (1942) 1 All ER 337 : 166 LT 306 (HL)] and it is quite clear that arising out of is very much wider than under, the agreement.
(emphasis supplied)
17. This court is also conscious of the position that the list under section 2(1)(c) of the Commercial Courts Act presents an exhaustive, restrictive definition, as explained in Ambalal Sarabhai Enterprises Ltd. vs. K.S. Infraspace LLP7, in which the Supreme Court has held that the provisions of the Commercial Courts Act must not be given a liberal interpretation, and that the purpose of the statute would be fulfilled
only if the provisions of the Act are interpreted in a narrow sense
.
18. Upon a conjoint reading of the foregoing enunciation of the law by the Supreme Court, in the opinion of this court, the following inferences arise in the present case :
18.1. In legal parlance, the word dispute has a wide meaning. It postulates the assertion of a claim by one party and its denial by the other. The word relief is to be distinguished from dispute. Relief sought in a legal proceeding is a reference to the remedial measure claimed from the court, be it by way of declaration, recovery, specific performance and so on. In a litigation, relief is sought in respect of a dispute.
18.2. It may be noticed that in section 2(1)(c) of the Commercial Courts Act, the Legislature specifies the kind of disputes which would be amenable to the special procedure under that special statute, which it calls commercial dispute; and in sections 6 and 7, the Legislature says that apart from being a commercial dispute, the relief sought in a commercial suit must also be of a Specified Value8.
18.3. When in section 2(1)(c)(xv) of the Commercial Courts Act, the Legislature inter-alia says that a dispute arising out of a partnership agreement9 is also a commercial dispute, it only means that the dispute must be relatable to a partnership agreement, not that the relief sought must necessarily be under the partnership agreement.
18.4. In the present case, the plaintiffs claim recovery of money which, on the plaintiffs own admission, is part of the sale proceeds of a property that belonged to the partnership firm, in which the late father/husband of the plaintiffs was a partner. It is the plaintiffs contention that the partnership property was sold; part of the sale proceeds were credited to their fathers/husbands account (though his personal account); and the monies were thereafter withdrawn unlawfully by the defendants.
18.5. The money claimed by way of the suit is therefore part of the sale proceeds of property which was owned by the partnership firm.
18.6. The plaintiffs contention in the suit is two-fold :
18.6.1. Firstly, that the partnership property could not have been sold without the consent of the plaintiffs father/husband; and
18.6.2. Secondly, that the sale proceeds thereof have been misappropriated by the defendants after having been deposited in their fathers/husbands account.
18.7. Plaintiff No.1 himself alleges that instead of dissolving the partnership firm and distributing its assets, the defendants have clandestinely misappropriated partnership funds, in the manner as detailed in the plaint.
19. In light of the above, this court is of the view that the present suit relates to a commercial dispute of Specified Value within the meaning of sections 2(1)(c)(xv) and 2(1)(i) read with section 12 of the Commercial Courts Act; and is therefore maintainable as such before this court under section 7 of the Commercial Courts Act.
20. The suit is therefore required to be dealt-with as a commercial suit.
21. The Registry is accordingly directed to change the nomenclature of the suit.
22. Another aspect that requires consideration at this point is whether, having held that the suit is to be treated as a commercial suit, would the plaintiffs be entitled to exemption from the mandatory, pre-litigation mediation and settlement process comprised in section 12A of the Commercial Courts Act.
23. The claims in the present suit are only for recovery of money and damages. Though the plaintiffs have also filed an application bearing I.A. No. 4814/2024 under Order 39 Rules 1 & 2 read with Order 38 Rule 5 of the Code of Civil Procedure, 1908 seeking attachment of the defendants bank accounts and for restraining the defendants from alienating certain immovable properties to secure the money claimed in the suit, the essential claim in the suit is for recovery of money along with interest. Therefore, in the opinion of this court, the relief of attachment and/or ad-interim injunction prayed-for by way of the interim application appears somewhat farfetched. Therefore there is no reason to exempt the plaintiffs from complying with the requirement of pre-litigation mediation under section 12A of the Commercial Courts Act.
24. That being said, since the suit has already been instituted, taking cue from the decision of the Supreme Court in order dated 13.10.2023 passed in SLP (Civil) Diary No. 32275/2023 titled Yamini Manohar vs. TKD Keerthi, the suit is kept pending, directing the plaintiffs to comply with the relevant provisions of the Commercial Courts Act, the Delhi High Court (Original Side) Rules, 2018 and the practice directions issued thereunder, including the requirement of section 12A of the Commercial Courts Act.
25. For compliance of the above, re-notify before the learned Joint Registrar on 09th July 2024.
26. List before court thereafter.
ANUP JAIRAM BHAMBHANI, J
MARCH 06, 2024
V.Rawat
1 2022 SCC OnLine Del 3635
2 cf. sections 6 and 7 of the Commercial Courts Act
3 cf. sections 2(1)((i) and 12 of the Commercial Courts Act
4 (2022) 5 HCC (Del) 6 : 2022 SCC OnLine Del 2233
5 (2005) 12 SCC 738
6 (1984) 4 SCC 679
7 (2020) 15 SCC 585 at para 36 (from concurring opinion)
8 cf. section 2(1)(i) read with section 12 of the Commercial Courts Act
9 cf. section 2(1)(c)(xv) of the Commercial Courts Act
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CS(OS) 176/2024 Page 1 of 13