The Delhi High Court has held that if a Commercial Court determines that a suit does not qualify as a “commercial dispute” under the Commercial Courts Act, 2015 (CC Act), it is legally obligated to return the plaint under Order VII Rule 10 of the Code of Civil Procedure (CPC) for presentation before the appropriate forum, rather than dismissing the suit.
The Division Bench comprising Justice Anil Kshetarpal and Justice Amit Mahajan observed that dismissing a suit due to a jurisdictional defect effectively shuts the doors of justice on substantive claims, whereas the correct procedure is to facilitate the transfer of the case to the competent court.
Background of the Case
The appeal was filed by Pramod Kumar (Appellant), who had served M/s Gannon Dunkerley and Co. Ltd. (Respondent) for over 27 years, rising to the rank of Deputy General Manager (Civil). The Appellant was appointed in 1992 and his services were confirmed after probation. On February 3, 2020, he applied for earned leave to attend his elder son’s wedding. However, on February 6, 2020, the Respondent-company summarily terminated his employment, invoking Provision 14(a) of the revised terms and conditions dated December 20, 2012.
Following this termination, the Appellant sought a full and final settlement of his dues. He claimed a total outstanding sum of Rs. 4,10,184/-, which included:
- Rs. 1,00,000/- towards the balance of two months’ basic salary in lieu of notice.
- Rs. 2,55,000/- for the encashment of 153 days of earned leave.
- Rs. 5,184/- for pending Travel Expense bills.
- Rs. 50,000/- towards the refund of a laptop security deposit.
Despite legal notices, the Respondent failed to settle the dues. Consequently, the Appellant instituted a recovery suit before the Commercial Court. In the impugned judgment dated April 30, 2024, the Commercial Court held that the dispute was essentially a service-related recovery matter between an employee and a private employer. Ruling that it did not satisfy the criteria of a “commercial dispute” under Section 2(1)(c) of the CC Act, the Commercial Court dismissed the suit.
Submissions of the Parties
The Appellant challenged the dismissal before the High Court on a limited legal grievance. The counsel for the Appellant argued that while the Commercial Court might have correctly identified the dispute as non-commercial, it erred in law by dismissing the suit. It was submitted that the Court’s power, upon finding a lack of subject-matter jurisdiction, was restricted to returning the plaint under Order VII Rule 10 of the CPC so it could be presented before the appropriate non-commercial forum. The counsel contended that dismissing the suit resulted in a “gross miscarriage of justice” by shutting the doors on substantive claims due to a defect of “wrong forum.”
Defending the impugned judgment, the counsel for the Respondent submitted that the termination was in accordance with the revised company policy and all legitimate dues had been settled. The Respondent argued that since the Appellant chose to approach a specialized Commercial Court for a non-commercial matter, the dismissal was a natural consequence of the suit being non-maintainable before that specific forum.
Court’s Analysis and Reasoning
The High Court examined whether a Court, upon finding it lacks jurisdiction because a dispute is “non-commercial,” can dismiss the suit or is mandated to return the plaint.
On the Nature of the Dispute
The Bench affirmed the Commercial Court’s finding regarding the nature of the dispute. The Court observed:
“Judicial consensus, as well as the plain reading of the statute suggests that a simple recovery of salary or terminal benefits by an employee from a private employer does not fall within the categories of ‘merchants, bankers, financiers and traders’ or other specified commercial transactions.”
Thus, the High Court found no infirmity in the conclusion that the dispute was non-commercial.
On Dismissal vs. Return of Plaint
However, the Court held that the Commercial Court erred in the procedural consequence of this finding. Distinguishing between dismissal and return of plaint, the Court observed:
“In our measured opinion, ‘dismissal’ of a suit is a final adjudication on the merits or on a bar that prevents the claim from ever being heard (such as res judicata or limitation). Conversely, the ‘return of a plaint’ is a procedural mechanism, which is used when a Court finds it is not the correct forum to hear the matter. By dismissing the suit, the Commercial Court treated a jurisdictional defect as a substantive failure of the cause of action.”
The Court emphasized that a litigant “cannot be left remediless simply for approaching the wrong door of the courthouse, especially when the claim involves substantial terminal benefits after 27 years of service.”
Judicial Precedents
The High Court relied on the Supreme Court’s judgment in Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP & Anr. (2020), which dealt with the strict interpretation of “commercial disputes.” The Bench noted that the Supreme Court had explicitly suggested the procedure to be followed:
“The Commercial Court shall therefore return the plaint indicating a date for its presentation before the Court having jurisdiction.”
The High Court interpreted this to mean that when a Commercial Court finds a dispute to be non-commercial, “it does not lose the power to do justice; rather, it loses the jurisdiction to hear that specific matter, thereby necessitating the return of the plaint to the appropriate forum.”
The Bench also referred to the Bombay High Court judgment in AJ Organica Pvt. Ltd. v. State of Maharashtra, which held that a court lacking subject-matter jurisdiction is duty-bound to pass an order under Order VII Rule 10 CPC.
Decision
The High Court allowed the appeal and set aside the impugned judgment dated April 30, 2024. The Bench issued the following directions:
- Restoration: The suit filed by the Appellant is restored to its original position.
- Return of Plaint: The Commercial Court is directed to return the plaint to the Appellant in terms of Order VII Rule 10A CPC, indicating a date for its presentation before the appropriate Court of competent jurisdiction.
- Utilization of Evidence: Acknowledging that pleadings were filed and evidence led in the original proceedings, the Court referred to the Supreme Court in EXL Careers v. Franklin Aviation Services. While noting that a return of plaint typically necessitates de novo proceedings, the Bench observed:
“Hence, with the consent of the learned counsel representing the parties, who will take a pragmatic view, the Competent Court may utilise the pleadings and evidence (documentary and oral) which have already been produced by the parties.”
The parties were directed to appear before the concerned Commercial Court on February 3, 2026.
Case Details:
- Case Title: Pramod Kumar v. M/s Gannon Dunkerley and Co. Ltd.
- Case Number: RFA(COMM) 348/2024
- Coram: Justice Anil Kshetarpal and Justice Amit Mahajan
