Commercial Courts – Jurisdiction – Hotel was not being used for trade and commerce

As per the business agreement dated 7.7.2022 between the parties for running, operating, and managing Hotel Niveditta, an amount of Rs.30 lakhs was to be paid by the respondent as security to the petitioners. 

Since the disputes arose, the petitioners filed commercial suit in Varansi Court.   However, the Court refused to entertain the commercial suit on the ground that since the Hotel was not being “used for trade and commerce” in the ambit of Section 2(1)(c)(vii) of the Commercial Courts Act, 2015.

 HELD that the Commercial Court overlooked the broader commercial context of the agreement and to recognise the commercial nature of the dispute.   Section 2 (1) defines “commercial disputes” in various categories and clause (vii) covers “agreements relating to immovable property used exclusively in trade or commerce”.  Four conditions as elaborated in para 13 of the judgment should be fulfilled.  It is evident from the nature of the agreement that the primary purpose was to facilitate and manage the commercial activities related to the Hotel and therefore, the argument that the Hotel was not “actually used for trade or commerce” lacks merit since the very purpose of the agreement was to engage in commercial activities related to the operation of the Hotel.

Disputes arising out of business, operation and management agreements of immovable properties such as hotels, resorts, office buildings, shopping centres and other commercial real estate fall within “commercial dispute” under Section 2(c)(vii) of the CC Act.

Judgment dated 27.5.2024 of the Allahabad High Court in Matters under Article 227 No.4127 of 2023 of Mamta Kapoor and another  Vs. Vinod Kumar Rai