Full Judgment Text
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
R
TH
DATED THIS THE 18 DAY OF JUNE, 2025
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 17588 OF 2022 (GM-CPC)
BETWEEN:
M/S. VISWAS TEXTILE PROCESSORS,
A PARTNERSHIP FIRM HAVING ITS OFFICE AT
SY. NO. 24, GUDIMAVI VILLAGE,
KENGERI HOBLI, MYSURU ROAD,
BENGALURU - 560 074,
REPRESENTED BY ITS MANAGING PARTNER,
MR. B.K. RAMAKRISHNA.
…PETITIONER
(BY SRI. HEMANTH R. RAO, ADVOCATE FOR
SRI. RUKKOJI RAO H.S, ADVOCATE)
AND:
1. ICICI BANK LIMITED,
REGISTERED ADDRESS:
ICICI BANK TOWER, NEAR CHAKLI CIRCLE,
OLD PADRA ROAD, VADODARA, GUJRAT - 390 007,
BRANCH OFFICE ADDRESS:
ICICI BANK LIMITED, KUMBALAGODU BRANCH,
RAJARAJESHWARI COLLEGE OF ENGINEERING,
NO. 14, RAMOHALLI CROSS, MYSORE ROAD,
KUMBALAGODU, BENGALURU - 560 074.
2. MR. MOHAN NAIK,
FATHERS NAME NOT KNOWN,
AGED ABOUT 27 YEARS,
Digitally signed
by NAGAVENI
Location: High
Court of
Karnataka
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RESIDING AT NO. 772, CHOWKIMANE,
GUDDINAKATTU, KADATOKA,
HONNAVARA TALUK,
UTTARA KANNADA - 581 334.
3.
MR. ARUN KUMAR K.S,
S/O SIDDAPPA,
AGED ABOUT 27 YEARS,
RESIDING AT KITHEGERI VILLAGE,
K. HOSEKOTE POST, HOBLI ALUR TALUK,
HASSAN - 573 213.
4. MS. SHALINI B.G,
W/O ARUN KUMAR K.S,
AGED ABOUT 27 YEARS,
RESIDING AT NO. 474,
NANDAGOKULA HOUSE,
YAMUNA ROAD, SMV LAYOUT,
G. BELLUR VILLAGE, PALYA HOBLI,
ALUR TALUK, HASSAN - 573 213.
5. MR. SHIVALINGEGOWDA,
AGED ABOUT 36 YEARS,
RESIDING AT HUYLLEGALA VILLAGE,
HALUGURU HOBLI, MALAVALLI TALUK,
MANDYA DISTRICT - 571 430.
…RESPONDENTS
(BY SRI. JAI M. PATIL, ADVOCATE FOR R1;
VIDE ORDER DATED 16.01.2025, NOTICE TO R3 AND R5 IS
DISPENSED WITH AND SERVICE OF NOTICE TO R4 IS
HELD SUFFICIENT;
R2 SERVED - UNREPRESENTED)
THIS WP IS FILED UNDER ARTICLE 227 OF THE
CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER
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DATED 30.08.2022 PASSED BY THE X ADDL. DISTRICT AND
SESSION JUDGE, BENGALURU RURAL DISTRICT, BENGALURU
PASSED IN COMM.OS.NO.95/2022 PRODUCED AT ANNEXURE-A
AND ETC.,
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE M.NAGAPRASANNA
ORAL ORDER
The petitioner - plaintiff is before this Court calling in
question an order dated 30.08.2022 by which the concerned
Court rejects the plea of the petitioner - plaintiff that the
dispute is a commercial dispute within the meaning of Section
2(1)(c) of the Commercial Courts Act, 2015 ('the Act for short)
and therefore as to be tried by the Commercial Court.
2. Heard Shri Hemanth R. Rao, learned counsel and
Shri Rukkoji Rao H.S., learned counsel appearing for the
petitioner and Shri Jai M. Patil, learned counsel appearing for
respondent No.1.
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3. The facts in brief germane are as follows:
The plaintiff is a partnership firm in the business of
garment processing and manufacturing. The defendant No.1 is
a banking company and other defendants are employees of the
banking company. The plaintiff had appointed defendant No.3
as its Accountant with effect from 01.07.2017 and the other
defendants are associates of defendant No.3. A current account
is maintained at the branch of defendant No.1 for several
years. Several irregularities in the said account were found in
the month of December-2019. It transpires that huge sums of
money were withdrawn in cash through cheques by defendant
No.3 from the current account by allegedly forging the
signatures of the partners of the plaintiff firms. All the said
cheques have been passed by defendant No.1 through
defendant No.2, without due verification.
4. The plaintiff then was informed by defendant No.1 that
defendant No.3 had changed the registered mobile number of
the plaintiff's banking account to his personal number and
thereby all the OTP would come to his mobile number. On
coming to know of the said misappropriation of funds, a crime
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comes to be registered by the plaintiff and the police after
investigation have filed a charge sheet, which is pending in
C.C.No.2281/2020. The plaintiff then causes a legal notice on
the defendants calling upon them to jointly and severally pay a
sum of Rs.4,58,75,000/- with 18% interest per annum.
5. The notice was served and defendant No.1 replies
to the notice denying the same. The plaintiff then institutes an
O.S.No.117/2021 before the V Additional Senior Civil Judge,
Bengaluru Rural District. On constitution of the Commercial
Court, the plaintiff is said to have filed an application under
Section 15 of the Act seeking transfer of the suit to the
Commercial Court, as according to the plaintiff the dispute was
a commercial dispute in terms of the Act. The Court taking up
the application, rejects it on the ground that it is not a
commercial dispute. None of the defendants objected to the
application, but consented to the matter to be transferred to
the Commercial Court. The suit was transferred on 16.04.2022
and registered as Commercial O.S.No.95/2022. The
Commercial Court then framed an issue as to whether the
Commercial OS was maintainable, as a preliminary issue.
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Answering the preliminary issue, the Commercial Court holds
that the suit, before the Commercial Court is not maintainable.
It is therefore, the petitioner - plaintiff is before this Court.
5. Learned counsel appearing for the petitioner would
reiterate the submissions made before the concerned Court to
contend that the definition is clear, that it is a commercial
dispute. If it were to be misappropriation in a savings bank
account, it would not have become a commercial dispute, but
what has happened is in a current account, as day to day
business happens in that account. Therefore, it becomes a
commercial dispute. He would seek to place reliance upon
plethora of judgments, all of which would bear consideration
qua the relevance, in the course of the order.
6. Per contra , the learned counsel representing
respondent No.1 would submit that they never objected to the
maintainability of the commercial OS nor objecting now. The
Court on by itself has framed a preliminary issue and answered
the said issue. The learned counsel submits it does amount, to
a commercial dispute.
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7. I have given my anxious consideration to the
submissions made by the respective learned counsel and have
pursued the material available on record.
8. The afore-narrated facts would not require
reiteration, as they are a matter of record. The issue now lies in
a narrow compass. Whether misappropriation of funds or loss
of funds, in a current account maintained in a banking
institution, would become the subject matter of a commercial
dispute, it is necessary to notice the Act.
THE ACT:
9. Section 2 of the Commercial Courts Act, 2015 reads as
follows:
" 2. Definitions .—(1) In this Act, unless the
context otherwise requires,––
[(a) “Commercial Appellate Courts” means the
Commercial Appellate Courts designated under section
3A;]
[(aa)] “Commercial Appellate Division” means the
Commercial Appellate Division in a High Court
constituted under sub-section (1) of section 5;
(b) “Commercial Court” means the Commercial
Court constituted under sub-section (1) of section 3;
(c) “commercial dispute” means a dispute
arising out of––
(i) ordinary transactions of merchants,
bankers, financiers and traders such as those
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relating to mercantile documents, including
enforcement and interpretation of such documents;
(ii) export or import of merchandise or services;
(iii) issues relating to admiralty and maritime law;
(iv) transactions relating to aircraft, aircraft
engines, aircraft equipment and helicopters, including
sales, leasing and financing of the same;
(v) carriage of goods;
(vi) construction and infrastructure contracts,
including tenders;
(vii) agreements relating to immovable property
used exclusively in trade or commerce;
(viii) franchising agreements;
(ix) distribution and licensing agreements;
(x) management and consultancy agreements;
(xi) joint venture agreements;
(xii) shareholders agreements;
(xiii) subscription and investment agreements
pertaining to the services industry including outsourcing
services and financial services;
(xiv) mercantile agency and mercantile
usage;
(xv) partnership agreements;
(xvi) technology development agreements;
(xvii) intellectual property rights relating to
registered and unregistered trademarks, copyright,
patent, design, domain names, geographical indications
and semiconductor integrated circuits;
(xviii) agreements for sale of goods or provision of
services;
(xix) exploitation of oil and gas reserves or other
natural resources including electromagnetic spectrum;
(xx) insurance and re-insurance;
(xxi) contracts of agency relating to any of the
above; and
(xxii) such other commercial disputes as may be
notified by the Central Government.
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;
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(b) one of the contracting parties is the State or
any of its agencies or instrumentalities, or a private body
carrying out public functions;
(Emphasis supplied)
Section 2 of the Commercial Courts of the Act deals with
definition. Section 2(1)(c) of the Act defines what is a
commercial dispute. A commercial dispute in terms of 2(1)(c)
of the Act would mean in relationship to an immovable
property.
PRECEDENTIAL LANDSCAPE:
10. The Apex Court in the case of PRADEEP KUMAR
Vs. POSTMASTER GENERAL , reported in (2022) 6 SCC 351
holds that, on the opening of a bank account, a contractual
relationship is created between the customer and the banker.
The Apex Court has held as follows:
“24. When deciding whether the bank is negligent it is
necessary to see whether the rules or instructions of the
bank are followed or not, though this may not always be
conclusive. Till an account is opened, banker and
customer relationship is not created, but once the
account is opened contractual relationship is created.
Moreover, mutual rights and obligations between the
banker and customer are also created under law. In case of
fraudulent encashment of cheques, the collection and
payment embraces the bank's duty to the real owner, if the
customer happens not to be the real owner. In such cases,
the bank's liability is protected on the satisfaction of the
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conditions mentioned under Section 131 of the NI Act and
not otherwise. This is so because the drawer of the cheque
is not the customer of the bank while the payee is.
Consequently, if there is anything to arouse suspicion
regarding the cheque and the ownership of the customer,
the bank may find itself beyond the protection of Section
131 of the NI Act. Suspicion may arise when the
amount is very large, credibility and identity of the
customer is pied, etc. Further, negligence may be
established when collection and payment is made
contrary to the tenor of the instrument. Carelessness
occurs when there is failure to pay due attention to
the actual terms of the mandate.”
(Emphasis supplied)
The Apex Court holds that till an account is opened, banker and
customer relationship is not created. But once the account is
opened, contractual relationship is generated.
11. The High Court of Delhi in the case of JAGMOHAN
BEHL Vs. STATE BANK OF INDORE , reported in 2017 SCC
OnLine Del 10706 while interpreting the words “arising out
of” used in Section 2(1)(c) of the Act holds that the words have
an expansive and wide meaning. It reads as follows:
“9. In order to appreciate the controversy, we would
first reproduce the relevant definition clause, i.e.
2(1)(c)(vii), as also the explanation thereto:—
“ Definitions. -(1) In this Act, unless the context
otherwise requires-
(c) “commercial dispute” means a dispute arising out
of-
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(vii) agreements relating to immoveable property
used exclusively in trade or commerce;
Explanation .-A commercial dispute shall not cease to
be a commercial dispute merely because-
(a) It also involves action for recovery of immoveable
property or for realisation of monies out of
immoveable property given as security or involves
any other relief pertaining to immoveable
property;
(b) One of the contracting parties is the State or any
of its agencies or instrumentalities, or a private
body carrying out public functions;”
10. The explanation in the present case has to be read
as part and parcel of clause (vii), for the language of the
explanation shows the purpose, and the construction
consistent with the purpose which should be placed on the
main provision. The main provision, therefore, has to be
construed and read in the light of the explanation and
accordingly the scope and ambit of sub-clause (vii) to
clause(c), defining the expression “commercial dispute”, has
to be interpreted. The explanation harmonises and clears up
any ambiguity or doubt when it comes to interpretation of
the main provision. In S. Sundaran Pillai v. V.R.
Pattabiraman (1985) 1 SCC 591, it was observed that
explanation to a statutory provision can explain the
meaning and intendment of the provision itself and also
clear any obscurity and vagueness to clarify and make it
consistent with the dominant object which the explanation
seems to sub-serve. It fills up the gap. However, such
explanation should not be construed so as to take away the
statutory right with which any person under a statute has
been clothed or to set at naught the working of the Act by
becoming a hindrance in the interpretation of the same.
11. Clause (c) defines the “commercial dispute” in
the Act to mean a dispute arising out of different sub-
clauses. The expression “arising out of” in the context
of clause (vii) refers to an agreement in relation to an
immoveable property. The expressions “arising out of”
and “in relation to immoveable property”1 have to be
given their natural and general contours. These are
wide and expansive expressions and are not to be
given a narrow and restricted meaning. The
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expressions would include all matters relating to all
agreements in connection with immoveable properties.
The immoveable property should form the dominant
purpose of the agreement out of which the dispute
arises. There is another significant stipulation in
clause (vii) relating to immoveable property, i.e., the
property should be used exclusively in trade or
commerce. The natural and grammatical meaning of
clause (vii) is that all disputes arising out of
agreements relating to immoveable property when the
immoveable property is exclusively used for trade and
commerce would qualify as a commercial dispute. The
immoveable property must be used exclusively for
trade or business and it is not material whether
renting of immoveable property was the trade or
business activity carried on by the landlord. Use of the
property as for trade and business is determinative.
Properties which are not exclusively used for trade or
commerce would be excluded.”
(Emphasis supplied)
12. The High Court of Calcutta in the case of
LADYMOON TOWERS (P) LTD. Vs. MAHENDRA
INVESTMENT ADVISORS (P) LTD., reported in 2021 SCC
OnLine Cal 4240, while interpreting the definition of “bankers”
used in Section 2(1)(c)(i) holds that a banker is one, who is
involved in the business of receipt of money, in the current or
deposit account, and in the collection of cheques. The Court
also holds that only a dispute arising out of a transaction
between the named classes of persons falling under Section
2(1)(c)(i) of the Act, which has been formalized by way of a
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mercantile document will be a “commercial dispute” under
Section 2(1)(c)(i) of the 2015 Act. It reads as follows:
““Bankers”
7. In Halsbury's Laws of England, Fourth Edition,
Volume 3, a banker has been defined as one who is
involved in the business of receipt of money on
current or deposit account and the payment of
cheques drawn by and the collection of cheques paid
in by a customer. Section 5(b) of The Banking Regulation
Act, 1949 defines the work of a Banker on the same lines.
….…..
13. It should also be pointed out that the words used in
sub-clause (i) of clause (c) are “ordinary transactions of
merchants, bankers, financiers and traders such as those
relating to mercantile documents ………”. The placement of
the underlined words between ordinary transactions of the
named persons and the mercantile documents indicates that
all transactions between the specified classes of persons will
not result in a “commercial dispute” where the transaction
does not relate to mercantile documents. Hence, only a
dispute arising out of a transaction between the
named classes of persons which has been formalised
by way of a mercantile document will be a
“commercial dispute” under Section 2(1)(c)(i) of the
2015 Act. ”
(Emphasis supplied)
13. In a later judgement a Division Bench of the High
Court of Calcutta in the case of VENKATESH VINCOM (P)
LTD. Vs. SPICE OF JOY, reported in 2022 SCC OnLine Cal
3010 holds that the definition of “mercantile documents”
mentioned under Section 2(1)(c)(i) of the Act is a definition
wide enough to include any expression or a description of any
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substance by means of letters, marks or figures or electronic
means, which would be sufficient enough to bring clarity of the
matter. The word “mercantile” means a document relating to a
merchant or trading or a document which is commercial in
nature, and commercial paper includes negotiable instruments
like cheques too. It reads as follows:
“7. Reverting to the core issue the eventuality enshrined
in Clause (i) of Section 2(1)(c) of the said Act postulates
that a dispute arising out of the ordinary transaction of
financer relating to mercantile documents including its
enforceability and interpretation are the important factors to
be borne in mind. The said Clause can be segregated into 3
parts. Firstly, the dispute must arise out of ordinary
transaction of financer and secondly, such ordinary
transaction must relate to a mercantile document and
thirdly, the enforceability and the interpretation of such
document is involved. Admittedly, the appellant is a non
banking financial corporation which would be evident from
the averments made in the plaint and the certificate of
incorporation annexed thereto. The primary function of the
non banking corporation is to extend financial supports and
can be regarded as an ordinary transaction of the financer.
We find no ambiguity in this regard that lending money by
the appellant is fundamentally the transactions which it
does and can be regarded as the ordinary transaction. The
parties are not ad idem on the expression “mercantile
document” appearing in the said clause for the reason that
there was no agreement in writing nor any document
evincing the money given as loan to the respondents. The
mercantile document is not defined in the said Act.
However, the said Act defines ‘document’ in Section
2(1)(f) to mean any matter expressed or described
upon any substance by means of letters, figures, or
marks, or electronic means or, by more than one of
those means, intended to be used, or which may be
used, for the purpose of recording that manner. The
definition of a document is expansive and is not
restricted to any agreement to be executed by and
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between the parties recording the transactions at the
beginning thereof. The definition is wide enough to
include any expression or a description of any
substance by means of letters, marks or figures or
electronic means which would be sufficient enough to
bring clarity of the matter. The word ‘mercantile’ in
ordinary parlance means a document relating to a
merchant or trading or a document which is
commercial in nature. In Black's Law Dictionary ,
8th Edition ‘mercantile’ is defined as in “BLD”
8. Since the word ‘mercantile’ includes the transaction
which is of commercial nature the “commercial paper” is
also defined in the Black's Law Dictionary as an instrument
other than the cash for the payment of money and include
negotiable instrument of a particular kind in the following:
“Commercial Paper : 1. An instrument, other
than cash, for the payment of money. Commercial
paper - typically existing in the form of a draft
(such as a check) or a note (such as a certificate of
deposit) - is governed by Article 3 of the UCC. But
even though the UCC uses the term commercial
paper when referring to negotiable instruments of
a particular kind (drafts, checks, certificates of
deposit, and notes as defined by Article 3), the
term long predates the UCC as a business and legal
term in common use. Before the UCC, it was
generally viewed as synonymous with negotiable
paper or bills and notes. It was sometimes applied
even to nonnegotiable instruments. - Also termed
mercantile paper; company's paper. See
NEGOTIABLE INSTRUMENT.”
“‘Commercial paper’ is rather a popular than
a technical expression, often used, however,
both in statutes and in decisions of courts, to
designate those simple forms of contract long
recognized in the world's commerce and
governed by the law merchant.”
“Defined most broadly, commercial paper
refers to any writing embodying rights that are
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customarily conveyed by transferring the
writing. A large subset of commercial paper
consists of such writings that are negotiable,
which means that the law enables a transferee
to acquire the embodied rights free of claims
and defences against the transferor.”
“Sec. 2 (c) “Commercial dispute” means a
dispute arising out of -
(ii) Ordinary transactions of merchants,
bankers, financiers and traders such as those
relating to mercantile documents, including
enforcement and interpretation of such
documents.”
A coalesce of the judgments rendered by the Apex Court and
the other High Courts, would unmistakably infer that the suit
instituted by the petitioner-plaintiff for misappropriation of
funds, or loss of funds from the current account maintained by
the banking institution, based on the withdrawals of money by
defendant No.3 by encashing forged cheques would become the
subject matter of a commercial dispute, as it is arising from the
ordinary transaction between the petitioner-plaintiff and
defendant No.1 - banking institution.
14. With the aforesaid reasons, the following
ORDER
i) The writ petition is allowed.
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ii) The order dated 30.08.2022 passed by
the concerned Court impugned stands
quashed.
iii) It is declared that the Commercial Court
has jurisdiction to try the suit and shall
try it as a commercial OS.
iv) The Court shall regulate its procedure in
accordance with law.
Sd/-
(M.NAGAPRASANNA)
JUDGE
JY
List No.: 1 Sl No.: 1
CT: BHK