Defamation Suit Against Former Employer Lacks Commercial Character under Section 2(1)(c) of Commercial Courts Act

The Plaintiff, a software programmer and founder-director of Defendant No. 1 (a subsidiary of South African Defendant No. 4), filed a suit for permanent injunction and damages.

The Plaintiff alleged he was entitled to 25% equity in the company, but after internal disputes, the Defendants allegedly allotted him less than 1%.

Following his resignation in May 2023, the Defendants issued a letter dated 24.05.2023 to clients and the public alleging fraud, embezzlement, and corporate sabotage by the Plaintiff.

The Plaintiff filed this suit under the Commercial Courts Act, 2015 (“CC Act”), seeking to restrain the Defendants from publishing defamatory statements and for rendition of accounts.

Defendant No. 1 filed an application under Order VII Rule 11 of the CPC seeking rejection of the plaint, arguing the dispute was not "commercial" and that the Plaintiff bypassed mandatory pre-litigation mediation.

1. Whether the suit qualifies as a 'commercial dispute' under Section 2(1)(c) of the Commercial Courts Act, 2015.

2. Whether the plaint should be rejected or returned for non-compliance with the mandatory pre-litigation mediation under Section 12-A of the CC Act.

The court applied Section 2(1)(c) of the Commercial Courts Act, 2015, which defines "commercial disputes," specifically evaluating sub-clauses (xii) (shareholders agreements) and (xviii) (agreements for services).

The court relied on Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP, which mandates a strict interpretation of the definition of "commercial dispute" to prevent clogging the system with ordinary suits.

Regarding Order VII Rule 11 of the CPC, the court applied principles from Popat and Kotecha Property v. State Bank of India Staff Assn., holding that the plaint must be read as a whole to determine if it discloses a cause of action, without considering the defendant's pleas.

The Court observed that while the factual background involved a Shareholders Agreement and the provision of services, the actual cause of action and the relief sought (injunction against defamation and damages) centered entirely on the allegedly malicious letter dated 24.05.2023.

The Court reasoned that there was nothing "commercial" in nature regarding a claim for defamation, and the plaint failed to demonstrate how the dispute arose directly from any agreement mentioned in Section 2(1)(c).

The Court found no basis for the relief of rendition of accounts, noting that allegations of embezzlement require adjudication by criminal courts or specialized tribunals rather than a commercial court.

Because the dispute was fundamentally non-commercial, the Court determined it lacked jurisdiction under the CC Act, rendering the issue of Section 12-A (pre-litigation mediation) moot for the purposes of a commercial filing.

The Court allowed the application in part by ordering the return of the plaint under Order VII Rule 10 of the CPC. The Plaintiff was directed to present the matter as a non-commercial suit before the competent civil court, with the benefit of Section 14 of the Limitation Act for the period spent pursuing the commercial suit.