High Sea Sales Disputes Fall Under Commercial Courts Act: Calcutta HC

The Calcutta High Court has clarified the boundaries of commercial jurisdiction, ruling that disputes involving High Sea Sales of metallurgical coke and the interpretation of related tripartite agreements constitute commercial disputes, even if allegations of fraud are involved. In a significant procedural move, the court invoked its powers to transfer a decade-old suit to the Commercial Division, emphasizing that the nature of the transaction and the involvement of mercantile documents are the primary determinants of jurisdiction.

In an appeal assailing an order concerning the substitution of a liquidator and the abatement of a suit, a Bench of Justice Debangsu Basak and Justice Aryak Dutt addressed whether the subject matter fell within the ambit of the Commercial Courts Act, 2015. The dispute, which originated in 2013, centered on the ownership of imported metallurgical coke and the validity of a tripartite agreement alleged to be fabricated.

Key Takeaways

Dual Ingredient Requirement

For a dispute to qualify under Section 2(1)(c)(i) of the Commercial Courts Act, 2015, the court held that the transaction must be an ordinary transaction of merchants, bankers, financers, or traders, and it must relate to mercantile documents.

Fraud No Bar to Commercial Jurisdiction

The Court clarified that neither Section 2(1)(c) nor any other provision of the Commercial Courts Act, 2015 ousts the jurisdiction of a Commercial Court to decide issues of fraud relating to a commercial dispute.

Plaint-Centric Determination

The determination of whether a suit involves a commercial dispute must be arrived at solely on a meaningful and purposive reading of the averments made in the plaint, strictly construing the statutory provisions.

Court's Rationale on Commercial Character of High Sea Sales

The Court observed that the parties involved were business entities acting as ordinary merchants and traders in respect of acts of commerce. It noted that High Sea Sales of metallurgical coke necessarily involve commercial instruments. The Court, in its reasoning, observed: "In the facts and circumstances of the present case, the various mercantile documents have to be considered at the trial to pronounce on the claims made by the plaintiff. Such mercantile documents relate to title to the portion of the metallurgical coke imported by two vessels. While the parties had developed jural relationship amongst each other, they had been acting as ordinary merchants and traders in respect of the acts of commerce, that is, High Sea Sales of metallurgical coke."

The Court has the following directions:

"...we direct the suit to be transferred from the Non-commercial Division to the Commercial Division of the High Court. Department will transmit records of CS 77 of 2013 along with all connected applications therewith to the Commercial Division of the High Court where it will be renumbered. On such transmission being made, Department will treat CS 77 of 2013 and all connected applications to be disposed of in the Non-commercial Division."

Ratio

A dispute constitutes a 'commercial dispute' under Section 2(1)(c)(i) of the Commercial Courts Act, 2015, if it arises out of the ordinary transactions of merchants relating to mercantile documents, including their enforcement and interpretation. The presence of an issue regarding fraud does not oust the jurisdiction of the Commercial Court, provided the underlying transaction satisfies the dual ingredients of merchant status and mercantile documentation.

Background

The plaintiff, LMJ International Limited, had filed a suit in 2013 claiming ownership of metallurgical coke imported via two vessels and seeking cancellation of a tripartite agreement dated March 23, 2012, alleging it was fabricated. During the pendency of the suit, the plaintiff entered liquidation, leading to applications for substitution by the liquidator and an application for abatement by the defendant.

The Court relied on Ambalal Sarabhai Enterprises Limited vs. K. s. Infraspace LLP and Another ( "2020 (15) SCC 585": 2019 CaseBase(SC) 1728) to emphasize that the provisions of the Commercial Courts Act, 2015 must be strictly construed and that the plaint's averments are the sole criteria for jurisdictional determination. It also referenced several precedents, including Teliz Realtors vs. JTL Projects Private Limited, Bharat Huddanna Shetty vs. Ahuja Properties & Developers and others, Glasswood Realty Pvt. Ltd. and Others vs. Chandravilas Kailashkumar Kothari, Ladymoon Towers Private Limited vs. Mahendra Investment Advisors Private Limited, and Kailash Devi Khanna and Others vs. DD Global Capital Ltd. and Others, to distinguish between regular civil suits (such as friendly loans) and commercial disputes involving mercantile documents. Regarding the appealability of such orders, the court noted the principles in BGS SGS Soma JV vs. NHPC Limited and Bank of India vs. M/s Maruti Civil Works. Ultimately, the Court found that the Jural relationship and the High Sea Sales transactions squarely fell within the commercial definition, ordering the transfer of the case records to the appropriate division.

Case Details:
Case No.: APOT 70 of 2022
Case Title: LMJ International Limited vs. Concast Steel & Power Limited and Ors.
Appearances:
For the Petitioner(s): Mr. S.N. Mitra, Ld. Advocate General; Mr. D. N. Sharma, Sr. Adv.
For the Respondent No. 1: Mr. Rupak Ghosh, Adv.; Mr. Pourush Bandopadhyay, Adv.; Mr. Rajesh Upadhyay, Adv.
For the Respondent No. 2: Mr. Jayanta Kr. Mitra, Sr. Adv.; Mr. Trilok Bose, Sr. Adv.; Mrs. Suchismita Ghosh, Adv.; Mr. Pradip Kr. Sarawagi, Adv.

Source: 2026 CaseBase(CAL) 2573