Vijay Kohli & Anr. v. Sanjay Jethwani

18. When a pure construction contract is entered into, the contractor has no interest in either the land or the construction which is carried out. But in various other categories of development agreements, the developer may have acquired a valuable right either in the property or in the constructed area. The terms of the agreement are crucial in determining whether any interest has been created in the land or in respect of rights in the land in favour of the developer and if so, the nature and extent of the rights. 8.[2] A perusal of the Agreement entered between the parties shows that the Agreement does not grant any interest to the Respondent in the suit property and the Agreement only provides for the Respondent to complete the construction of the suit property. Thus, the Agreement is a pure construction contract.

9. In order to ascertain whether the transaction between the parties which is the subject matter of the suit could be considered as a “commercial dispute”, it is relevant to examine the provisions of Section 2(1)(c) of the CC Act which provides for the definition of “commercial disputes”. Section 2(1)(c) of the CC Act is reproduced below:

(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;…” 9.[1] Section 2 (1) (c) of the CC Act, provides for a wide range of disputes which have been recognized by the legislature as commercial disputes and which are incorporated from clause (i) to (xxii). It includes ordinary transactions of merchants and bankers to export and import of merchandise, admiralty and carriage of goods, license agreements etc. The definition of commercial disputes under this provision is thus exhaustive and detailed and covers each kind of commercial transaction and a wide range of categories. 9.[2] Section 6 read with Section 2(1)(i) of the CC Act provides that in order to be categorized as a commercial dispute under Section 2 (1) (c) of the CC Act, only a commercial suit of the specified value where the subject matter exceeds Rs. 3 lacs, would fall within the definition of a commercial dispute. In addition, Section 11 of the CC Act also provides that Commercial Court shall not entertain or decide any suit, application or proceedings relating to any commercial dispute in respect of which the jurisdiction of the civil court is either expressly or impliedly barred under any other law.

10. At its core, a commercial dispute arises when the terms or consequences of an agreement extend beyond a purely private arrangement between the contracting parties and generate broader commercial activity between them. The specific types of agreements listed under Section 2(1)(c) of the CC Act suggest that not every dispute can automatically be classified as commercial dispute. It is essential to examine the substance and detailed provisions of the agreement to determine whether it aligns with any of the categories outlined in the sub-clauses of Section 2(1)(c). A key consideration is whether the parties, at the time of entering into the contract, recognized and intended for the agreement to fall within the scope of subclauses (i) to (xxii) of Section 2(1)(c) of the CC Act. 10.[1] It is no longer res integra that the provisions of CC Act have to be construed and interpretated in a narrow sense in order to fulfil the object of the Act. In Ambalal Sarabhai Enterprises Limited v. K.S. Infraspace LLP[2], the Supreme Court observed that the question of whether the suit falls within the scope of a ‘commercial dispute’, as defined under the Commercial Courts Act, cannot be dealt with in abstract. Instead, the nature of the dispute and the jurisdiction to try the same is to be reflected in the suit itself, since in a civil suit, the pleadings, namely, averments in the plaint would, at the outset, be relevant to confer jurisdiction. It was further held that the very purpose for which the Commercial Courts Act has been enacted is to expedite the adjudicatory process and to place the trial of the suits relating to Commercial Dispute on a fast track. The provisions of the Act are, therefore, required to be strictly construed, as if the provisions are given a liberal interpretation, the object behind the Act will be defeated. The relevant extract of the Ambalal Sarabhai case is below:

the plaintiff to secure the mortgage deed in view of the terms of the MoU is stated. In the entire plaint there is no reference to the nature of the land or the type of use to which it was being put as on the date of the agreement to sell/sale deed/memorandum of understanding or as on the date of the suit. xxx xxx xxx xxx

36. A perusal of the Statement of Objects and Reasons of the Commercial Courts Act, 2015 and the various amendments to the Civil Procedure Code and insertion of new rules to the Code applicable to suits of commercial disputes show that it has been enacted for the purpose of providing an early disposal of high value commercial disputes. A purposive interpretation of the Statement of Objects and Reasons and various amendments to the Civil Procedure Code leaves no room for doubt that the provisions of the Act require to be strictly construed. If the provisions are given a liberal interpretation, the object behind constitution of Commercial Division of Courts viz. putting the matter on fast track and speedy resolution of commercial disputes, will be defeated. If we take a closer look at the Statement of Objects and Reasons, words such as “early” and “speedy” have been incorporated and reiterated. The object shall be fulfilled only if the provisions of the Act are interpreted in a narrow sense and not hampered by the usual procedural delays plaguing our traditional legal system.”

11. The commercial dispute is defined in Section 2(c)(vii) of the CC Act as a dispute which is arising out of an agreement relating to immovable property exclusively used in trade or commerce. The words that are used by the Legislature in this sub-Section must be regarded as having been used deliberately, and thus, the intention that where there are contracts or agreements relating to immovable property which are being used only in trade and commerce, disputes arising out of such agreements and contracts are to be included as commercial disputes. The emphasis has been laid on the words “exclusively in trade or commerce” thus keeping out of its ambit transactions which are other than trade and commerce.

12. Section 2(1)(c)(vi) includes commercial disputes relating to “construction and infrastructure contracts, including tenders”. Relying on Section 2 (1) (c) (vi) of the CC Act, the Respondent was contended that the Agreement is a commercial dispute. 12.[1] Both terms “construction” and “infrastructure” are defined separately. To gain a clearer understanding of these terms, it is apposite to refer to the definitions of the term “construction” and “infrastructure,”. Black’s Law dictionary[3] defines the terms “construction” and “infrastructure” in the manner set out below: “BLACK’S LAW DICTIONARY Construction 1. The act of building by combining or arranging parts or elements; the thing so built. 2. The act or process of interpreting or explaining the sense or intention of a writing (usu. a constitution, statute, or instrument); the ascertainment of a document's meaning in accordance with judicial standards. Infrastructure. The underlying framework of a system; esp., public services and facilities (such as high- ways, schools, bridges, sewers, and water systems) needed to support commerce as well as economic and residential development.” 12.[2] The Oxford Advanced Learners Dictionary[4] and Merriam Webster Dictionary[5] also defines these two terms in the following manner: “OXFORD ADVANCED LEARNERS DICTIONARIES: Construction- (1) The action or manner of constructing (2) a thing constructed (3) a sense in which words, statements, etc are to be understood (4) the way in which words are put together to form a phrase, clause or sentence: Black’s Law Dictionary, Eight Edition Oxford Advanced Learner’s Dictionary Fifth Edition Webster’s New Collegiate Dictionary Infrastructure- The basic structures and facilities necessary for a country or an organisation to function efficiently, for example buildings, transport and water and energy resources and administrative systems.

MERRIAM WEBSTER DICTIONARY: Construction- (1) The arrangement and connection of words or groups of words in a sentence: syntactical arrangement (2) The process, art, or manner of constructing; also: a thing constructed (3) The act or result of construing, interpreting, or explaining (4) A sculptural creation that is put together out of separate pieces of often disparate materials Infrastructure- (1) The underlying foundation or basic framework (as of a system or organisation) (2) The permanent installations required for military purposes.” 12.[3] Thus, what can be construed from the above is that construction is an activity while infrastructure is the outcome of that activity. The term construction would essentially mean building while infrastructure would relate to creating public facilities needed to support commerce.

13. It is settled law that where wordings of a statute are absolutely clear and unambiguous, only a literal interpretation may be given. In the case of

read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule, vide Swedish Match AB v. SEBI [(2004) 11 SCC 641: AIR 2004 SC 4219].”

13.1. In the case of Gopal Krishan v. Daulat Ram[7], the Supreme Court while relying on Justice G.P. Singh's, Principles of Statutory Interpretation has held that the word “or” is normally disjunctive while the word “and” is normally conjunctive and the ordinary, grammatical meaning displayed by the words of the statute should be given effect to unless the same leads to ambiguity, uncertainty or absurdity. The relevant extract is below: “21. In the considered view of this Court, the learned Single Judge fell in error in arriving at such a finding for the words used in the section, which already stands extracted earlier, read — “or has seen some other person sign the will, in the presence and by the direction of the testator, or has received from the testator a…”. That being the case, there is no reason why the “or” employed therein, should be read as “and”. After all, it is well-settled that one should not read “and” as “or” or vice-versa unless one is obliged to do so by discernible legislative intent. Justice G.P. Singh's treatise, Principles of Statutory Interpretation tells us that the word “or” is normally disjunctive while the word “and” is normally conjunctive. Further, it is equally wellsettled as a proposition of law that the ordinary, grammatical meaning displayed by the words of the statute should be given effect to unless the same leads to ambiguity, uncertainty or absurdity. None of these requirements, to read a word is which is normally disjunctive, as conjunctive herein, are present.”

14. The expression “and” generally has a cumulative effect which requires the fulfilment of all the conditions that it joins together. The term “and” is considered as a conjunction that connects words or phrases which expresses the idea that the later has to be added to or taken along with the first. Black’s Law Dictionary[8] defines the term “and” in the following manner: “ BLACK’S LAW DICTIONARY And. A conjunction connecting words or phrases expressing the idea that the latter is to be added to or taken along with the first. Added to; together with; joined with; as well as; including. Sometimes construed as "or." Land & Lake Ass'n v. Conklin, 182 A.D. 546, 170 N.Y.S. 427, 428. It expresses a general relation or connection, a participation or accompaniment in sequence, having no inherent meaning standing alone but deriving force from what comes before and after. In its conjunctive sense the word is used to conjoin words, clauses, or sentences, expressing the relation of addition or connection, and signifying that something is to follow in addition to that which proceeds and its use implies that the connected elements must be grammatically co-ordinate, as where the elements preceding and succeeding the use of the words refer to the same subject matter. While it is said that there is no exact synonym of the word in English, it has been defined to mean "along with", "also", "and also", "as well as", "besides", "together with". Oliver v. Oliver, 286 Ky. 6, 149 S.W.2d 540, 542.” 14.[1] The words of Section 2(1)(c)(vi) of the CC Act are absolutely clear and ambiguous and as “Construction AND Infrastructure”. In view of the settled law, Section 2(1)(c)(vi) of the CC Act has to be interpreted strictly in the terms as provided by the legislature.

15. In addition, to give purposeful interpretation to the object of the CC Act, the expression “construction and infrastructure contracts” must be interpreted as one unified phrase and not as two distinct terms, namely construction contracts and infrastructure contracts. A construction and infrastructure contract must inherently possess a commercial nature — right from the conceptualisation of the project, through its execution, and culminating in a commercially viable outcome, one that holds tangible market value and is expected to yield profit. Black’s Law Dictionary, Sixth Edition

16. The Agreement states that it is a building contract agreement for completion of balance pending work. It is dated 09.04.2018 and executed between one Mr. Vijay Kohli (owner) (Petitioner No.1 herein) and Mr. Sanjay Jethwani (contractor) (Respondent herein). The Agreement states that while the basement, second floor and third floor with terrace rights are owned by Mr. Vijay Kohli, the upper ground floor and first floor are owned by Mr. Ajay Kohli. 16.[1] The Agreement further states that Mr. Vijay Kohli has taken up the responsibility to get the balance pending construction work completed under his supervision, and the contractor, Mr. Sanjay Jethwani, has approached him to complete the said work, which includes installation of lift, interior work i.e., electrical, sanitary, plumbing, wood work, flooring, POP, false ceiling and other works in terms of the Annexure to the Agreement. 16.[2] The Agreement provides for a time period of six months to complete the balance work. The Agreement states that the amount of Rs.90,00,000/will be the costs to be incurred by the contractor, Mr. Sanjay Jethwani to complete the balance work. 16.[3] Clause 2 read with Clause 5 of the Agreement states that Mr. Vijay Kohli (owner) shall pay Mr. Sanjay Jethwani (contractor) Rs.90,00,000/- for expending on the construction. Clause 2 of the Agreement states that a consideration amount in the sum of Rs.25,00,000/- shall be paid to Mr. Sanjay Jethwani (contractor) after the building is completed, from the sale of the second floor. Clause 2 further states that in case of delay of payment after 8 months, Mr. Vijay Kohli (owner) shall sell the second floor at market price and clear the payment of Mr. Sanjay Jethwani (contractor). 16.[4] Clause 5 of the Agreement further states that in the first instance, the expenses in the sum of Rs.90,000,00/- shall be expended by Mr. Sanjay Jethwani (contractor), which will be paid to him (reimbursed) after 2 months after the work is complete. The fees/charges for the work of Mr. Sanjay Jethwani (contractor) are affixed at Rs.25,000,00/-. Clause 2 and 5 of the Agreement are reproduced below: “1. The second party shall complete the entire work as per ANNEXURE signed by both the parties at his own cost within a period 6 months from the date of signing this agreement. The total cost of completing the balance work that is incomplete work has been estimated at Rs.90,00,000/- (Rs. Ninety Lacs only) This amount has to be spent by the second party to complete the balance work within a period of SIX months from the date of signing this agreement.

2. In consideration of the above mentioned work to be completed (as per annexure) by the second party with an investment of Rs.90,00000/-(Rs. Ninety Lacs ) within period of Six months the first party has agreed to pay an amount of Rs.25,00000/-(twenty five lacs) over and above the amount invested by the second party within a period of 08 months (that is two months after completion of the above mentioned building) from his own resources or by selling the Second Floor of the said property which is owned by the first party. In case of delay of payment after 8 months, the first party is bound to sell the second floor at market prices and clear the payment of the second party.

5. After the competition of the entire work (full and final ) in all respects the first party shall pay to the second party an amount Rs.90,Lacs/- (Ninety lacs) plus Rs.25 lacs (twenty five lacs ) totalling an amount of Rs 1 crore 15 lacs /- (one crore fifteen lacs only) as consideration amount for the above mentioned work done by the second party within a period of 2 months after completion of the work as per annexure (full and final).” 16.[5] The Annexure to the Agreement sets out details with respect to the flooring, including the type of marble and the prices, wiring, electricals, wood work and similarly details are set out for electricals, wood work, parking, air conditioner, basement etc.

17. As discussed above, a perusal of the Agreement shows that the intention of the parties while entering into the Agreement was for mere completion of construction of the suit property, which was being used for residential purposes. The Agreement does not contain any provision granting the right of sale to the contractor. There is no element of trade and commerce contained therein. Admittedly the suit property is a residential property and not a commercial property and there is no involvement in any commercial activity qua the suit property.

18. Thus, the Agreement as entered between the parties can be termed as a pure building contract agreement where construction of a building needs to be completed and nothing else. The Agreement lacks any infrastructure component.

19. A reading of the pleadings and the Agreement makes it evident that the Agreement in question is a private arrangement for competition of construction of the suit property. As such, it does not fall within the scope of a "commercial dispute" as defined under Section 2(1)(c)(vi) of the Act. 19.[1] As stated above, the Plaint as filed by the Respondent only seeks prayer of specific performance of the Agreement and other reliefs which arise of a building contract agreement for a residential property. Thus, the finding of the learned Trial Court on the aspect of the suit being a suit for simpliciter suit for specific performance not a commercial suit does not warrant any interreference.

20. In view of the aforegoing discussions and for the reasons as stated above, this Court finds no infirmity with the Impugned Order.

21. The Petition is accordingly dismissed. Interim order dated 09.02.2024 stands vacated.