Bombay High Court Clarifies the Scope of Section 2(1)(c)(vii) of the Commercial Courts Act | When Does a Dispute Relating to Immovable Property Qualify as a Commercial Dispute?

Introduction

The Hon’ble Bombay High Court in its recent decision in the case of Jayshree Jagdish Thakker & Anr. v. Pragati Infra Interiors Pvt. Ltd. (Writ Petition No. 8129 of 2026), while interpreting the provision of Section 2(1)(c)(vii) of the Commercial Courts Act, 2015 (“Act”), has clarified and upheld that a dispute is considered as a Commercial Dispute in respect of an immoveable property only if the property is “actually used” exclusively in trade or commerce and not merely proposed or for intended use.

Relying upon the principles laid down by the Hon’ble Supreme Court in the case of Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP, the Hon’ble High Court observed that the expression “used exclusively in trade or commerce” was to be interpreted in a purposive manner. The word “used” denoted “actually used” and not either “ready for use” or “likely to be used” or “to be used”. It should be “actually used”, else the wide interpretation would defeat the objects and the fast-track procedure under the Act.

Relevant Facts

Pragati Infra Interiors Pvt. Ltd. (“Company”), an architectural and interior designing company, had entered into a registered leave and licence agreement dated March 4^th 2020 (“Agreement”), with the owners of the office premises at Neelkanth Business Park. The term of the agreement was 36 months, with a security deposit of ₹5 lakh and monthly licence fees of ₹95,000 to ₹1.05 lakh. The premises were to be used as an office for the Company’s business and allied lawful activities. The Company alleged that the owners had repeatedly failed to hand over possession, and in view thereof, the Company terminated the Agreement and sued for refund of the security deposit with interest.

The owners contended that the premises were never actually used in trade or commerce, the Company never occupied the premises, and therefore, the owners were justified to forfeit the deposit. Accordingly, the owners had applied for rejection of the plaint on the ground that the dispute was not commercial. The Commercial Court declined the same. Thus, the Defendants filed the Petition against the said rejection before the Hon’ble Bombay High Court.

Observations and findings

The High Court set aside the Commercial Court’s order, and held that the dispute over refund of a security deposit under a Agreement was not a commercial dispute in the facts of the present case, for the following reasons:

1. subject premises was agreed to be used as an office for the purpose of carrying on the interior designing business;
2. the Company never took possession of the premises;
3. the Leave & License Agreement nowhere indicated that the subject premises was being used exclusively for the purpose of trade or commerce;
4. at the time of execution of the Agreement for Leave and License, the said premises was being used as an office premises;
5. merely because a premises is used as an office, does not necessarily mean/imply that the same is being used for trade or commerce;
6. the test of actual user of the subject premises was not satisfied.

 

Although the Hon’ble High Court found that the suit was not a Commercial Dispute, it did not order rejection of plaint. Instead, it held that the correct course was to return the plaint under Order VII Rule 10 CPC for presentation before the court with proper jurisdiction i.e., ordinary City Civil Court.

This ruling is crucial for owners, landlords, licensors, licensees and similar litigators, for determination of the right and appropriate forum for adjudication of their dispute(s). The practical lesson is to establish the actual use of the premises/immoveable property before choosing Commercial Courts, and draft agreements accordingly so that the facts of use are clear therefrom.