Development Agreements Fall Under 'Commercial Disputes'; Market Value Of Property Determines 'Specified Value' Under CC Act: Calcutta High Court

"A development agreement, essentially for construction and infrastructure, does not lose such character merely because in addition to such component, other rights are created in favour of the developer." High Court at Calcutta, in a significant ruling, held that disputes arising from development agreements constitute "commercial disputes" under the Commercial Courts Act, 2015 (CC Act).

A Division Bench comprising Justice Sabyasachi Bhattacharyya and Justice Supratim Bhattacharya observed that for determining the "specified value" of a suit involving immovable property, the market value of the property must be considered, overriding the provisions of the Court Fees Act. The Court further clarified that suits filed in ordinary civil courts that lack inherent subject-matter jurisdiction under the CC Act must be returned for presentation before the appropriate forum rather than being transferred.

The appellants, who are property owners, entered into registered development agreements and powers of attorney with the respondent-developers in 2016. Alleging that the developers failed to complete the construction work within the stipulated time, the owners filed suits in an ordinary Civil Court seeking cancellation of the agreements. The respondents moved applications under Order VII Rule 10 of the Code of Civil Procedure (CPC), contending that the disputes were commercial in nature and exceeded the pecuniary jurisdiction of the regular civil court. The trial court allowed these applications, leading to the present appeals.

The primary questions before the court were whether development agreements involving the transfer of ownership rights qualify as "commercial disputes" under Section 2(1)(c)(vi) of the CC Act. The court was also called upon to determine whether the "specified value" of a suit should be governed by the market value of the property or the plaintiff's self-assessed valuation under the Court Fees Act. Additionally, the Bench examined whether an ordinary civil court has the power to transfer such a suit to a Commercial Court or if the plaint must be returned.

Nature Of Development Agreements Under The Commercial Courts Act

The Court conducted an independent enquiry into whether a development agreement fits the definition of a commercial dispute. It analyzed Section 2(1)(c)(vi) of the CC Act, which encompasses disputes arising out of "construction and infrastructure contracts." The Bench rejected the appellants' argument that because the agreements also contemplated a transfer of title, they were not pure construction contracts. It noted that the term "commercial dispute" has an expansive connotation due to the expression "arising out of" used in the statute.

The Bench observed that the inclusion of other components, such as the transfer of a portion of ownership rights, does not strip a contract of its primary character if it essentially pertains to construction and infrastructure. It held that the presence of additional ingredients is superfluous to the determination of whether the CC Act applies. The Court emphasized that a housing project, by its very nature, falls under the category of infrastructure.

"The determinant would be whether the contract giving rise to the dispute contemplates construction and infrastructure, irrespective of whether or not it has other ingredients."

CC Act Overrides Court Fees Act In Determining Specified Value

Regarding the determination of "specified value," the appellants relied on judgments from the Delhi and Kerala High Courts which suggested a harmonious construction between the CC Act and the Court Fees Act. However, the Calcutta High Court expressly differed from these views. It pointed to Section 21 of the CC Act, which provides that the provisions of the Act shall have effect notwithstanding anything inconsistent contained in any other law currently in force.

The Court held that Section 21 lends an "unbridled" overriding effect to the CC Act over all other statutes, including the Court Fees Act. It remarked that the legislature was well aware of existing statutes like the Court Fees Act when it enacted the CC Act and specifically intended to override them in cases of conflict. Therefore, general principles of statutory interpretation regarding special and general statutes cannot be used to dilute this statutory rigour.

"Such a blanket provision does not leave scope for any mitigation of such rigour by importing provisions of other Acts, which are specifically sought to be overridden."

Market Value Is The Sole Determinant For Immovable Property Disputes

The Bench clarified that the matrices for suit valuation and the determination of "specified value" under the CC Act operate in entirely separate fields. It held that while the Suits Valuation Act and Court Fees Act might govern the payment of court fees, they do not dictate the "specified value" for jurisdictional purposes under the CC Act. Instead, the Court must strictly adhere to the mandate of Section 12 of the CC Act.

Under Section 12(1)(c), where the relief sought relates to immovable property or a right therein, the market value of the property on the date of filing must be taken into account. In the present case, the market value of the properties involved significantly exceeded the threshold of Rs. 30,00,000. Consequently, the Court held that the suits fell within the domain of commercial suits triable exclusively by a Commercial Court.

"Whatever relief is sought in a suit relating to an immovable property or to a right therein, the ‘specified value’ would be determined by the market value of the immovable property."

Ordinary Civil Courts Cannot Transfer Post-Act Commercial Suits

A significant procedural issue addressed was whether the trial court should have transferred the suits instead of returning the plaints. The appellants argued for a transfer under Section 15 of the CC Act. However, the Bench ruled that the scope of Section 15 is limited only to suits that were already pending at the time the CC Act came into force in 2015. Since the present suits were filed in 2020, they were governed by the full regime of the Act from their inception.

The Court held that because the suits were commercial in nature and exceeded the pecuniary limit, the ordinary civil court lacked inherent subject-matter jurisdiction ab initio. This threshold defect cannot be cured by a transfer. The Bench noted that the Commercial Court operates under a different paradigm, including mandatory timelines and mediation requirements under Section 12-A, which are not applicable to regular civil suits.

"Since the very institution of such a suit is without inherent jurisdiction ab initio, the said threshold defect cannot be cured merely by transferring the suit to the court having determination."

Responsibility For Delay And Limitation Issues

The appellants claimed that returning the plaints at this stage would cause their claims to be barred by limitation. The Court dismissed this contention, observing that the plaintiffs were responsible for the initial delays, including failing to pay appropriate court fees for nearly two years. It noted that the defendants only received summons in late 2022 and moved for the return of the plaint shortly after entering their appearance.

The Bench concluded that the "inconvenience" of the plaintiffs cannot justify retaining a suit in a court that lacks jurisdiction. However, it left it open for the plaintiffs to argue for the benefit of Section 14 of the Limitation Act before the Commercial Court, asserting that they had proceeded bona fide in the wrong forum. The Court affirmed the trial judge's order as being in line with the Supreme Court's dictum in Aase Ram v. Amit Kumar.

Both appeals were dismissed, and the trial court's decision to return the plaints for presentation before the Commercial Court at Rajarhat was affirmed. The Court ordered that any interim orders previously granted would stand vacated. No orders were made as to costs.

Date of Decision: June 30, 2026