Suits Erroneously Filed As Non-Commercial Can Be Transferred To Commercial Courts Under Section 24 CPC To Save Proceedings: Delhi High Court

"The difference between Section 24 and Order VII Rule 10 of the CPC is that in terms of Sub-Section (2) of Section 24, all proceedings that were undertaken before the Court where a Suit was earlier instituted, though it lacked jurisdiction to try the same, can be saved." Delhi High Court, in a significant ruling dated May 26, 2026, held that when a suit is found to be a "commercial dispute" after its institution, the court may exercise its powers under Section 24 of the CPC to transfer the matter to a Commercial Court instead of returning the plaint under Order VII Rule 10 CPC.

A bench of Justice Manoj Kumar Ohri observed that this approach prevents the "abrupt and disruptive consequences" of returning a plaint, which would otherwise result in the loss of all proceedings already conducted.

The court noted that Section 24 CPC remains fully applicable to commercial disputes as it has not been amended or excluded by the Commercial Courts Act, 2015.

The appellant had filed a suit for recovery of possession, mesne profits, and permanent injunction regarding an industrial shed in Okhla, which he had permitted his brother to use for business. During the pendency of the suit, the defendant argued that since the property was used for commercial purposes, the dispute fell under Section 2(1)(c)(vii) of the Commercial Courts Act. The Trial Court agreed, categorizing it as a commercial suit and returning the plaint under Order VII Rule 10 CPC for re-filing before the competent commercial forum.

The primary questions before the court were whether a gratuitous license for business use qualifies as an "agreement relating to immovable property used exclusively in trade or commerce" under the Commercial Courts Act. The court was also called upon to determine whether such a suit should be returned under Order VII Rule 10 or transferred using the High Court's powers under Section 24 CPC.

Gratuitous License In Business Property Still Constitutes A Commercial Dispute

The court first addressed whether the lack of consideration in a "gratuitous license" would take the dispute out of the ambit of the Commercial Courts Act. Referring to the Supreme Court’s decision in Prabhudas Damodar Kotecha v. Manhabala Jeram Damodar, the bench noted that payment of a license fee is not an essential attribute for a license under Section 52 of the Indian Easements Act.

The bench emphasized that the "commercial character" of the dispute is determined by the use of the property. Since the plaint admitted the property was an industrial shed used for business activities, the arrangement possessed the commercial flavor contemplated under Section 2(1)(c)(vii) of the Act.

"The alleged permissive gratuitous use will not make the agreement non-commercial for deciding the applicability of Commercial Courts Act."

Property Actually Used For Trade Falls Under Commercial Courts Act

Relying on Ambalal Sarabhai Enterprise Limited v. K.S. Infraspace LLP, the court reiterated that the expression "used exclusively in trade or commerce" refers to property actually being used for such purposes. The bench observed that for a dispute to be categorized as "commercial," the transaction should generally be supported by documents evidencing business activity.

In the present case, even though the appellant claimed the arrangement was made out of brotherly respect, the actual utilization of the premises for a partnership firm confirmed its commercial nature. The court held that a strict construction of the Act is required to ensure the speedy disposal of high-value commercial disputes.

"The essence of a 'commercial dispute' inherently carries a commercial flavour, encompassing elements of trade and business."

Section 24 CPC vs. Order VII Rule 10: Saving Prior Proceedings

The most pivotal part of the judgment concerned the procedural remedy when a suit is filed in the wrong forum. The court noted that while Order VII Rule 10 CPC mandates the return of a plaint for want of jurisdiction, Section 24 CPC offers a "novel method" to avoid inconvenience to litigants.

Justice Ohri explained that Section 24 CPC empowers the High Court or District Court to transfer a proceeding to a subordinate court competent to try it. Unlike a return of plaint, which necessitates a fresh start, a transfer under Section 24 allows the transferee court to proceed from the point at which the case was transferred, thereby saving all prior judicial work.

"All proceedings that were undertaken before the Court where a Suit was earlier instituted, though it lacked jurisdiction to try the same, can be saved, and the Suit on its transfer can be proceeded from the point at which it was transferred."

Commercial Courts Act Does Not Exclude Power Of Transfer Under Section 24 CPC

The court clarified that Section 16 of the Commercial Courts Act provides that the CPC applies to commercial disputes except where amended by the Act’s Schedule. Since Section 24 CPC has not been amended or deleted by the Schedule, it continues to apply in full force to commercial disputes.

The bench held that there is no implied exclusion of this power, as it does not conflict with any provision of the Act. A Commercial Court, being subordinate to the High Court, is a valid transferee forum under the general powers of superintendence and transfer.

"If the Legislature wanted to take away this power from the Court, it would have expressly stated so by deleting the said provision in the Schedule to the Act; it did not do so."

Pre-Suit Mediation Non-Compliance Saved For Suits Filed Before August 2022

Regarding the mandatory pre-suit mediation under Section 12-A of the Commercial Courts Act, the court noted that the present suit was instituted in 2017. This was long before the Supreme Court's judgment in Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd., which made Section 12-A mandatory prospectively from August 20, 2022.

Consequently, the suit was saved from rejection for non-compliance with mediation requirements. However, the bench left the question of Section 12-A compliance open for the transferee court to evaluate on merits, ensuring that the defendant’s right to raise such objections remains intact.

The High Court set aside the Trial Court's order returning the plaint and instead exercised its jurisdiction under Section 24 CPC. The suit was ordered to be transferred to the concerned Principal District and Sessions Judge to be heard as a commercial matter, ensuring the continuity of the litigation process.

Date of Decision: 26 May 2026