Karnataka High Court
Sri K H Narayana vs Sri S L Balakrishna on 17 March, 2026
-1-
COMAP No. 163 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF MARCH, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
COMMERCIAL APPEAL NO. 163 OF 2024
BETWEEN:
1. SRI K.H. NARAYANA
S/O SRI HANUMAYYA
AGED ABOUT 72 YEARS
2. SMT. BHAGYALAKSHMI
W/O SRI K.H. NARAYANA
AGED ABOUT 47 YEARS
3. MR B.N. SKANDA
S/O SRI K.H. NARAYANA
AGED MINOR
Digitally
signed by 4. MS. SRUSTI B.N.
AMBIKA H B D/O SRI K.H. NARAYANA
Location: AGED MINOR
High Court
of Karnataka APPELLANT No.3 & 4 ARE
REPRESENTED BY
THEIR NATURAL GUARDIAN MOTHER
i.e., APPELLANT NO.2
ALL THE ABOVE APPELLANT ARE
RESIDING AT:
BIRUR, KADUR TALUK
CHIKMAGALUR
...APPELLANTS
(BY SRI CHANDAN GOWDA PATIL, ADVOCATE)
-2-
COMAP No. 163 of 2024
AND:
1. SRI S.L. BALAKRISHNA
S/O SRI S.R. LAKSHMANAPPA
AGED ABOUT 66 YEARS
R/A RAJAJINAGAR
BIRUR, KADURR TALUK
CHIKAMAGALUR - 577 116
2. NAYARA ENERGY LIMITED
FORMERLY KNOWN AS:
ESSAR OIL LIMITED
HAVING ITS OFFICE AT:
3RD FLOOR
MAXIMUM COMMERCIAL COMPLEX
LIGHT HOUSE HILL ROAD
MANGALORE - 575 001
REPRESENTED BY ITS MANAGER
...RESPONDENTS
(SRI SAMARTH S. MURTHY, ADVOCATE FOR
SRI MUNISWAMY GOWDA S.G., ADVOCATE FOR
RESPONDENT No.1
SRI R. GOPAL KRISHNA, ADVOCATE FOR
RESPONDENT No.2)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1A) OF THE COMMERCIAL COURTS ACT, 2015 R/W ORDER
XLIII RULE 1(R) OF THE CPC, 1908, PRAYING TO SET ASIDE
THE ORDER DATED 14.03.2024 PASSED BY THE HON'BLE
PRINCIPAL DISTRICT AND SESSIONS COURT AT
CHIKKAMAGALUR IN FR. NO.COM. O.S.NO.104/2023 ON THE
PLAINT FILED UNDER ORDER VII RULE 1 AND 2 READ WITH
SECTION 26 OF THE C.P.C. & ETC.
THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR
PRONOUNCEMENT THIS DAY, JUDGMENT WAS
PRONOUNCED AS UNDER:
-3-
COMAP No. 163 of 2024
CORAM: HON'BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE
and
HON'BLE MR. JUSTICE C.M. POONACHA
C.A.V. JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE)
1. The appellants have filed the present appeal under Section
13(1A) of the Commercial Courts Act, 2015 [CC Act] read with
Order XLIII Rule 1 of the Code of Civil Procedure, 1908 [CPC]
impugning an order dated 14.03.2024 passed by the Principal
District and Sessions Judge, Chikkamagaluru [Commercial Court]
in Com.OS.FR No.104/2023 [impugned order]. In terms of the
impugned order, the learned Commercial Court had directed return
of the plaint to be presented before a proper court in accordance
with law. The impugned order is premised on the basis that the suit
instituted by the appellants did not involve any commercial dispute
under Section 2(1) of the CC Act.
2. The only question to be addressed is whether the
aforementioned suit instituted by the appellants involved a
commercial dispute.
3. The appellants who are plaintiffs in the suit had filed the suit,
inter alia, seeking a decree of ejectment of the respondents
-4-
COMAP No. 163 of 2024
(defendants in the suit) from the suit property which was described
as under:
"SCHEDULE PROPERTY
All the piece and parcel of the commercial land along
with structures, if any, standing thereon admeasuring
1575 Square Meters out of total 4048 Square Meters
land bearing Property No.:10-2-676, Ward No.11,
Survey No.40/3 (Old Sy.No.:40), (One (1) Acre land In
Survey No.40/3 as converted by order issued by the
Deputy Commissioner, Chikmagalur District, order
bearing No.:LAND10010464 dated 03.12.2018),
situated at Berur Kaavalu Village, Berur Hobli, Kadur
Taluk, Chikmagalur District, Karnataka and is bounded
by:
On the East : Property of Chandana Bhargavi
On the West : Road
On the South : Property of Suresh
On the North : Property of K.H.Narayan"
4. Additionally, the appellants also sought a decree for recovery
of the amount of `8,10,000/- as arrears of rent and for the mesne
profits for occupying the suit property.
5. A plain reading of the plaint indicates that the appellants had
claimed that appellant No.1 is the absolute owner of an immovable
property measuring two acres falling in Survey No.40/3 (old Survey
No.40), Berur Kaavalu Village, Berur Hobli, Kaduru Taluk,
Chikkamagaluru District. Appellant No.2 is appellant No.1's wife,
and appellant Nos. 3 and 4 are their children.
-5-
COMAP No. 163 of 2024
6. The appellants state that under a Notification dated
31.08.2016, the National Highway Authority of India acquired 2023
sq. mtrs. of land out of the aforementioned land measuring 2 acres.
After the said land was acquired, appellant No.1, who claimed to be
the absolute owner of the suit property, applied for the conversion
of one acre of the remaining land for commercial purposes for
setting up a petroleum outlet. The said one acre of land was
converted by an order dated 03.12.2018 for commercial use. The
said property was accorded a new property number-property
No.10-2-676 measuring 40.24 mts. from east to west and 100.60
mts. from north to south, totally measuring an area 4048 sq. mts.
Out of the aforesaid area, 1575 sq. mts. [the suit property] was
leased to respondent No.1 (arrayed as defendant No.1 in the suit)
under a lease deed dated 06.03.2021. The lease was for a term of
29 years 11 months (commencing from 01.12.2020 till 31.10.2050),
and the monthly rent was fixed at `30,000/-, inclusive of all taxes
and rates. The appellants stated that respondent No.1 had
obtained a licence for running a retail outlet/storage depot/retail
station for retailing of petroleum products like MS/HSD/Lubes allied
and other products and services. The appellants claim that
respondent No.1 failed to pay the lease rentals as agreed. It is also
averred that respondent No.1 was constructing a building for the
-6-
COMAP No. 163 of 2024
installation of a petrol pump on the suit property. Subsequently, a
Rectification Deed of Lease dated 25.02.2022 was executed
between the parties. By virtue of the same, appellant No.2 and
appellant Nos.3 and 4 (through their guardian, appellant No.2)
were added as Lessors, as well as a rent enhancement of 8%
every five years was introduced.
7. In the aforesaid circumstances, appellant No.1 sent a legal
notice dated 12.08.2022 calling upon respondent No.1 to pay the
arrears of rent and hand over peaceful possession of the suit
property, and not to carry on any further development work.
Subsequently, appellant No.1 issued another legal notice dated
03.02.2023 (erroneously dated 03.02.2021) to respondent Nos.1
and 2 stating that the lease deed and the rectification deed stood
infringed. Respondent No.2 replied on 09.02.2023 stating that it
had issued a notice to respondent No.1, alerting him to make
necessary corrections with the appellants. The appellants aver that
respondent No.1 responded to the said legal notice. In his reply
dated 22.02.2023, sent through an advocate, respondent No.1
claimed that he had been making efforts to complete the
establishment of a petrol bunk and to commence the said business
-7-
COMAP No. 163 of 2024
and the delay was attributable to not obtaining the requisite NOC
from the NHAI.
Reasons and conclusions
8. As noted, at the outset, the only question to be examined is
whether the dispute as set out in the plaint and the accompanying
documents, involves "a commercial dispute".
9. The expression "commercial dispute", is defined under
Clause (c) of sub-section (1) of Section 2 of the CC Act. Sub-
clause (vii) of Clause (c) of sub-section (1) of Section 2 is relevant,
and is reproduced below:
"2. Definitions.-- (1) In this Act, unless the context
otherwise requires,--
*** *** ***
(c) "commercial dispute" means a dispute arising out of
--
*** *** ***
(vii) agreements relating to immovable property used
exclusively in trade or commerce;”.
10. In Doypack Systems (P) Ltd. vs. Union of India1, the
Supreme Court had explained that the expression ‘arising out of’ is
expansive and observed as under:
1
(1988) 2 SCC 299
-8-
COMAP No. 163 of 2024“48. … The expressions “pertaining to”, “in relation to”
and “arising out of”, used in the deeming provision, they
are used in the expansive sense, as per decisions of the
court, meanings found in standard dictionaries and
principles of broad and liberal interpretation in
consonance with Article 39 (b) and (c) of the
Constitution.”
11. Although the observations were made in the context of
analysing the scope of an arbitration agreement, it is clear that the
expressions “in relation to” and “arising out of” are words of the
broadest scope.
12. In the present context, given the wide import of the
expression “arising out of”, the expression “commercial dispute”
would encompass all disputes arising from agreements relating to
immovable properties used exclusively for trade or commerce. The
principal question to be addressed is whether the lease deed dated
06.03.2021 in respect of the suit property is to be construed as an
agreement relating to the immovable property used exclusively in
trade or commerce.
13. Recital 2 of the said lease deed is relevant and is set out
below:
“The LESSEE is desirous of taking the said land on
lease for the purpose of setting up a Retail Outlet
/Storage Depot / Retail Station on the Demised
Premises for retailing of petroleum products like
-9-
COMAP No. 163 of 2024MS/HSD/Lubes allied and other products and services
(THE BUSINESS).”
14. In terms of the said lease deed, respondent No.1 (Lessee)
had agreed as under:
“2) The LESSEE to the intent that obligations may
continue throughout the terms hereby granted doth
hereby covenant with the LESSOR as follows :
a) To pay the rent hereby reserved on the date and in
the manner aforesaid.
b) To use the Demised Premises for any lawful purpose
which the LESSEE desires and especially as a Retail
Outlet for the storage and sale of petroleum products,
motor accessories etc., as well as a service station and /
or filling station and for all other purposes incidental
thereto and for any other business as the LESSEE may
deem fit and for all such purposes the LESSEE shall
have full liberty to make excavations thereon for tanks
and construct and erect thereon any buildings, boundary
walls, pumping plants and accessories as may be
required, The LESSEE shall have full accessories as
may be required, The LESSEE shall have full freedom
of access over suitable approaches thereto for its
workmen, servants, agents and customers and for the
usage of lorries, cars and all other vehicles to maintain
supplies and otherwise for running the Retail Outlet on
the Demised Premises.
c) To exercise due precaution in working the Retail
Outlet against explosion, fire, or other accidents and
comply with all regulations as imposed by public
authorities in that behalf.
d) To regularly pay bills for electricity and water
consumed on the Demised Premises.
e) At the expiration of the said term to deliver unto the
LESSOR the Demised Premises.”
– 10 –
COMAP No. 163 of 2024
15. As noted above, the suit property was already converted,
pursuant to the conversion order dated 03.12.2018, to be used for
“Non-Agricultural Commercial, Petrol Station purposes”.
16. It is apparent from the above that the suit property was for
exclusive use for commercial purposes. As noted above, the lease
deed expressly recorded the purpose for which the suit property
was leased. It is contended on behalf of respondent No.1 that
although the property was leased for commercial purposes, it was
in fact not used for the same as the business had not commenced.
17. The photographs on record indicate that a petrol station is
fully constructed on the suit property, and that fuel dispensing units
have also been installed. There is also no dispute that the suit
property was leased for establishing and operating a fuel pump. It
is apparent that the lease is for commercial purposes, and
respondent No.1 has used it for the said purpose. In response to
the legal notice, respondent No.1 clearly stated that large sums of
money had been spent on constructing the petrol bunk.
18. In view of the above, it can hardly be disputed that the suit
property is used for the respondent’s business. The fact that the
petrol pump was not operational or was in a construction phase
– 11 –
COMAP No. 163 of 2024
does not detract from the fact that the suit property was used for
the business of establishing a petrol pump, which is clearly a part
of the respondent’s commercial enterprise. The fact that a
business is in its gestation period does not mean that its resources
are not used for commercial purposes. Setting up a petrol bunk is
an integral part of establishing a retail outlet and dispensing fuel or
petroleum products. As noted above, the suit property was already
converted for the purposes of a petrol pump and thus, clearly an
integral part of the said business and its profit-making apparatus.
19. In the aforesaid view, we are unable to accept that the lease
deed is not an agreement in respect of an immovable property
used exclusively for commercial purposes.
20. The learned counsel appearing for respondent No.1
fashioned his contentions on the decision of the Supreme Court in
Ambalal Sarabhai Enterprises Ltd. vs K.S. Infraspace LLP and
Ors.2 The learned counsel has emphasised that the word “used” in
clause 2(1)(c)(vii) of the CC Act must mean ‘actual use’.
21. There is no cavil that the word “used”, as used in Section
2(1)(c)(vii) of the CC Act, must mean actual use of the immovable
2
(2020) 15 SCC 585
– 12 –
COMAP No. 163 of 2024
property. The agreements, which contemplate an immovable
property, likely to be used for trade or commerce or may in the
future be used for the said purpose, may not give rise to a
commercial dispute within the meaning of clause 2(1)(c)(vii) of the
CC Act. However, the word “used” cannot be read restrictively to
mean only revenue operations, excluding all other facets, activities,
or stages of a commercial enterprise.
22. The expression “commercial dispute” must be interpreted
using the principle of purposive interpretation.
23. The relevant extract of the Statement of Object and Reasons
of the CC Act is set out below:
“Statement of Objects and Reasons.–The proposal
to provide for speedy disposal of high value
commercial disputes has been under consideration of
the Government for quite some time. The high value
commercial disputes involve complex facts and
question of law. Therefore, there is a need to provide
for an independent mechanism for their early
resolution. Early resolution of commercial disputes
shall create a positive image to the investor world
about the independent and responsive Indian legal
system.
2. The global economic environment has since become
increasingly competitive and to attract business at
international level, India needs to further improve its
ranking in the World Bank ‘Doing Business Report’
which, inter alia, considers the dispute resolution
environment in the country as one of the parameters
for doing business. Further, the tremendous economic
development has ushered in enormous commercial
activities in the country including foreign direct
– 13 –
COMAP No. 163 of 2024
investments, public private partnership, etc., which has
prompted initiating legislative measures for speedy
settlement of commercial disputes, widen the scope of
the courts to deal with commercial disputes and
facilitate ease of doing business. Needless to say that
early resolution of commercial disputes of even lesser
value creates a positive image amongst the investors
about the strong and responsive Indian legal system. It
is, therefore, proposed to amend the Commercial
Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015.”
24. A plain reading of the above indicates that the immovable
property which is used in trade or commerce is also one of the
resources used for commerce, and the disputes arising from the
agreements of those properties are sought to be covered under the
definition of a “commercial dispute”. Thus, guided by the main
principal objective, the question to be considered is whether the
immovable property in question is a part of the integral resources of
the business enterprise. In the present case, there is little doubt
that the suit property – which, as noted above, was converted for
the purpose of “… petrol station purposes” and was leased for the
said purpose – was used as an exclusive resource for the
respondent’s commercial enterprise.
25. If the respondent’s contention is accepted, the immovable
property must physically be used for revenue operations only and
use in all other facets is to be excluded; it shall yield results which
– 14 –
COMAP No. 163 of 2024
are neither contemplated under the CC Act nor serve its principal
object. Illustratively, if a shop is leased out for the first time and the
lessee has six months’ time as a rent-free fit-out period to stock
goods and commence retail operations, the disputes relating to the
said lease arising in the first six months would not be classified as
a commercial dispute, but the disputes thereafter would. The
contention that the immovable property must already be used for
trade and commerce prior to the agreement relating to it is also
equally untenable.
26. The decision in Ambalal Sarabhai Enterprises Ltd. (supra)
is to be understood in its context. The appellant in the said case
had instituted the suit for execution of a mortgage deed. The
appellant had entered into an agreement to sell the immovable
property in favour of a party (arrayed as respondent No.2 in the
Supreme Court), who, in turn, had assigned its rights under the
agreement to sell to another party (respondent No.1 in the
Supreme Court) by executing an assignment deed. The subject
property was conveyed by executing a deed of conveyance.
However, certain aspects regarding the nature of land use were still
pending. The appellant was required to be protected as the parties
had entered into a Memorandum of Understanding in terms of
– 15 –
COMAP No. 163 of 2024
which the mortgage deed was required to be executed. The
property in question had not been converted. In the said case, the
use of the property would not be in prasenti, but possibly in the
future. However, in the present case, the suit property has been
converted for petrol pump purposes and leased for the said
business.
27. In view of the above, the appeal is allowed. The impugned
order is set aside, and the plaint is restored before the learned
Commercial Court. The parties shall appear before the learned
Commercial Court on 10.04.2026.
28. The pending application also stands disposed of.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(C.M. POONACHA)
JUDGE
AHB
