Introduction:

The Calcutta High Court has held that a money-recovery suit instituted by a company cannot be rejected at the threshold merely because the plaint does not expressly refer to a written agreement or mercantile document evidencing the underlying financial transaction. The Court emphasised that where the pleadings and documents disclose an arguable case and the commercial character of the transaction requires factual examination, such issues should ordinarily be determined after trial rather than through a summary application under Order VII Rule 11 of the Code of Civil Procedure, 1908.

Justice Aniruddha Roy delivered the ruling while dealing with an application filed by Ashoka Hawai and Shoes Pvt. Ltd. seeking rejection of the plaint in a suit instituted by Divij Mercantiles Private Limited for recovery of approximately ₹65 lakh. The proceedings were registered as GA-COM/11/2025.

The dispute arose from a financial transaction between the parties. Divij Mercantiles Private Limited, the plaintiff, pleaded that it was engaged, among other activities, in financial intermediation and financial activities. According to the plaint, in January 2020, Ashoka Hawai and Shoes Pvt. Ltd. approached the plaintiff seeking financial assistance. Following discussions between the parties, the plaintiff agreed to advance funds to the defendant, with the amount being repayable along with interest at the rate of 12 per cent per annum.

The plaintiff claimed that it subsequently transferred an aggregate amount of ₹65 lakh to the defendant through banking channels between January 18, 2020 and September 18, 2020. The plaint referred to documentary material including the plaintiff’s ledger, bank statements and Form 26AS in support of the transaction.

The plaintiff further pleaded that the defendant had made a part-payment of ₹1,37,650 towards interest and had also deposited tax deducted at source in relation to the interest allegedly payable on the amount advanced. These circumstances were relied upon by the plaintiff to demonstrate that the financial transaction was not merely a disputed or unsupported claim but was reflected in the parties’ financial records.

The defendant, however, challenged the very maintainability of the suit. It sought rejection of the plaint under Order VII Rule 11 of the CPC, contending, among other things, that the dispute did not qualify as a “commercial dispute” under the Commercial Courts Act, 2015.

The defendant’s principal objection was that the plaint did not contain an averment concerning any written agreement, mercantile document or other written contractual instrument governing the alleged advance. According to the defendant, the absence of such a document meant that the plaintiff had failed to establish that the transaction fell within the statutory definition of a commercial dispute.

The defendant also raised an objection under the Bengal Money-Lenders Act, 1940. It contended that the plaintiff was effectively carrying on money-lending activity and that the suit could not be maintained without the requisite certificate or licence contemplated by the statute. Since the plaint did not plead or disclose possession of such a certificate, the defendant argued that the suit was liable to be rejected.

The plaintiff resisted the application and maintained that the plaint disclosed a clear and triable cause of action. It argued that the nature of the transaction, the parties’ dealings, the bank transfers, the interest component and the financial records relied upon in the plaint could not be brushed aside at the preliminary stage.

The High Court was therefore required to consider whether the alleged absence of a written agreement was sufficient to take the dispute outside the scope of the Commercial Courts Act and whether the objection under the Bengal Money-Lenders Act could justify rejection of the plaint without a trial.

In deciding these questions, the Court examined the scope of Section 2(c) of the Commercial Courts Act, the principles governing Order VII Rule 11 CPC and the earlier decisions relied upon by both sides.

Arguments of the Parties:

On behalf of Ashoka Hawai and Shoes Pvt. Ltd., it was argued that the suit could not be treated as a commercial suit merely because the plaintiff had described itself as being engaged in financial intermediation or financial activities. The defendant contended that the substance of the transaction, rather than the plaintiff’s description of its business, had to determine whether the dispute fell within the jurisdiction of the Commercial Court.

The defendant particularly relied upon the absence of any pleading concerning a written agreement or mercantile document. According to its case, a commercial dispute contemplated by the Commercial Courts Act had to arise out of a transaction possessing the necessary commercial character, and the plaint did not disclose sufficient material to establish that character.

The defendant argued that the plaintiff’s reliance on ledger entries, bank statements and tax records could not substitute for the contractual foundation of the alleged transaction. In its submission, merely transferring money from one company to another did not automatically make the resulting dispute a commercial dispute within the meaning of the Commercial Courts Act.

It was therefore submitted that the plaint, on a meaningful reading, failed to disclose the necessary facts establishing the jurisdiction of the Commercial Court. Since the defect was apparent from the plaint itself, the defendant contended that the Court could reject the plaint under Order VII Rule 11 CPC without requiring the parties to undergo a full-fledged trial.

The defendant also invoked the Bengal Money-Lenders Act, 1940. It argued that the plaintiff’s pleaded activity of advancing money with interest amounted to money-lending. If the plaintiff was carrying on such activity, it was required to satisfy the statutory requirements applicable to money lenders.

According to the defendant, the failure of the plaintiff to plead that it possessed the requisite money-lending certificate was fatal to the suit. The defendant therefore sought rejection of the plaint on this additional ground.

In support of its argument, the defendant referred to the Supreme Court’s orders in Raj Kumar Santoshi v. Prashant Malik, seeking to establish the importance of compliance with the requirement relating to a money-lending certificate. It also relied upon the decisions of the Calcutta High Court in Prime Hitech Textiles LLP v. Manish Kumar and the Delhi High Court in Meena Vohra v. Master Hosts Pvt. Ltd. to contend that a plaint can be rejected where the statutory defect is apparent and unimpeachable.

The plaintiff, Divij Mercantiles Private Limited, opposed the application and argued that the defendant was effectively seeking a determination of disputed factual issues under the guise of an Order VII Rule 11 application.

The plaintiff pointed out that the plaint specifically pleaded the circumstances in which the defendant approached it for financial assistance, the agreement to advance money, the rate of interest, the dates and amounts of the bank transfers and the subsequent payment of interest. It further relied upon its ledger, bank statements and Form 26AS.

The plaintiff contended that these pleadings were sufficient to disclose a cause of action for recovery. Whether the transaction was ultimately proved and whether it possessed all the characteristics of a commercial transaction were matters that could be determined only after evidence was led by both sides.

On the objection concerning the Commercial Courts Act, the plaintiff argued that the statutory definition of “commercial dispute” did not impose a universal requirement that every commercial transaction must be founded upon a written agreement. The absence of an expressly pleaded written contract could not, by itself, take a financial transaction outside the statutory definition.

The plaintiff further maintained that the Court was required to examine the substance of the pleadings and the nature of the transaction disclosed in the plaint rather than insist upon a particular form of documentary evidence at the preliminary stage.

With respect to the Bengal Money-Lenders Act, the plaintiff argued that the issue could not result in immediate rejection of the plaint, particularly when the statutory scheme itself provided a mechanism through which a money lender could cure the relevant defect by payment of penalty.

The plaintiff relied upon the Calcutta High Court’s earlier decision in Dutta Vinimay Private Limited v. Dinesh Singh. According to the plaintiff, that judgment demonstrated that the absence of the requisite certificate was not necessarily an incurable defect warranting immediate rejection of the suit. The statutory framework contemplated an opportunity to comply with the requirement.

The plaintiff also sought to distinguish the authorities relied upon by the defendant. It submitted that the decisions cited by the defendant were factually and legally distinguishable and did not establish that every suit involving a financial advance must be rejected at the threshold if the plaint does not expressly mention a particular written agreement or certificate.

The plaintiff therefore urged the Court to dismiss the application and permit the suit to proceed in accordance with law.

Court’s Judgment:

Justice Aniruddha Roy rejected the defendant’s attempt to have the suit terminated at the preliminary stage. The Court’s reasoning centred on the limited scope of an application under Order VII Rule 11 CPC and the necessity of distinguishing between defects apparent from the plaint and issues requiring factual investigation.

The Court first considered the objection that the suit did not involve a “commercial dispute” under the Commercial Courts Act, 2015. The Court examined the relevant provisions of the legislation, particularly the statutory definition contained in Section 2(c).

The Court found that there was no requirement under the Commercial Courts Act that every transaction falling within the definition of a commercial dispute must necessarily be based upon a written contract or a particular mercantile document. The statute could not be read as imposing an additional condition that was not contained in its language.

The Court consequently declined to accept the defendant’s argument that the plaint was liable to be rejected merely because it did not expressly refer to a written agreement.

Justice Roy noted that the plaintiff had pleaded a specific financial transaction between the parties. It had stated that the defendant approached it for funds, that the plaintiff agreed to advance money at a specified rate of interest and that the money was actually transferred through banking channels.

The plaint also referred to financial records supporting the alleged transfers. The plaintiff relied upon its ledger, bank statements and Form 26AS and pleaded that the defendant had made a payment towards interest and had deposited TDS relating to such interest.

In these circumstances, the Court held that the character of the transaction could not be determined conclusively merely by looking for a written contract in the plaint.

The Court observed that the nature and character of the financial transaction had to be ascertained first. The Court’s approach was that the pleadings disclosed sufficient material to raise a genuine question concerning the commercial nature of the transaction. Therefore, it could not be held at the threshold that the dispute was outside the scope of the Commercial Courts Act.

The Court stated that, on a conjoint and harmonious reading of the relevant provisions of the Commercial Courts Act in light of the pleadings and documents referred to in the plaint, the nature of the transaction required proper examination.

This finding is significant because the defendant was not merely disputing the amount claimed. It was attempting to prevent the suit from proceeding as a commercial action altogether. The Court, however, found that such a determination could not appropriately be made through a summary rejection application when the plaint disclosed an arguable factual foundation.

The Court made it clear that it could not summarily conclude that the transaction was not commercial in nature. A proper trial would be necessary to determine the relevant factual questions.

The Court’s reasoning was closely connected with the established principles governing Order VII Rule 11 CPC. The provision permits rejection of a plaint in specified circumstances, including where the suit appears from the statements in the plaint to be barred by law or where the plaint fails to disclose a cause of action.

However, the power is not intended to permit a defendant to establish its defence by inviting the Court to conduct a detailed examination of disputed facts at the inception of the litigation.

Justice Roy emphasised that although a plaint may be rejected where a meaningful reading clearly reveals a legal bar, the Court should not resort to summary rejection where the pleadings disclose an arguable and triable case.

The Court observed that a plaintiff should not be non-suited “at the threshold” in a summary and hasty manner when an arguable and triable case has been pleaded.

This principle was particularly applicable to the present case because the parties disputed the nature of the financial transaction. Determining whether the plaintiff’s activities amounted to money-lending, whether the transaction was commercial, what the precise terms of the financial arrangement were and what effect should be given to the financial records would potentially require examination of evidence.

The Court then considered the defendant’s objection under the Bengal Money-Lenders Act, 1940.

The defendant’s case was that the plaintiff was carrying on money-lending activity and had failed to disclose possession of the necessary certificate. The Court, however, relied upon its earlier decision in Dutta Vinimay Private Limited v. Dinesh Singh.

In that decision, the Calcutta High Court had considered the statutory mechanism permitting a money lender to cure the relevant defect by paying the prescribed penalty. Justice Roy noted that the existence of such a statutory mechanism was relevant to the question whether the plaint could immediately be rejected.

If the legislation itself provides an opportunity to cure a defect, the Court cannot necessarily treat the defect as an automatic and irreversible bar to the institution or continuation of the suit.

The Court therefore declined to accept the defendant’s contention that the alleged absence of the requisite certificate, at the stage of the present proceedings, necessarily required rejection of the plaint.

The defendant had also relied upon the Supreme Court’s orders in Raj Kumar Santoshi v. Prashant Malik. Justice Roy, however, distinguished those proceedings on the basis of their nature and context.

The Court noted that the Supreme Court’s orders in that matter arose in connection with a criminal proceeding. The issue before the Supreme Court there was not the maintainability of the civil suit in the present context, nor was it an application seeking rejection of a plaint under Order VII Rule 11 CPC.

Consequently, the decision could not be applied mechanically to the present dispute.

The Court also examined the decisions in Prime Hitech Textiles LLP v. Manish Kumar and Meena Vohra v. Master Hosts Pvt. Ltd., relied upon by the defendant.

Justice Roy found that those decisions were distinguishable because, in those matters, the Courts had found circumstances providing an unimpeachable basis for rejection of the plaint. The present case stood on a different footing because the issues raised by the defendant required factual determination.

This distinction is central to the Court’s approach. An Order VII Rule 11 application may succeed where the legal defect is evident from the plaint itself and no amount of evidence can cure it. But where the objection depends upon facts that remain disputed or require evidence, the matter ordinarily cannot be conclusively decided at the threshold.

The Court therefore refused to convert the preliminary application into a mini-trial.

Importantly, the Court did not hold that the plaintiff had conclusively established its entitlement to recover ₹65 lakh. Nor did it decide that the plaintiff was definitively entitled to invoke the Commercial Courts Act or that it possessed all the necessary qualifications under the Bengal Money-Lenders Act.

Instead, the Court confined itself to the narrower question of whether the plaint should be rejected at the threshold.

On that question, the answer was clearly in the negative.

The Court held that the plaint disclosed an arguable and triable case and therefore had to be allowed to stand for trial. The defendant was given liberty to raise all questions concerning maintainability and the applicability of the Bengal Money-Lenders Act during the trial.

The Court specifically clarified that it had not expressed any final opinion on the merits of the defendant’s objections under the Bengal Money-Lenders Act. Those objections remained open for adjudication in accordance with law.

This qualification ensures that the dismissal of the Order VII Rule 11 application does not amount to a finding that the plaintiff has ultimately succeeded on the disputed statutory issue. The defendant remains entitled to establish its defence through appropriate evidence and legal submissions during the proceedings.

The Court also left open another procedural issue concerning the written statement. The plaintiff had separately challenged the written statement filed by the defendant beyond 120 days from the date of service of summons and had sought to have it taken off the record. That application remained pending and was not decided as part of the present order.

Ultimately, the Calcutta High Court dismissed the application filed by Ashoka Hawai and Shoes Pvt. Ltd. seeking rejection of the plaint in the recovery suit filed by Divij Mercantiles Private Limited.

The ruling reinforces the principle that Order VII Rule 11 CPC is a limited threshold jurisdiction and cannot ordinarily be used to determine disputed factual questions. A defendant may certainly challenge the legal maintainability of a suit, but where the pleadings disclose a plausible cause of action and the alleged statutory bar depends upon facts requiring examination, the dispute should ordinarily proceed to trial.

The decision also clarifies an important aspect of commercial litigation. The commercial character of a dispute cannot be defeated merely because the plaintiff has not pleaded the existence of a formal written agreement. The Court must examine the nature of the transaction disclosed by the pleadings and determine whether the statutory requirements are met. Where that inquiry involves factual questions, premature rejection of the plaint would be inappropriate.

At the same time, the judgment does not mean that every financial transaction between companies will automatically constitute a commercial dispute or that every objection under the Bengal Money-Lenders Act must await the conclusion of a full trial. The Court’s conclusion was based upon the particular pleadings and circumstances before it and upon the principle that disputed issues should not be conclusively determined under Order VII Rule 11 when they require evidence.

The decision thus preserves the distinction between threshold scrutiny and adjudication on merits. The former is concerned with whether the plaint itself discloses a legally sustainable action; the latter require the Court to examine evidence and determine the competing factual and