Introduction:

The Kerala High Court has clarified the jurisdictional consequences that follow once a civil court is designated as a Commercial Court under the Commercial Courts Act, 2015. The Court held that where the State Government has issued a notification constituting a particular court as a Commercial Court for disputes involving a specified value, an ordinary civil court cannot continue to adjudicate such a commercial dispute on merits. Any pending suit falling within the notified jurisdiction must be transferred to the designated Commercial Court in accordance with law.

Justice Easwaran S delivered the judgment in BRD Finance Ltd. v. Santhosh P & Anr., RSA No. 194 of 2026, arising from judgments rendered by the Munsiff Court, Chavakkad and the Sub Court, Chavakkad. The dispute concerned a recovery suit filed by BRD Finance Ltd., a kuri company, seeking recovery of Rs. 3,47,587 from the defendants on the basis of a promissory note.

The suit had originally been instituted before the Munsiff Court, Chavakkad. At the time of institution, the question of jurisdiction under the Commercial Courts Act did not arise in the manner that subsequently became relevant. However, during the pendency of the proceedings, the legal position changed significantly.

On February 24, 2020, the State Government issued an order in exercise of its powers under Section 3(1) and (2) of the Commercial Courts Act, 2015. Through the notification, Sub Courts were designated as Commercial Courts for specified-value commercial disputes involving recovery claims exceeding Rs. 3 lakh across the State.

The pending suit filed by BRD Finance Ltd. involved a recovery claim of Rs. 3,47,587 and therefore fell within the financial threshold specified in the notification. Consequently, the dispute was required to be dealt with by the appropriate designated Commercial Court.

Despite the notification, the Munsiff Court continued to hear the suit and ultimately adjudicated the dispute on merits, resulting in dismissal of the suit. The matter thereafter reached the Sub Court, Chavakkad in appeal. The first appellate court affirmed the decision of the Munsiff Court.

The appellant then approached the Kerala High Court in a Regular Second Appeal. The principal issue before the High Court was not whether the appellant was entitled to recover the amount claimed under the promissory note. Instead, the fundamental question was whether the Munsiff Court had jurisdiction to continue adjudicating the suit after the State Government had designated the Sub Courts as Commercial Courts for disputes exceeding the specified monetary threshold.

The appellant relied upon Section 15 of the Commercial Courts Act, which deals with the transfer of pending suits and proceedings relating to commercial disputes of specified value. The argument was that once the notification came into force and the pending dispute fell within its scope, the Munsiff Court was required to transfer the suit to the appropriate Commercial Court rather than proceed with the matter.

The High Court accepted this contention and held that the Munsiff Court’s continuation of the proceedings after the relevant notification was issued amounted to an exercise of jurisdiction that it no longer possessed in respect of the dispute.

The Court further held that the defect was not cured merely because the matter subsequently reached the first appellate court. Since the original judgment itself had been rendered by a court lacking jurisdiction, the appellate court could not validly affirm that judgment.

Accordingly, Justice Easwaran S set aside both the judgment and decree of the Munsiff Court as well as the judgment of the Sub Court, Chavakkad. The High Court deliberately refrained from examining the merits of the underlying recovery dispute. Instead, the original suit was directed to be transferred to the Principal Sub Court, Thrissur, which was to issue notice to the parties and adjudicate the dispute in accordance with law.

The decision reinforces an important procedural principle under the Commercial Courts Act: once a dispute falls within the jurisdiction of a designated Commercial Court, the statutory allocation of jurisdiction must be respected. A court cannot continue deciding the matter simply because the suit was originally instituted before it.

Arguments of the Parties:

The appellant, BRD Finance Ltd., challenged the judgments of both the Munsiff Court, Chavakkad and the Sub Court, Chavakkad primarily on the ground that the proceedings had continued before a court that had ceased to possess jurisdiction over the dispute after the State Government’s notification under the Commercial Courts Act.

The appellant pointed out that the original suit involved a recovery claim of Rs. 3,47,587 based on a promissory note. The monetary value of the claim therefore exceeded the Rs. 3 lakh threshold specified in the State Government’s notification dated February 24, 2020.

According to the appellant, the notification was not merely an administrative arrangement concerning the internal distribution of cases. It had a direct jurisdictional consequence because the State Government had exercised statutory powers under Section 3 of the Commercial Courts Act to designate Sub Courts as Commercial Courts for specified-value commercial disputes.

The appellant relied particularly upon Section 15 of the Act. The provision contemplates the transfer of pending suits and proceedings relating to commercial disputes of specified value to the appropriate Commercial Court. The appellant argued that the Munsiff Court was therefore under a legal obligation to transfer the pending suit once the notification became applicable to it.

Instead, the Munsiff Court proceeded with the case and eventually dismissed the suit on merits. The appellant contended that this course was legally impermissible because the court could not adjudicate a dispute that had fallen within the jurisdiction of the designated Commercial Court.

The appellant further argued that the subsequent appellate proceedings before the Sub Court could not cure the original jurisdictional defect. If the trial court lacked jurisdiction to decide the dispute, an appellate court could not validate the resulting decree merely by affirming it.

The appellant therefore sought interference by the High Court and requested that the judgments of the courts below be set aside and that the matter be dealt with by the competent Commercial Court.

The respondents, on the other hand, opposed the appellant’s challenge to the judgments rendered by the courts below. Although the precise submissions of the respondents are not elaborated in the case summary, the proceedings before the High Court involved the defence of the judgments delivered by the Munsiff Court and subsequently affirmed by the Sub Court.

The respondents’ position, in substance, was that the dispute had already been adjudicated by the competent civil court in which the suit had originally been instituted and that the appellate court had subsequently affirmed that decision. The continued validity of those proceedings was therefore in issue before the High Court.

The central controversy was consequently one of jurisdiction rather than the merits of the claim. The High Court was required to determine whether the subsequent designation of Sub Courts as Commercial Courts had the effect of removing the Munsiff Court’s authority to continue with a pending suit falling within the specified monetary threshold.

The appellant’s case was that the answer had to be in the affirmative because Section 15 of the Commercial Courts Act expressly contemplated the transfer of pending commercial disputes to the designated court.

The respondents, conversely, sought to sustain the proceedings already undertaken before the civil court. The High Court, however, ultimately found that the statutory scheme left no scope for the Munsiff Court to proceed with the matter after the notification had brought the dispute within the jurisdiction of the Commercial Court.

The Court’s approach also meant that it was unnecessary to determine whether the appellant had actually established its monetary claim under the promissory note. The merits could be considered only by the court having lawful jurisdiction over the commercial dispute.

Court’s Judgment:

The Kerala High Court allowed the Regular Second Appeal and held that the Munsiff Court, Chavakkad could not have proceeded to adjudicate the suit on merits after the State Government had issued the notification designating the Sub Courts as Commercial Courts for recovery disputes exceeding Rs. 3 lakh.

Justice Easwaran S began by examining the statutory framework created by the Commercial Courts Act, 2015. The Act was enacted with the object of providing a specialised adjudicatory mechanism for commercial disputes of specified value and ensuring their expeditious disposal through designated Commercial Courts.

The legislation creates a jurisdictional framework under which commercial disputes satisfying the statutory requirements are to be dealt with by courts designated for that purpose. The designation is therefore not merely a change in nomenclature. It affects which judicial forum is competent to adjudicate the dispute.

In the present case, the State Government exercised its statutory power under Section 3(1) and (2) of the Commercial Courts Act by issuing the order dated February 24, 2020. The notification designated the Sub Courts as Commercial Courts for recovery claims exceeding Rs. 3 lakh.

The suit instituted by BRD Finance Ltd. involved a claim of Rs. 3,47,587. It therefore crossed the monetary threshold prescribed by the notification.

The High Court consequently found that the dispute came within the jurisdiction of the designated Commercial Court.

The significant issue was that the suit had already been instituted before the Munsiff Court before the notification came into operation. The fact that the proceedings had commenced earlier, however, did not authorise the Munsiff Court to continue exercising jurisdiction once the statutory scheme required such pending proceedings to be transferred.

The Court therefore considered Section 15 of the Commercial Courts Act, which specifically addresses pending suits and proceedings involving commercial disputes of specified value.

The statutory transfer mechanism exists precisely to ensure that disputes which come within the jurisdiction of Commercial Courts do not continue before ordinary civil courts merely because they were instituted before the relevant notification or designation came into force.

In this case, the Munsiff Court ought to have recognised the change in jurisdiction and transferred the suit to the appropriate Commercial Court. Instead, it proceeded to hear the case and decided it on merits.

The High Court found this course of action to be legally unsustainable.

The Court categorically observed that, without transferring the suit, the Munsiff Court’s decision to proceed with the matter on merits was “clearly unsustainable and without jurisdiction.”

The emphasis on jurisdiction is significant. The High Court did not treat the defect as a mere procedural irregularity that could be overlooked because the parties had already participated in the proceedings. Rather, it treated the statutory allocation of jurisdiction under the Commercial Courts Act as binding.

Once the dispute fell within the notified jurisdiction of the Commercial Court, the Munsiff Court could no longer validly determine the rights of the parties on merits.

The Court’s reasoning also demonstrates the distinction between a procedural defect and an absence of jurisdiction. Where a court lacks jurisdiction to adjudicate a dispute, its decision cannot ordinarily be sustained merely because the proceedings have otherwise been conducted regularly.

The High Court next considered the consequence of the first appellate court having affirmed the Munsiff Court’s decision.

The Sub Court, Chavakkad had considered the appeal and affirmed the judgment of the Munsiff Court. However, the High Court held that this did not cure the foundational defect.

If the original decision had been rendered by a court without jurisdiction, the appellate court could not acquire jurisdiction over the matter merely by entertaining an appeal against that decision. The appellate judgment was therefore also unsustainable.

The High Court accordingly set aside both the judgment and decree of the Munsiff Court and the appellate judgment of the Sub Court.

Importantly, the Court did not proceed to decide whether BRD Finance Ltd. was ultimately entitled to recover Rs. 3,47,587 from the defendants.

This was a deliberate consequence of the Court’s jurisdictional finding. Since the merits had not been lawfully determined by the appropriate forum, the High Court considered it inappropriate to undertake a substantive examination of the underlying promissory-note claim in the Regular Second Appeal.

Instead, the High Court directed that the original suit itself be transferred to the Principal Sub Court, Thrissur.

The designated court was directed to issue notice to the parties and thereafter proceed with the suit on its merits in accordance with law.

This direction ensures that the dispute is not extinguished merely because the earlier proceedings were conducted before the wrong forum. The appellant retains the opportunity to establish its claim, while the defendants retain the right to contest the claim before the competent Commercial Court.

The decision thus preserves the substantive rights of both parties while enforcing the statutory jurisdictional framework.

The High Court also granted consequential relief concerning court fees. The appellant was held entitled to a refund of the court fee paid before the High Court and the first appellate court.

The ruling carries broader significance for pending civil suits that subsequently come within the scope of the Commercial Courts Act. It makes clear that parties and courts cannot ignore a change in statutory jurisdiction simply because proceedings have already commenced.

The Commercial Courts Act was enacted to create a specialised mechanism for commercial litigation. Its purpose would be undermined if ordinary civil courts could continue adjudicating specified-value commercial disputes even after the legislature and executive authorities had allocated such matters to designated Commercial Courts.

The judgment therefore reinforces the mandatory character of the statutory transfer mechanism.

The case also illustrates the importance of identifying the nature and value of a dispute at every stage of litigation. Jurisdiction cannot necessarily be determined solely by reference to the date on which a suit was instituted. Where legislation subsequently alters the forum competent to adjudicate a particular class of disputes, pending proceedings may have to be transferred in accordance with the statutory scheme.

The High Court’s decision also protects the institutional integrity of the Commercial Courts framework. Commercial Courts are intended to provide a specialised forum for commercial disputes and to facilitate their efficient resolution. Allowing a pending case that squarely falls within the notified category to remain before an ordinary civil court would create parallel jurisdiction and undermine the uniformity intended by the legislation.

The decision is equally significant from the perspective of judicial economy. Rather than permitting the parties to continue litigation through appeals against a decree passed by a court without jurisdiction, the High Court nullified the defective proceedings and sent the dispute to the proper forum at the appropriate stage.

The direction to issue fresh notice and proceed with the suit on merits ensures procedural fairness. Neither party is deprived of an opportunity to present its case merely because the original court failed to transfer the matter.

The Court’s decision also underscores that jurisdictional requirements cannot be treated as technical formalities where Parliament has established a specialised statutory forum. The question of which court is competent to decide a commercial dispute is fundamental to the validity of the adjudicatory process.

In the present case, the monetary value of the claim was decisive because the State notification expressly covered recovery disputes exceeding Rs. 3 lakh. Since the appellant’s claim was for Rs. 3,47,587, it crossed the prescribed threshold.

Once the notification came into force, the Munsiff Court was therefore required to transfer the proceedings rather than proceed to trial and judgment.

The fact that the dispute originated as a suit based on a promissory note did not alter this position. What mattered was whether the dispute satisfied the requirements of a commercial dispute of specified value under the statutory framework and whether it fell within the territorial and subject-matter jurisdiction of the designated Commercial Court.

The High Court’s conclusion was consequently straightforward: the Munsiff Court should not have adjudicated the dispute after the notification took effect.

The appellate court’s affirmation of that judgment could not cure the defect because an appellate proceeding cannot validate a decree that was rendered without jurisdiction.

The Court therefore set aside the judgments of both courts below without expressing any opinion on the merits of the claim.

The matter will now be considered afresh by the Principal Sub Court, Thrissur, acting in its capacity as the competent Commercial Court. The parties will receive notice and will have the opportunity to contest the suit before the appropriate forum.

The judgment in BRD Finance Ltd. v. Santhosh P & Anr. thus serves as an important reminder that jurisdiction is not a matter that courts can overlook merely because litigation has progressed substantially. When a statutory framework reallocates jurisdiction to a specialised forum, pending proceedings falling within that framework must follow the prescribed route.

The Kerala High Court has consequently reinforced the mandatory operation of Section 15 of the Commercial Courts Act in circumstances where a pending suit becomes one that is required to be tried by a designated Commercial Court.

Ultimately, the ruling does not determine who will succeed in the underlying recovery dispute. Instead, it ensures that the dispute is decided by the court legally empowered to do so. In doing so, the judgment balances procedural discipline with substantive fairness: the earlier proceedings are set aside, but the original claim remains alive and is transferred to the competent forum for a fresh adjudication on merits.