A “personal loan,” even if advanced for business purposes, does not by itself amount to a “commercial dispute.”
- rit arora
- Aug 10
- 4 min read
By Lex Horizon
Hon'ble Delhi High Court vide its order dated 18.03.2025 in IA 4178/2022 arising out of CS(COMM) 688/2021, in the case titled as Mrs. Meena Vohra vs. Master Hosts Pvt. Ltd and Ors. has held that a "personal loan", even if advanced for business purposes and carrying interest, will not inherently constitute a "commercial dispute" within the meaning of the Act of 2015, as long as it does not pertain to ordinary transactions involving merchants, bankers, financiers, and traders and relating to mercantile documents. Also, the loan had to be advanced in the ordinary course of business.
The Hon'ble High Court was deciding the application u/o 7 rule 11 of the CPC, 1908 moved by the Defendant no.1 in the above case. It was the case of the Defendant that the suit did not fall within the parameters of the "commercial dispute", as per the Act of 2015. The Defendant argued that the case at best is the ordinary suit for recovery for the loan amount.
The Counsel for the Defendant relied upon the following judgments to further his arguments: -
Rolta (P) Ltd. vs. Varanium Cloud Ltd. 2024 SCC Online Bom 3518 - Bombay High Court- Nature of a dispute should be determined based on the substance of the case rather than procedural technicalities; and that commercial disputes must necessarily involve commercial transactions.
Ladymoon Towers (P) Ltd. v. Mahendra Investment Advisors (P) Ltd.2021 SCC OnLine Cal 4240.
The Counsel for the Plaintiff on the contrary placed reliance upon the judgment of the Hon'ble Delhi High Court in Amanpreet Kohli v. Pankaj Dayal 2023 SCC OnLine Del 1808 to emphasize that a loan transaction with an element of interest would be contrary to the primary norm and thus, would not constitute a friendly loan. The Counsel for the plaintiff distinguished the judgments of the Calcutta High Court in Ladymoon Towers (P) Ltd (supra) and Bombay High Court in Glasswood Realty (P) Ltd. v. Chandravilas Kailashkumar Kothari 2021 SCC OnLine Bom 5032 stating that in those cases the Plaintiff had extended a friendly loan. He further relied upon the judgment of the Hon'ble Calcutta High Court in Padma Logistics and Khanij (P) Ltd. v. Ideal Unique Realtors (P) Ltd 2022 SCC OnLine Cal 126 to state that it is within the parties commercial wisdom to determine the incorporation of terms in the commercial documents.
Another argument advanced by the Counsel for the Defendant was that the definition of the commercial dispute should not be stretched to an extent to include all financial transactions, regardless of their purpose.
Observations of the Hon'ble High Court
Hon'ble Court in the above case observed as under: -
23. This provision sets forth an exhaustive enumeration comprising twenty-two specific categories of disputes that qualify as commercial disputes. By providing this exhaustive list, the legislature has unequivocally articulated the scope and extent of matters falling within the definition of “commercial dispute” thereby ensuring clarity, precision, and predictability in its application. The exhaustive nature of the enumeration underscores the legislative intent to prevent ambiguity and arbitrariness by way of over-breadth or under-reach, thereby facilitating a clear demarcation of the jurisdictional boundaries of commercial courts.
24. The Supreme Court in the case of Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP15, explained the provisions of the Act of 2015 and held that merely on account of high value, a suit cannot be filed before a Commercial Court, particularly where it does not relate to a “commercial dispute”
26. In Kailash Devi Khanna, this Court emphasized that not all suits for monetary recovery qualify as “commercial dispute” under the Act of 2015. The Court specifically observed that for a claim to fall under Section 2(1)(c)(i) of the Act of 2015, it must pertain to “ordinary transactions of merchants, bankers, financiers, and traders,” involving mercantile documents and their enforcement or interpretation.
Lastly, the Hon'ble High Court disposed off the matter in favour of the Defendant, observing as below: -
50. In light of the foregoing discussion, this Court finds that the claim for recovery in the present suit does not qualify as a “commercial dispute” under Section 2(1)(c) of the Act of 2015, as the transaction in question pertains to a personal loan. The lender was not a merchant, trader, banker or financier. The deceased had advanced a personal loan to defendant no. 1 on certain terms and conditions, but such a loan, even if ultimately used for business purposes, does not inherently constitute a “commercial dispute” within the meaning of the Act of 2015 as it does not pertain to ordinary transactions involving merchants, bankers, financiers, and traders such as those relating to mercantile documents. Moreover, the loan was not advanced in the ordinary course of business and has no relation to the trade, commerce, or business of the plaintiff’s deceased brother.
Find link for the judgment here
