Bench holds share purchase agreement distinct from shareholders' agreement under Commercial Courts Act; rejects suit for cancellation citing bar under Order II Rule 2 CPC and Doctrine of Election
In a significant judgment delivered on October 7, 2026, the Division Bench of the Calcutta High Court, comprising Justices Sabyasachi Bhattacharyya and Sandip Kumar De, addressed complex issues involving the jurisdiction of commercial courts, the nature of share purchase agreements vis-a-vis shareholders' agreements, and procedural bars to filing subsequent suits under the Code of Civil Procedure, 1908 (CPC).
The case, Funidea Projects Private Limited and Another v. Dr. Dilip Kumar Ghosh and Others, arose from a dispute surrounding two agreements dated May 16, 2012, and April 10, 2013, which involved transfer of shares and assets of Venkateswar Medicare Private Limited, a company whose sole asset was a leasehold plot and building situated in Salt Lake, Kolkata.
The appellants challenged the transfer of the suit to the Commercial Division of the High Court under Section 15 of the Commercial Courts Act, 2015 (CC Act), arguing that the dispute did not constitute a "commercial dispute" under Section 2(1)(c)(xii) of the Act, which specifically covers disputes arising out of shareholders' agreements, not share purchase agreements.
The Court agreed with the appellants and clarified the distinction between a shareholders' agreement and a share purchase agreement. Citing authoritative judgments including Vodafone International Holdings v. Union of India and a Karnataka High Court ruling in Bhaskar Naidu v. Aravind Yadav, the Bench held that since the defendant parties were outsiders at the time of executing the agreements and not existing shareholders, the agreements could not be classified as shareholders' agreements. Consequently, the suit did not fall within the commercial dispute ambit of the CC Act, and the transfer order to the Commercial Division was set aside.
Further, the Court examined the nature of the suit for cancellation of these agreements and concluded that despite the transactions being couched as share transfers, they effectively involved transfer of control over the company along with its immovable assets outside the Court's ordinary original jurisdiction. The Court held that the suit was, in substance, a suit for land and immovable property situated in Salt Lake, Kolkata, a location beyond the territorial jurisdiction of the Calcutta High Court's Original Side. Accordingly, the Court found that it lacked jurisdiction to entertain the suit and that the plaint ought to have been rejected or returned for presentation before the appropriate forum.
Addressing the procedural bar invoked by the appellants, the Bench applied the principles under Order II Rule 2(3) CPC, which bars a plaintiff from suing again for reliefs omitted in an earlier suit arising from the same cause of action without obtaining prior leave of the Court. The Court examined the pleadings of both the earlier money suit and the subsequent suit for cancellation and found the cause of action to be identical. The plaintiffs had consciously elected to pursue monetary relief and specific performance in the earlier suit while omitting to seek cancellation of the agreements. Seeking cancellation in the subsequent suit was thus held barred by Order II Rule 2(3) CPC and the Doctrine of Election, which prevents a party from pursuing mutually inconsistent remedies.
The Court distinguished the recent Supreme Court ruling in S. Valliammai v. S. Ramanathan, which held that a bar under Order II Rule 2 is not always a ground for rejection of plaint, by emphasizing that in the present case, the plaint itself disclosed all necessary ingredients to invoke the bar at the threshold. Therefore, rejecting the plaint outright was justified to prevent vexatious and harassing litigation.
In conclusion, the Calcutta High Court allowed both appeals, setting aside the order transferring the suit to the Commercial Division and ordering rejection of the plaint for the suit itself. The judgment underscores the importance of correctly classifying agreements under the CC Act, the limits of jurisdiction in suits involving immovable property, and the strict application of procedural bars to prevent multiplicity of suits and abuse of judicial process.
Bottom Line:
Commercial Courts Act, 2015 - Share purchase agreement entered into with outsiders to company is not a shareholders' agreement under Section 2(1)(c)(xii) - Suit for cancellation of agreements which in substance transfer control of company along with its immovable assets situated outside original jurisdiction is a suit for land - Subsequent suit for cancellation barred by Order II Rule 2(3) CPC and Doctrine of Election where earlier money suit on same cause of action sought enforcement/monetary relief on same agreements without leave.
Statutory provision(s):
Commercial Courts Act, 2015 Section 2(1)(c)(xii), Section 15; Code of Civil Procedure, 1908 Order II Rule 2(3), Order VII Rule 11(d); Letters Patent of Calcutta High Court Clause 12, Clause 15
