The Karnataka High Court recently ruled on the jurisdiction of Commercial Courts in cases involving Share Purchase Agreements (SPA). In Bhaskar Naidu v. Aravind Yadav 2025 KHC 3634, a petition under Article 227 of the Constitution of India was filed challenging an order passed by the LXXXIII Additional City Civil and Sessions Judge, Bengaluru. The dispute centered around whether an SPA falls within the definition of a “commercial dispute” under the Commercial Courts Act, 2015.
Background of the Case
The Petitioner, a shareholder of Bengaluru Fresh Fruits Pvt. Ltd., entered into an SPA with the Respondent for the sale of his shares. When a dispute arose regarding the agreement, the Respondent filed a suit in the Commercial Court for the recovery of money. The petitioner moved an application under Order VII Rule 10 of the Code of Civil Procedure (CPC), seeking a return of the plaint on the ground that the dispute was not maintainable before the Commercial Court. The trial court rejected this application, prompting the Petitioner to file the present petition.
Legal Issues
The primary legal question before the Karnataka High Court was whether an SPA qualifies as a “commercial dispute” under Section 2(1)(c)(xii) of the Commercial Courts Act, 2015. The Act recognizes disputes arising from Shareholder Agreements as commercial disputes, but it does not explicitly mention SPAs.
Court’s Findings
The Hon’ble Justice H.T. Narendra Prasad examined the definitions of Shareholder Agreements and Share Purchase Agreements from legal dictionaries and precedents. The court observed that:
- A Shareholder Agreement governs internal affairs, dispute resolution, and shareholder rights.
- A Share Purchase Agreement concerns the sale and transfer of shares between parties and does not regulate internal corporate governance.
Based on this distinction, the court ruled that an SPA is not covered under Section 2(1)(c)(xii), and therefore, the Commercial Court lacked jurisdiction to entertain the dispute.
Judgment
The High Court allowed the petition and set aside the trial court’s order. The case was remitted back to the Principal City Civil and Sessions Judge, Bengaluru, for re-allocation to an appropriate regular court.
Conclusion
This judgment clarifies the jurisdictional boundaries of the Commercial Courts Act, 2015, emphasizing that only Shareholder Agreements fall within the ambit of commercial disputes, not Share Purchase Agreements. It serves as an important precedent for litigants involved in corporate transactions, ensuring that cases are filed before the appropriate forum.
