Employment contract cannot be given colour of commercial dispute; will clog commercial courts: Karnataka High Court

The Karnataka High Court recently held that a pure and simple employment contract cannot be given the colour of a commercial dispute by dressing it as a provision of services [Sanjay Kumar v Elior India Food Services LLP]..Justice M Nagaprasanna said that if every employment agreement is brought within the ambit of commercial dispute, it would lead to the clogging of commercial courts by opening floodgates of litigation. “This in effect would defeat the very reason why the commercial Court was constituted,” the Court stated. .The High Court also placed reliance on a judgment of the apex court in the case of Ambalal Sarabhai Enterprises Limited v KS Infraspace LLP wherein it was observed that issues not related to commercial disputes which are filed before commercial courts merely because of high value and with the intention of seeking early disposal, should not be entertained. .The case before the High Court arose when the petitioner’s employment was terminated by the respondents. The petitioner had, on termination, sent a legal notice demanding the payment of various amounts including termination allowance as per the employment agreement and amount towards the long-term incentive plan..When the firm refused to pay, the petitioner invoked arbitration. He then moved the commercial court seeking interim protection. This application was rejected both by the commercial court and subsequently by the High Court. .Thereafter, an arbitral tribunal was constituted which passed directions to secure the amount claimed by the petitioner. Aggrieved by this, the respondents approached the commercial court. However, now, the petitioner disputed the commercial court’s jurisdiction. The respondents argued that the petitioner could not blow hot and cold, once having chosen to invoke the jurisdiction of the commercial court himself..This argument was rejected by the single-judge in this case, reasoning that merely because a party invokes wrong jurisdiction and a determination is made by the concerned court without the parties objecting to it, the jurisdiction will not become binding on any subsequent proceeding.“In view of the preceding analysis, I have no hesitation to hold that the dispute between the parties is not a commercial dispute within the meaning of Section 2(1)(c)(xviii) of the Act and therefore, the commercial Court ought not to have entertained the dispute,” it was thus concluded. .Advocate Nishanth AV appeared for the petitioner while the respondents were represented by Senior Advocate KG Raghavan and advocate Prashanth VG. .[Read Order]