The Delhi High Court recently held that disputes arising out of employment contracts do not qualify as “commercial disputes” under the Commercial Courts Act, 2015 [ARM Digital Vs Ritesh Singh]..Therefore, such cases need not be instituted before Commercial Courts or be preceded by mandatory pre-institution mediation under Section 12 of the Commercial Courts Act, Justice Purushaindra Kumar Kaurav said.“Any dispute relating to an employment agreement cannot be treated to be a commercial dispute within the purview of Section 2(1)(c) of the Commercial Courts Act,” the Court said.Thus, it dismissed an application under Order VII Rule 11 of the Code of Civil Procedure (CPC) seeking rejection of a civil suit filed by ARM Digital Media Pvt Ltd and its promoters.The Court held that the suit was fundamentally civil in nature, centered on employment and related obligations and therefore, maintainable as a regular civil suit..The suit, filed by ARM Digital Media Pvt Ltd, CEO Abhishek Punia and director Manas Gulati(plaintiffs), concerned an employment agreement dated September 8, 2016 under which Singh served first as Managing Director and later as a non-executive director. The plaintiffs alleged that Singh unilaterally increased his remuneration, failed to ensure statutory compliances and breached confidentiality, non-compete and non-solicitation duties after resigning on March 31, 2023. They also accused him of joining a competing entity, Insite Digital Private Limited (Icogz), and misusing confidential information to solicit clients.Singh argued that the employment arrangement could not be viewed independently of the Share Subscription and Shareholders’ Agreement (SSSA) executed on the same day. Since the SSSA required promoters to sign an employment-cum-non-solicitation agreement in a prescribed format, he said that enforcing the employment agreement amounted to enforcing the SSSA. On this basis, he contended the dispute was a shareholders’ agreement dispute falling under Section 2(1)(c)(xii) of the Commercial Courts Act, requiring institution only before the Commercial Court and compliance with mandatory pre-institution mediation under Section 12A.He further argued that the suit was barred under Section 430 of the Companies Act because the plaint alleged breach of fiduciary duties under Section 166 and sought reliefs concerning the conduct of company affairs.These, he said, were within the exclusive domain of the National Company Law Tribunal.The plaintiffs countered by arguing that the SSSA had been expressly terminated by a Share Purchase Agreement of August 4, 2022 and that the Employment Agreement survived as a standalone contract. They submitted that breaches of employment obligations, confidential information and non-compete covenants are civil disputes well within the jurisdiction of a civil court and outside the NCLT’s competence..The Court accepted this position. Relying on decisions including Ekanek Networks, Chanda Kochhar and Rachit Malhotra, it held that employment contracts remain contracts of personal service even where they contain confidentiality or non-compete clauses. "The mere presence of ancillary business-related clauses such as confidentiality, intellectual property assignment, or noncompete obligations does not metamorphose an employment contract, which is fundamentally a contract of personal service, into a commercial arrangement," the Court held.The Court further ruled that employment-derived benefits whether styled as ESOPs, incentives or long-term plans, cannot be treated as commercial agreements within the meaning of Section 2(1)(c)..The Court also rejected the argument based on Section 430, observing that the NCLT does not adjudicate breaches of employment contracts or grant injunctions and damages of the kind sought.Finding that multiple causes of action required trial and that none of the statutory bars applied, the Court dismissed Singh’s application. The suit is now listed before the Joint Registrar on March 9, 2026..The plaintiffs were represented by advocates Bishwajit Dubey, Mohit Rohatgi, Ashwini Tar and Nutan Keshwani..The defendants were represented by advocates Sitikanth Nayak and Samiksha Tiwari..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.
