Employment Agreement Disputes Not “Commercial Disputes” Under Section 2(1)(c) Commercial Courts Act : Delhi High Court
Sanchayita Lahkar
The High Court of Delhi Single Bench of Justice Purushaindra Kumar Kaurav dismissed an application seeking rejection of a civil suit on the premise that it was a commercial dispute triable only by a commercial court. In a case between a private company and its former managing director concerning alleged breaches of an employment agreement, including non-compete, confidentiality and fiduciary obligations, the Court held that disputes arising from such employment arrangements cannot be treated as commercial disputes merely because the contracts contain business-related clauses. It further clarified that, for the purposes of Section 2(1)(c) of the Commercial Courts Act, disagreements rooted in an employment agreement do not qualify as commercial disputes, and the civil suit will proceed in the ordinary civil jurisdiction.
The defendant filed an application under Order VII Rule 11(d) of the CPC seeking rejection of the plaint on the ground that the suit was barred by law. The plaintiffs had instituted a suit arising from an Employment Agreement dated 08.09.2016 executed between plaintiff No. 1 and the defendant, who initially served as Managing Director and later as a non-executive director. The plaintiffs alleged that between late 2022 and early 2023, the defendant had unilaterally increased his remuneration, failed to ensure statutory and secretarial compliances, and subsequently resigned on 31.03.2023. After resignation, he was stated to have joined a competing entity as Chief Growth Officer, allegedly breaching non-compete, non-solicitation, and confidentiality obligations under the Employment Agreement and the Articles of Association.
The plaintiffs further asserted that the defendant shared confidential information, solicited clients, raised allegations of non-compliance, issued a requisition for an extraordinary general meeting, and lodged investor complaints that later formed part of NCLT proceedings. They claimed that these actions disrupted the company’s operations and caused reputational and financial harm. The defendant argued that the dispute constituted a commercial dispute under Section 2(1)(c)(xii) of the Commercial Courts Act requiring pre-institution mediation under Section 12A, and that Section 430 of the Companies Act barred civil court jurisdiction.
The Court recorded that the scope of Order VII Rule 11 requires examination confined exclusively to the plaint, noting that “the Court is required to examine only the averments made in the plaint” and that “no reference can be made to the written statement or any defence raised” . It stated that the provision aims to prevent frivolous litigation and that “when a suit appears to be an abuse of the court’s process, the court is duty-bound to reject the plaint”, while also noting that rejection does not preclude filing a fresh plaint.
The Court further observed that the definition of commercial dispute under Section 2(1)(c) of the Commercial Courts Act is wide but not without limits. It recorded that the statutory list reflects a commercial thread, requiring that the dispute arise from a business-oriented engagement. The Court stated that “the mere presence of ancillary business-related clauses… does not metamorphose an employment contract… into a commercial arrangement” and referred to judicial precedents holding that employment disputes do not constitute commercial disputes.
The Court noted that the allegations in the plaint—salary increases, failure to ensure statutory compliances, joining a competitor, misuse of confidential information, and solicitation of clients—arose entirely from the defendant’s personal service obligations and director fiduciary duties. It stated that “every one of these allegations flows from personal service obligations and director’s fiduciary duties not from any commercial contract”. It also recorded that the termination of the SSSA did not affect the independent existence of the Employment Agreement and that the suit did not require enforcement of the SSSA.
On the defendant’s plea regarding Section 430 of the Companies Act, the Court observed that NCLT jurisdiction does not extend to breaches of employment contracts and that “the bar under Section 430 has no application to the present suit” . The Court further stated that even if any relief were arguably barred, “the plaint cannot be rejected in part” and that courts must not make adverse observations on potentially barred reliefs at the threshold stage.
The Court recorded that “the suit is fundamentally civil in nature, centered on employment and related obligations, and is maintainable as a regular civil suit. At this stage the Court may not require to consider the above aspects in great detail and hence the liberty is granted to the defendant to raise all the issues during the course of trial.”
The Court directed that “the defendant’s application under Order VII Rule 11 lacks merit and is liable to be dismissed” and thereafter held that “accordingly, the application is dismissed. Any observations made herein are only for the purposes of deciding the present application and would have no bearing on the final adjudication of the suit.”
The matter be “listed on 09.03.2026, before the Joint Registrar for taking up further necessary steps in accordance with the extant rules,” and required that after completion of those steps, the case be “listed before this Court on the date to be given by the Joint Registrar.”
Advocates Representing the Parties
For the Plaintiffs: Mr. Bishwjit Dubey, Mr. Mohit Rohatgi, Mr. Ashwini Tar, Mr. Nutan Keshwani
For the Defendant: Mr. Sitikanth Nayak, Ms. Samiksha Tiwari; Mr. Vaibhav Tyagi for R-4; Mr. Ashutosh Gupta, Mr. Gaurav Rana for D-5; Mr. Saurabh Seth, Ms. Neealampreet Kaur, Mr. Abhiroop Rathore, Mr. Kabir Dev, Mr. Sukhbir Singh for D-6
Case Title: ARM Digital Media Pvt. Ltd. v. Ritesh Singh
Neutral Citation: 2025: DHC:10726
Case Number: CS(OS) 896/2024
Bench: Justice Purushaindra Kumar Kaurav
