Yearly Rewind 2024: Commercial Disputes
Commercial Disputes: Key Judgements in the Year 2024
India, as the world’s fifth-largest economy by GDP and the third largest by purchasing power parity in 2024 (please see statistics here), continues to present vast and diverse opportunities for businesses globally. However, with the surge in business activity comes an inevitable rise in commercial misunderstandings resulting in disputes.
The past decade has witnessed a steady increase in commercial conflicts, and 2024 was no exception, with several noteworthy rulings addressing contentious issues. These disputes ranged from shareholder rights in newly formed joint ventures to rescission or cancellation of contracts, enforcement of foreign judgments and awards, mandatory mediation, title to shares, specific performance, and other critical matters impacting business and contractual relationships.
In this section, we highlight significant judgments from the Supreme Court of India (SC), various High Courts (HC), National Company Law Tribunals (NCLT), and the National Company Law Appellate Tribunal (NCLAT) that have shaped the landscape of commercial disputes in India in 2024.
Notable precedents in 2024:
1. When buyer breached the specified timeline to pay the consideration under the contract, specific performance cannot be claimed (January)
In ‘Alagammal and Ors. v. Ganesan and Anr.’, the SC held that if a specific timeline for payment of consideration by the buyer for execution of the agreement to sale is provided under the contract between the parties, then it is mandatory to adhere to the said timeline. The SC noted that a buyer who fails to make payment within the specified timeline cannot seek the remedy of specific performance if the seller declines to proceed with the transaction.
2. No second appeal permitted from the appellate decree and judgment passed by a commercial appellate court under the Commercial Courts Act, 2015 (January)
In ‘State of Kerala and Ors. v. Dr. Praveen Kumar T.K.’, the Karnataka HC held that no appeal shall lie against any order or decree of a commercial division or commercial court except as permitted under the Commercial Courts Act, 2015. The HC also highlighted that the Commercial Courts Act, 2015 incorporates a non-obstante clause, which takes precedence over other laws and limits the right to appeal strictly to what is provided under the Commercial Courts Act, 2015. Consequently, the Commercial Courts Act, 2015 does not allow for second appeals.
3. Succession certificate is a mandatory requirement for transmission of shares of a deceased shareholder (January)
In ‘Avanti Metals Pvt. Ltd. v. Alkesh Gupta’, the NCLAT, Chennai bench ruled on several key issues regarding the transmission of shares and related legal requirements. It held that if probate proceedings are pending in a Civil Court, a petition for rectification of the register of members under the Companies Act, 2013 would not be maintainable. The NCLAT also ruled that transmission of shares based on a will can involve complex issues requiring proper evidence and adjudication by a court of law. Furthermore, it held that submission of a succession certificate, as required by the Articles of Association and the Indian Succession Act, 1925 is necessary for the transmission of shares, ensuring the company’s compliance with the law.
4. No automatic expiry of interim orders of courts after expiry of six months (February)
In ‘High Court Bar Association Allahabad v. State Of Uttar Pradesh and Ors.’, the SC held that interim orders passed by the courts do not automatically expire after passage of six months. The SC highlighted that vacation of any interim order of the court requires judicial discretion which will also require consideration of individual circumstances and behaviour of the parties.
5. Disputes linked to appointment of nominee director can be referred to arbitration under shareholders agreement, not governed by oppression and mismanagement (April)
In ‘Mr. Puthucode Vaidyanathan Balasubramanian and Ors. v. M/s Metmin Investments Holdings Ltd.’, the NCLT, Bengaluru bench held that the right to appoint a nominee director, as provided under a shareholders’ agreement, is subject to arbitration in accordance with the dispute resolution clause in the agreement. It emphasized that disputes arising out of such agreements can be resolved through arbitration as agreed by the parties.
The NCLT further ruled that raising allegations of fraud in an application concerning oppression and mismanagement does not, in itself, prevent arbitration from proceeding. In this case, the arbitration clause remains valid and enforceable despite the nature of the allegations.
6. IBC petition by creditor does not mandate restoration of struck-off company name (May)
In ‘Fedex Express Transportation and Supply Chain Services (India) Pvt. Ltd. v. Zipker Online Services Pvt. Ltd.’, the NCLAT, New Delhi bench overturned its earlier rulings in ‘Hemang Phophalia v. The Greater Bombay Co-Operative Bank Ltd. & Anr.’ and ‘Elektrans Shipping Pte. Ltd. v. Pierre D’Silva’ and clarified that while recoveries can be pursued against a company whose name has been struck off, insolvency proceedings under the Code cannot be initiated against such an entity.
The NCLAT ruled that once a company’s name is struck off by the Registrar of Companies, it ceases to exist as a corporate entity. Since it is no longer a corporate person, initiating insolvency proceedings against it is not permissible.
7. Royalty on minerals is not tax (July) (read our thoughts on the judgment here)
In ‘Mineral Area Development Authority and Anr. v. M/s Steel Authority of India and Anr. Etc.’, the SC with an 8:1 majority upheld the right of State Governments to impose taxes on mines and mineral-bearing lands. The SC also ruled that royalties payable on extracted minerals do not constitute a tax.
8. Interim relief granted despite arbitration (August) (read our thoughts on the judgment here)
In the case of ‘Ambrish H. Soni v. Mr. Chetan Narendra Dhakan & Ors.’, the Bombay HC ruled that it can grant interim relief under the Arbitration and Conciliation Act, 1996 even after an Arbitral Tribunal is constituted, if necessary. The HC affirmed that it retains the power to provide such relief only if the court finds that circumstances exist which may render the remedy of interim relief available through the arbitral tribunal ineffective. In this case, since an arbitrator could not have appointed a court receiver for preservation of assets, the HC facilitated such appointment.
9. Title to shares cannot pass to third party via will upon joint holder’s death under Companies Act, 2013 (August)
In ‘Pratik Chandrakant Khandhadiya v. Hindustan Unilever Ltd. Shares Department’, the NCLT, Mumbai bench held that upon the death of a joint shareholder, the surviving joint holder(s) are entitled to the deceased’s interest in the shares. For the death of a sole shareholder, the nominee (if any) or the legal representative(s) will be recognized by the company as having title to the shares. In the present matter, as the Petitioner’s mother jointly held shares with the Petitioner, the Petitioner, as the survivor, is the only person recognized by the company as having title to her interest in the shares. Since the Petitioner’s mother was not the sole holder, her “will” in favor of the Petitioner’s sister is inconsequential.
10. Pre-institution mediation mandatory for counterclaim under the Commercial Courts Act, 2015 (September) (read our thoughts on the judgment here)
In ‘Aditya Birla Fashion and Retail Ltd. v. Mrs. Saroj Tandon’, the Delhi HC held that a counterclaim is to be treated as a separate suit in its individual and distinct capacity as per Code on Civil Procedure,1908. Consequently, the process of pre-institution mediation is mandatory for every suit involving a commercial suit and no distinction can be drawn when it comes to a counter claim involving a commercial dispute and not contemplating any urgent relief.
11. Deadlock between shareholders holding equal shareholding and director representation is to be resolved by one shareholder buying out the other (September)
In ‘Hormouz Phiroze Aderianwalla and Anr. v. Del. Seatek India Pvt. Ltd. and Ors. and Delzad Aspy Karani and Anr. v. Del. Seatek India Pvt. Ltd. and Ors.’, the NCLT, Mumbai bench held that in situation of a deadlock regarding day-to-day management of the company amongst shareholders who have equal shareholding and director representation, the deadlock is to be resolved with one of them purchasing the shares of the other. The NCLT held that this would be in the best interest of the company as the deadlock between the shareholders would affect the business.
12. Merit of the case cannot be deliberated in an application for waiver as Companies Act, 2013 provides for strict interpretation of mandatory requirement of such waiver (November)
In ‘Lieutenant Colonel Sandeep Dewan v. Ootacamund Club and Ors.’, the NCLAT, Chennai bench held that a waiver under Section 244 of the Companies Act, 2013 must be interpreted strictly and cannot be assumed based solely on the merits of a case. Section 244 specifies that for members of a company to file a petition alleging oppression or mismanagement, they must meet certain minimum thresholds, such as holding at least 10% of the company’s share capital or constituting at least 100 members. However, the Companies Act allows these requirements to be waived in exceptional cases, but only if strong justification is provided. The NCLAT clarified that a waiver can be granted, for instance, when a shareholder’s stake is unfairly diluted through oppressive actions. This safeguard ensures that only genuine cases of oppression and mismanagement can bypass the mandatory thresholds.
Our Thoughts
India’s evolving commercial dispute resolution framework has witnessed significant progress in recent years, yet challenges remain that warrant urgent attention. With over 10.9 million civil cases pending in 2024 in India courts, and more than 73% of them being over a year old (please see statistics here), the sheer backlog highlights the need for expedited reforms. The establishment of commercial courts and the emphasis on Alternative Dispute Resolution (ADR) mechanisms, such as arbitration and mediation, have been commendable steps towards easing the judiciary’s burden.
India’s ongoing push to institutionalize mediation through the Mediation Act, 2023 (please see our FAQ here) is a welcome development. By creating a structured framework, the country is moving towards embracing ADR and reducing its reliance on protracted litigation. Furthermore, the rise of ‘Online Dispute Resolution’ (ODR) platforms has unlocked new possibilities, particularly for small and medium enterprises (SMEs) seeking cost-effective and time-efficient solutions.
However, challenges remain. Procedural inefficiencies, delays in enforcement of orders, and frequent judicial interventions dilute the potential of the ADR system. Additionally, the absence of strict timelines for case resolution often dampens the effectiveness of even specialized commercial courts.
The way forward involves harmonizing ADR and traditional litigation systems while leveraging technology to enhance accessibility and efficiency. If India continues to build on its ADR and ODR frameworks, it has the potential to become a global hub for commercial dispute resolution, offering businesses a transparent, efficient, and reliable justice system.
The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.