In a recent ruling, Justice M Nagaprasanna of the Karnataka High Court emphasized the need to differentiate between employment contracts and commercial disputes, preventing the potential inundation of commercial courts. The case, titled Sanjay Kumar v Elior India Food Services LLP, raised the critical question of whether a mere employment contract should be categorized as a provision of services, effectively transforming it into a commercial dispute.

Citing the risk of flooding commercial courts with litigation, the court held that every employment agreement should not be automatically classified as a commercial dispute, a move that would undermine the primary purpose of establishing commercial courts. The judgment drew support from a significant precedent, Ambalal Sarabhai Enterprises Limited v KS Infraspace LLP, where the Supreme Court cautioned against non-commercial issues being filed before commercial courts merely due to high value or the desire for expeditious resolution.

The dispute in question emerged when the petitioner's employment was terminated, prompting a legal notice demanding several amounts outlined in the employment agreement. Upon the firm's refusal to pay, the petitioner invoked arbitration and subsequently sought interim protection from the commercial court. Both the commercial court and the High Court rejected this application.

The respondents, unhappy with the outcome, approached the commercial court. However, the petitioner contested the jurisdiction of the commercial court. Rejecting the respondents' argument that the petitioner could not change positions after invoking the commercial court's jurisdiction, the single-judge ruling reasoned that a party's initial invocation of the wrong jurisdiction does not bind subsequent proceedings.

Consequently, the court concluded that the dispute between the parties did not qualify as a commercial dispute under Section 2(1)(c)(xviii) of the Act, leading to the commercial court's improper jurisdiction. Advocate Nishanth AV represented the petitioner, while Senior Advocate KG Raghavan and advocate Prashanth VG appeared for the respondents.

This landmark decision reaffirms the significance of maintaining a clear distinction between employment contracts and commercial disputes, ensuring the efficient functioning of commercial courts.