The Delhi High Court has ruled that disputes stemming from employment agreements cannot be classified as commercial disputes under the Commercial Courts Act, 2015, solely because such agreements may involve business responsibilities or commercial implications.
Justice Purushaindra Kumar Kaurav clarified that the Commercial Courts Act does not extend to conflicts arising from a contract of personal service, observing:
“Any dispute relating to an employment agreement cannot be treated as a commercial dispute within the contours of Section 2(1)(c) of the CC Act.”
The Court passed the order while rejecting an application filed by Ritesh Singh—former Managing Director of Arm Digital Media Private Limited—who sought dismissal of a civil suit filed against him for alleged breach of employment duties and fiduciary responsibilities.
Commercial character must arise from business relationship: Court
The Court noted that although the scope of “commercial dispute” under Section 2(1)(c) is broad and inclusive, its interpretation must be guided by a unifying feature — a nexus with business or trade-related activities.
It stressed that:
• The existence of business-oriented clauses,
• Restrictive covenants, or
• The status of a corporate employer,
cannot transform an employment contract into a commercial transaction since the relationship fundamentally revolves around personal service obligations.
Allegations against former MD
As per the suit filed by Arm Digital Media Pvt. Ltd. and its directors, Singh allegedly:
• Inflated his own remuneration without approval
• Neglected statutory and governance compliances
• Misappropriated confidential data
• Joined a market competitor (Icogz) immediately after resigning
• Attempted to lure clients and disrupt internal corporate processes
It was also claimed that Singh violated duties expected of a director under Section 166 of the Companies Act, 2013.
Defence: Suit should lie before commercial court / NCLT
Singh argued that the civil suit was not maintainable as:
• The employment agreement was linked with a Share Subscription-cum-Shareholders’ Agreement (SSSA), thereby attracting Section 2(1)(c)(xii) of the Commercial Courts Act
• Issues concerning director obligations fell within NCLT’s exclusive jurisdiction, barring the civil court via Section 430 of the Companies Act
• Mandatory pre-institution mediation under Section 12A had not been undertaken
Court rejects objections — dispute remains purely civil
The Court found that:
The SSSA had already been terminated
The investor had exited the company
Only the employment agreement governed the parties
Therefore, the relationship in question was not commercial but contractual and personal in nature.
The Court also reiterated the well-established principle that matters arising from contracts of personal service do not fall within the commercial courts framework, and held that the plaint disclosed valid civil causes of action requiring adjudication.
The application was accordingly dismissed, with the Court concluding that:
“The dispute is essentially civil, rooted in employment obligations, and triable by the regular civil court.”
Case Title: Arm Digital Media Pvt. Ltd. & Ors. v. Ritesh Singh
Case No.: I.A. 3226/2025 in CS(OS) 896/2024
For Plaintiffs: Bishwjit Dubey, Mohit Rohatgi, Ashwini Tar & Nutan Keshwani, Advocates
For Defendant: Sitikanth Nayak & Samiksha Tiwari, Advocates
