A Commercial Court in Bengaluru has returned the plaint filed by Singapore-based construction company Lee Kim Tah Pte Ltd (LKT) against Yong Tiam Yoon and Yong Kon Yoon, nominee directors of L&W Construction Private Limited. According to reports from Moneycontrol, the Court held that the dispute does not qualify as a 'commercial dispute' under the Commercial Courts Act, 2015. The Court held that it lacked subject-matter jurisdiction to entertain the suit and directed that the plaint, along with all documents, be returned to the plaintiff for presentation before the appropriate jurisdictional forum in accordance with law. It also vacated the interim ex parte order passed on May 2. The ruling has broader implications for foreign investors operating through Indian joint ventures, as cross-border shareholder disputes frequently involve allegations concerning board governance, nominee directors and management decisions.
As reported by Moneycontrol, LKT had instituted the suit alleging that the two nominee directors failed to discharge their fiduciary duties under Section 166 of the Companies Act despite being informed of alleged financial irregularities and misappropriation involving the company's Managing Director. According to the plaint, the directors were repeatedly requested to initiate action against the Managing Director and recover the alleged losses, but failed to do so. LKT sought a declaration that the directors had breached their statutory duties, damages of ₹16.5 crore, recovery of 50 per cent of the salary allegedly paid to the Managing Director from the date the Board became aware of the alleged wrongdoing, and an injunction restraining the directors from entering into transactions without first placing them before the company's Board.
According to Moneycontrol reports, the two nominee directors sought return of the plaint under Order VII Rule 10 of the Code of Civil Procedure, contending that the suit was founded on an alleged breach of statutory duties under Section 166 of the Companies Act and did not fall within any of the categories of 'commercial dispute' under Section 2(1)(c) of the Commercial Courts Act. They also submitted that disputes between Lee Kim Tah and Woh Hup Holdings Pte Ltd had existed prior to the suit and were already the subject of mediation proceedings in Singapore. Opposing the application, LKT argued that the dispute arose out of a 50:50 joint venture and shareholders' agreement between Lee Kim Tah and Woh Hup Holdings, under which the defendants had been nominated as directors of the Indian company. Appearing for the directors, Senior Counsel M. Dhyan Chinappa and Keystone Partners argued that the suit was not maintainable before the Commercial Court as the allegations concerned statutory duties of directors under company law rather than commercial contracts.
As reported by Moneycontrol, rejecting LKT's submissions, the Commercial Court held that the substance of the suit concerned the alleged breach of fiduciary duties by the directors under Section 166 of the Companies Act and not the enforcement or breach of any shareholders' agreement, joint venture agreement or construction contract. The Court noted that there was no pleading that the plaintiff and the defendants were parties to any shareholders' agreement or joint venture agreement concerning L&W Construction Private Limited. It was observed that merely because the directors had been nominated pursuant to a shareholders arrangement did not convert allegations relating to their statutory duties into a commercial dispute under the Commercial Courts Act. The Court also rejected LKT's contention that the dispute related to construction and infrastructure contracts, observing that although L&W Construction Private Limited is engaged in the construction business, the suit did not arise out of any construction or infrastructure contract between the parties but from allegations concerning the conduct of the directors. The ruling vindicates the directors, who maintained throughout that the claim was misconceived and the injunction improperly obtained.
According to Moneycontrol reports, referring to the Supreme Court's decision in Ambalal Sarabhai Enterprises Ltd. v. KS Infraspace LLP and other precedents, the Court reiterated that the definition of 'commercial dispute' under the Commercial Courts Act must be interpreted strictly and that only disputes falling within the categories specifically enumerated under Section 2(1)(c) can be entertained by Commercial Courts. The Court further observed that Section 166 of the Companies Act itself provides consequences for breach of directors' duties and held that, even if the plaintiff's allegations were assumed to be true, the remedy lay under the Companies Act and not before a Commercial Court. Holding that the claims did not constitute a commercial dispute, the Court allowed the application filed by the two nominee directors, directed the return of the plaint with all documents for presentation before the appropriate jurisdictional forum, vacated the interim order dated May 2, 2026, and made no order as to costs. The Court also issued a caution regarding publication of court proceedings, stating that the plaintiff shall ensure that orders of the court are published in the press as it is and nothing beyond.
