This article has been written by Pavitra Naidu, a student of Jindal Global Law School.

India and ease of doing business

India is currently ranked 77th on the ease of doing business index 2019 [1], with a low score of 67.96 and way behind many other Asian countries like Singapore (rank 2), Malaysia(rank 15), Mauritius (rank 20) and African countries like Kenya (rank 61), Chile (rank 56), Rwanda (rank 29). [2] The rankings were based on a report called Doing Business 2019 (16th ed.World Bank Flagship Group Report) which is an initiative of the World Bank to rank the countries after studying their cumulative policies and institutional assistance to businesses. It accounts for ten major factors when assessing these ranks, amongst which one that stands out is ‘Enforcing contracts’. [3] This criteria assesses the time and cost to resolve a commercial dispute and the quality of judicial processes of a country.

In the wake of such global trends, India has taken cognizance of the issue and has incorporated this vision in its latest legislations to improve the situation. One such measure includes amendments to the Code of Civil Procedure, 1908 via Commercial Courts Act, 2015. 

Commercial Courts and Forum Non Conveniens

While assessing the various reasons that pushed for such a progressive legislation, in addition to the above mentioned reason there was another pressing concern regarding Forum Non Conveniens, which refers to a court’s ability to decline to exercise its jurisdiction where another court may more conveniently hear a case. It was noticed that courts in the US and UK were not granting Forum Non Conveniens to foreign entities doing business in India, with an Indian entity from instituting suits in their courts on the underlying assumption that Indian Courts were infamously known for their extraordinary delays. Subsequently, parties were customarily submitting applications to such courts in the UK and US to institute suits there and citing reasons such as the deplorable state of Indian courts.

In Shin-ETSU Chemical Co. Ltd v. ICICI Bank (and State Bank of India) [4], a case entailing a Japanese company suing Indian Banks on basis of Letters of Credit (US having no jurisdiction) were tried in the Supreme Court of New York solely on the assumption that Indian cases relating to simple cases of Bank Guarantees or Letters of credit go on for 15 years. In another popular case Bhatnagar v. Surendra Overseas Ltd., 1995 [5] another affidavit was accepted on the ground that litigation in India continues for a quarter of a century. Lewis J commented that the “Indian Court system was in a state of virtual collapse.” In cases like European Asian Bank v. Punjab& Sind Bank [6] and Vishva Abha [7] the court in UK accepted the generalised plea that Indian courts are plagued with unwarranted delays and in effect deny justice. 

Therefore the Commercial Courts Act, 2015 was passed to combat such assumptions and to deprive foreign courts of reasons to make generalisations regarding inordinate delays in the system and leave them no scope to try cases that essentially have jurisdiction with the Indian courts.

Analysis of the Provisions of the Commercial Courts Act, 2015 and the Civil Procedure Code, 1908

The Commercial Courts Act 2015 (hereon, the Act) introduces various amendments to the Code of Civil Procedure, 1908 (hereon, the Code) that direct the proceedings in the commercial courts across the country. It is a small act with an aim of accelerating the proceedings while maintaining all the principles of natural justice. 

The Act has introduced various amendments to the provisions to streamline the process and reduce speculations. For example, section 35of Civil Procedure Code 1908 [8] which deals with compensatory costs has been substituted with the new section in the Act, that generalised the rule for payment of costs by the judgment debtor in commercial disputes cases and even though the judges are allowed to deviate, they have to list down their reasons for the same. Similarly, the procedure for discovery, disclosure and inspection of documents has been altered and it is made mandatory under the act to submit all the relevant documents along with photocopies and a list of documents they would require upon at the stage of filing the plaint/ written statement itself. In order to strictly enforce this provision and save the time of the court, parties are prohibited from relaying on any other documents not submitted before. The courts have extensive power to award exemplary costs against a party also. In implementing the act to its black letter, the judge in Mira Gehani and Ors v. Axis Bank Limited and Ors [9] held that a court cannot circumvent the spirit of the law by resorting to inherent powers of the court. They strictly upheld the rule of submission of written statements within 120 days with no extension.

Additionally, amendment to Order VI Rule 15 direct that pleadings have to be verified before they can be relied upon as evidence. They have to be attached with affidavits signed by the parties or their representatives. This compulsory verification allows the procedure to be free from any malicious allegations in the pleadings. 

The Act while consciously deviating from the general practise of prolonged and dense with content written arguments implies that it is mandatory for the written arguments submitted under Order XVIII [10] of the Code to be concise, clear and under distinct headings. The Act introduces innovative methods to improve the common proceedings by introducing a premeditated timeline for cases. Order XV-A [11] of the Code provides for Case Management Hearing which allows the judges to decide upon the dates for the proceedings of the matter. This provision has been proposed to deal with the problem of adjournments which has infested the legal system. 

Assessment of Implementation of the Commercial Courts Act, 2015

Section 17 [12] of the Act mandates all the commercial courts to collect and disclose data on the pendency of commercial courts. The Act tried to sufficiently remedy the cause of judicial inadequacy, however; the High Courts have failed to follow this mandate. The government had to issue Commercial Courts (Statistical data) Rules, 2018 to increase the compliance and the number improved from three to a total of five High Courts following it. [13] The disposal rate of cases in Commercial Courts is below 10% across states. [14] 

Even though the Act tries to accelerate the process by making it more progressive, the implementation of the Act brings down its essential value. There is a dearth of judges to adjudicate these cases and the number of the courts setup is also not sufficient. In cities like Delhi, there are 14244 cases pending in 11 commercial courts [15]. In Karnataka [16], there are 1089 cases pending in 3 courts and in Tamil Nadu even though there are 32 courts, 1305 cases are pending. [17] It has been noted that in Commercial Courts of Punjab the pendency rate of cases increase by 7.93 percent every month [18].

Another reason for the delay could be the increase in the amount of cases that have been filed in these courts after the recent amendment to the Act. In the amendment [19] the section 2(i) the Act was amended and the Specified Value was brought down from 1 crore to 3 lakh. While this move was appreciated for increasing inclusivity of small businesses, conversely it has tremendously decreased efficiency of the courts by increasing the burden on them and the execution of high value cases have become pending. As a general practice, Courts actively try to limit the cases they accept in order to maintain the efficiency of the system. In Bharat Bhogilal Patel v. Leitz Tooling Systems India Private [20], the court interpreted section 2 and clarified that only cases of Commercial Disputes of the Specified Value and above would be adjudicated under them. The amendment defeats this purpose completely.

Currently in Delhi as of September 2018, the commercial division had disposed of only 267 of 3,804 of the commercial disputes cases [21]. The act after this amendment seems to be deviating from its aim of making Indian legal process conducive to businesses. In Kandla Export Corporation and Ors. v. OCI Corporation and Ors., 2018, [22] the Supreme Court held that the Raison d`etre for the enactment of the Act was that commercial disputes involving high amounts of money should be speedily decided. The court said that the commercial courts have to adopt interpretations that further this objective and this becomes pertinent for India to remain an equal partner in the international community.

Comparative Study of Commercial Courts in other Countries

In the past decade, numerous countries have tried to address this issue by incorporating expeditious judicial proceedings and other similar methods.

1. France: France decided to elect traders and industrialists as special status justices. They are not professional justices but are well equipped to resolve commercial disputes as they understand the nature and needs of settling such disputes. They are elected every 4 years by their peers and act as counsellor justices [23].
2. Singapore: With a vision of becoming premier international commercial dispute resolution in litigation, arbitration and mediation, Singapore introduced specialist commercial courts[24]. They strategically started by adding commercial courts to Admiral Courts since their shipping industry is the strongest. Such an identification is important to recover from the losses occurred due to the current system.
3. Ukraine: In 2001, the government of Ukraine introduced a hierarchy of commercial courts and expanded the scope of these courts to include disputes with national bodies and state tax administration also [25]. Businesses interact with governmental institutions at every step. Hence, by expanding the scope of the commercial cases to include cases between government and businesses, Ukraine promises an encouraging business environment.
4. Kenya: In an effort to free the system of inefficiency and laxity, the courts in Kenya refused to grant adjournments. Only adjournments allowed were on the ground that the lawyer was engaged in a matter at the Appeal Court. [26] 
5. Maryland, USA: The Judicial Institute of Maryland has introduced special courses that trained judges, clerks and staff for working in commercial courts. Their courses are specially designed in consultation with Maryland State Bar Association, MICPEL. [27] 

All these countries and many more have integrated a strong system of commercial courts that are working exemplarily. These courts commonly have a high pecuniary value and are equipped with efficient infrastructure to deal with such cases regarding commercial disputes.

Conclusion

The Commercial Courts Act 2015 is an attempt to support the multiple policies of the government to make India a commercial hub. The Act is a progressive legislation that prepares a legal framework for expeditious proceedings. However, it fails to translate into a success because of substandard implementation. The lack of court infrastructure along with only a few judges with actual experience to handle such cases limits the object of the Act.

While comparing the act with other countries around the world and their approach to commercial courts, we understand the various ways of filling the lacunas in our system. We cannot discredit the fact that we are halfway there with an act with various innovative provisions to repair the system (like section 17 of the Act). 

Recent amendments and rules notified along with the current act instils hope of building a foolproof commercial dispute resolution system that would someday be internationally recognised and would make India a sought after destination for the commercial dispute resolution in litigation.

References

[1] Doing Business 2019 (16th ed.World Bank Flagship Group Report), table 1.1

[2] Doing Business 2019 (16th ed.World Bank Flagship Group Report), table 1.1

[3] Doing Business 2019 (16th ed.World Bank Flagship Group Report), table 1.1 (n 1) table 1.2.

[4] Shin-ETSU Chemical Co. Ltd v. ICICI Bank (and State Bank of India) [2003] Supreme Court Appellate Division of New York 

[5] Bhatnagar v Surendra Overseas Ltd (1995) 52 F. 2.d. 1220(3rd Cir).

[6] European Asian Bank v Punjab& Sind Bank (1982) 2 Lloyd’s Rep. 356 (CA)

[7] Vishva Abha: (1990 (2)) Lloyd’s Rep. 312.

[8] Civil Procedure Code 1908, s 35

[9] Mira Gehani and Ors v. Axis Bank Limited and Ors [2019] MH 0317

[10] Civil Procedure Code 1908, OXVIII

[11] Civil Procedure Code 1908, XV- A

[12] Commercial Court Act, 2015 s 17

[13] Misra V, “Commercial Courts: A Failure In Implementation” (BloombergQuint June 21, 2019) accessed October 18, 2019

[14] https://vidhilegalpolicy.in/wp-content/uploads/2019/07/CoC_Digital_10June_noon.pdf

[15] Welcome to High Court of Delhi:: Commercial Court Statistic Module http://delhihighcourt.nic.in/CommercialCourtStatistic.asp accessed October 18, 2019

[16] High Court of Karnataka Official Web Site https://karnatakajudiciary.kar.nic.in/commCourt.asp accessed October 18, 2019

[17] Misra V, “Commercial Courts: A Failure In Implementation” (BloombergQuint June 21, 2019) accessed October 18, 2019

[18] Misra V, “Commercial Courts: A Failure In Implementation” (BloombergQuint June 21, 2019) accessed October 18, 2019

[19] The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018

[20] Bharat Bhogilal Patel v. Leitz Tooling Systems India Private, (2019) MH 1249

[21] Bharat Bhogilal Patel v. Leitz Tooling Systems India Private, (2019) MH 1249(n 14)

[22] Kandla Export Corporation and Ors. v. OCI Corporation and Ors. [2018] SC 0112 

[23] Al-Khulaifi MA and Kattan IA, “Establishment of Specialist Commercial Courts in the State of Qatar: A Comparative Study” (2016) 2016 International Review of Law 5

[24] Law Commission of India, Proposals For Constitution Of Hi-Tech Fast – Track Commercial Divisions In High Courts (188th Law Commission Report), 2003

[25] Law Commission of India, Proposals For Constitution Of Hi-Tech Fast–Track Commercial Divisions In High Courts (188th Law Commission Report), 2003

[26] Law Commission of India, Proposals For Constitution Of Hi-Tech Fast–Track Commercial Divisions In High Courts (188th Law Commission Report), 2003

[27] Lee Applebaum, ‘The New Business Courts’ (2008) 17 Bus L Today 13