In this blogpost, Harsha Jesawani, Student, National Law Institute University, Bhopal, analysis the Commercial Court Act, 2015.

INTRODUCTION

Recently, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 (“Commercial Court Ordinance“) was enacted by the President of India for the creation of  commercial divisions in high courts, and commercial courts at the district level.  The bill is one of the initiatives of Make in India concept for speedy disposal of commercial disputes.  Looking to the pending litigation in India, there is a need for swift and speedy enforcement of contracts, recovery of monetary claims and compensation for damages suffered which are critical to increasing investment and economic activity in a country.  The promulgation of Commercial Courts, Commercial Division and Commercial Appellate Division of the High Court’s Act, 2015 (the “Act“), will act as a means to accomplish the said objective. The Act is likely to reduce the burden of litigation on courts making it less cumbersome and expeditious. The President of India has given assent to the said Act on December 31, 2015. The Act came into force on October 23, 2015.

KEY FEATURES OF THE ORDINANCE

1. Meaning of ‘Commercial Disputes’

The term ‘Commercial Dispute’ has been given a wider meaning in the 2015 Ordinance. It provides an inclusive definition of commercial disputes to include almost every kind of transaction that gives rise to a commercial dispute’even in the most generic sense. The definition broadly includes commercial contracts disputes ranging from infringement of Intellectual Property Rights, exploitation of natural resources, insurance, to disputes between bankers, traders, merchants, etc. The Act also talks about disputes with respect to partnership agreements, shareholder agreements, joint venture agreements, mercantile documents, etc.

2. Constitution of Commercial Courts

The Act provides for constitution of various commercial courts:

1. Commercial Courts- The Act makes provision for the constitution of Commercial Courts in every district of the state as well as union territory where the High Court of that concerned state or union territory does not have original jurisdiction. At present, there are only five High Courts which exercise original jurisdiction over the commercial disputes namely, the High Courts of Bombay, Calcutta, Delhi, Himachal Pradesh and Madras. However, with the coming of this Act, now each state will have its own commercial courts to decide upon commercial disputes.
2. Commercial Divisions- Those High Courts which do not have original jurisdiction over cases related to commercial contracts will now have a Commercial Division to be set up within itself which is empowered to hear all applications with respect to commercial transactions.
3. Commercial Appellate Divisions- These divisions will be set up in every High Court to hear appeals against (i) orders of Commercial Division of High Court; and (ii) orders of Commercial Courts. The appeal has to be filed within sixty days from the date of judgment. The Commercial Appellate Division is required to dispose of such an appeal within six months from the date of filing such Appeal. However, the Ordinance does not mention a statutory right to appeal to the Supreme Court from an order of the Commercial Appellate Division. Accordingly, a limit of one is imposed on a number of appeals allowed in case of commercial disputes. The Act also bars any revision application filed against any interlocutory orders passed by Commercial Court.

The constitution of these commercial courts was felt necessary since the present law did not provide for any such courts specially designated to hear commercial disputes. The judges of district court predominately hear such kind of disputes.  Similarly, the five High Courts which exercise the jurisdiction to hear such disputes have certain designated judges to hear commercial disputes. However, such judges do not exclusively deal with the matters involving commercial disputes. The Ordinance proposes to constitute and establish Specialized Commercial Courts to hear only Commercial Disputes.

3. Valuation of Disputes- Under the Ordinance, the Specialised Commercial Courts have jurisdiction to hear those cases pertaining to commercial matters where the value of the subject matter is more Rs. 1,00,00,000. The Bill also prescribes the manner of determining the value of a commercial dispute.
4. Jurisdiction over Arbitration Matters- As far as Arbitration is concerned, the Act provides that all the matters dealing with international commercial arbitration must be brought within the ambit of High Court irrespective of the fact whether the High Court exercises such jurisdiction or not. However, there is a proviso added to this clause which provides that the matters pertaining to the appointment of arbitrators in international commercial contracts must be excluded from the purview of High Court’s jurisdiction. Commercial Court will also have the power to hear appeals filed against domestic arbitrations involving Indian parties, which initially lie before any civil court other than High Court exercising territorial jurisdiction over such arbitration.
5. Amendments to CPC

The Ordinance tends to amend certain provisions of the Code of Civil Procedure (CPC), 1908 dealing with the procedure of trial of any suit relating to commercial dispute of a specified value. Some of the key amendments made to the provisions of CPC are as follows-

(a) The Ordinance introduces a new provision in the CPC, which provides that a Commercial Court or a Commercial Division needs to hold a ‘case management hearing’ in order to frame issues for trial. The provision further prescribes timelines to be strictly followed for the filing of written statements once summon is served so that the case can be disposed of in an efficient manner without much delay.

(b) The amended provisions of the CPC allow parties to apply for summary judgement where the court could arrive at a decision solely on the basis of written pleadings.

(c) The ordinance also introduces certain comprehensive provisions in the CPC to determine the actual costs and interest to be awarded to parties. These provisions also deal with the issues to be considered by the Commercial Courts while deciding the cost to be imposed on parties. The earlier provisions of the CPC which deal with such costs and interest only provide for nominal costs which are generally applicable to matters other than commercial disputes. However, these new provisions specifically deal with the cost and interest in the case of commercial matters.

The Act also clearly specifies that in the case of inconsistency between the provisions of CPC, as amended by this Act, and any provisions of any rule of jurisdictional High Court or any state amendment to the CPC, the provisions of CPC, as amended by this Act, is to prevail

CONCLUSION

Thus it can be said that the Act would, in the long run, reduce the pending suits and the burden on existing courts deciding commercial disputes. With the constitution of Commercial Courts dealing specifically with Commercial Disputes, the speed of disposing of such disputes is likely to increase thereby making such long drawn process less cumbersome and efficient. While the need for commercial courts is must in India, the institution of such courts should be seen as a positive step in reforming the civil justice system of India. Therefore, the need of the hour is that the said Act must be implemented by all the states and the High Courts of the country in its true spirit and form so as to accomplish its very objectives.