In this blog post, Pramit Bhattacharya, a student of Damodaram Sanjivayya National Law University analyses the Commercial Courts Act, 2016. The post highlights some essential features of the Act and also looks into the procedural changes which have been made to make the Act more efficient.

The pace at which disputes are resolved in the court indicate the efficiency of the judicial system and such speedy dispute resolution positively impacts the growth and the development of the country. At present, our judicial system is not fully efficient, and the slow pace of our justice delivery system is very evident. If anyone wants to enforce any of his rights, it takes years for the court to reach a decision. Matters get adjourned regularly. All these delays can take a toll on the litigant, not only physically and emotionally but financially as well.

Keeping this in mind, the legislature has enacted The Commercial Courts, Commercial Division and Commercial Appellate Division of the High Court Act, 2016, to remedy the issue of judicial delays. This Act seeks to reduce the amount of delay in cases of commercial dispute at least, if not all kind of disputes. Going by the status of the judiciary, even a small step is welcome.

A Summary of the Act

• The Act authorizes setting up of specialized courts or divisions of courts. The role of these specialized courts or divisional courts would be to hear commercial disputes where the stakes are at least Rs 1 crore or more. These courts will comprise of judges who have expertise in the field of commercial law.
• The scope of applicability of this Act is very wide. This Act will cover all the disputes relating to commercial matters like the sale of goods and services, corporate agreements (such as shareholder, partnership, joint venture agreement), all matters relating to commercial property, and all intellectual property matters, under its purview.
• This Act also applies to arbitration application and appeals.
• The Act also introduces some procedural innovations through which it seeks to speed up the hearing of the disputes.

The provisions of the Act are being put into effect step by step. For instance, from 1^st June 2016, cases in the Bombay High Court are to be filed in accordance with the new system. The pending matters which falls within the purview of the Act will be transferred to the specialized commercial division of the High Court on 18^th June 2016

Key features of the Act

Commercial Disputes

The Act only applies to commercial disputes, but efforts have been made to cover a wide range of disputes within the scope of ‘commercial activities’. The definition widely covers disputes arising from transactions of merchants, bankers, financiers and traders such as those relating to a sale of goods and services, export or import of goods and services, disputes relating to mercantile documents, construction and infrastructure contracts, etc. The definition also includes dispute arising out of agreements of licensing, franchising, management, distribution, joint venture, investment, etc. the Acts also includes under its purview those commercial disputes which are arising with the government or any particular government agency.

Constitution of specialized courts and divisions

The Act states that a Commercial Division in High Courts which have original civil jurisdiction (such as the High Courts of Delhi, Bombay, Madras, Calcutta and Himachal Pradesh) should be set up to dispose of the matters as quickly as possible. The Commercial Divisions will also have ordinary original civil jurisdiction, which means that litigants will be able to file their cases in the specialized division at the first instance.  The Act also states that in all the other districts over which the High Court does not have original civil jurisdiction, establishing the Commercial Courts is the responsibility of the respective State Governments. All the commercial disputes which falls under the purview of the Act, and which are valued at Rs 1 Crore and above will be heard by the newly constitutes specialized courts, or specialized division, as applicable. The Commercial Appellate Division set up in the High Court will hear the appeals. The judges will be those people who have expertise in the field of commercial matters.

• Pending Matters – If an existing commercial dispute involves the value of Rs 1 crore or more, it’ll be transferred to the new system, unless final judgment is reserved in the matter. If there are any case pending in the High Court, they’ll be transferred to the Commercial Bench of that High Court. Where commercial matters are pending in any other civil court, such matters will be transferred to the commercial courts which have a corresponding jurisdiction.
• Arbitration application and appeals – The arbitration application and appeals in such disputes will also be taken up by the specialized courts. Moreover, the pending arbitration applications and appeals are also to be transferred to the specialized courts.
• No Overlap with tribunals – There are a few matters which does not fall under the jurisdiction of the civil court, but falls under the jurisdiction of specialized tribunals such as the Company Law Board or the Debt Recovery Tribunal. The matters which fall under the jurisdiction of some specialized tribunal will not be transferred to the commercial courts even if the value of the dispute is Rs1 crore or more. This will avoid any conflict of jurisdiction between the Commercial Courts and the Tribunals.

Procedural changes

The Act has also brought about some new procedural changes regarding the hearing of the matters in the case of a dispute.

• Strict deadlines – The rules relating to the deadlines have been made more stringent by the Act. The Act provides for strict deadlines for conduct of case, filing of written statements, filing of documents, filing of written statements, etc. if any party fails to comply with the deadlines provided by the Act, they have to face serious consequences as the penalties are harsh such as forfeiture of right to make a filing or the right to rely on a document. A deadline of judges is also imposed through this Act. The Act states that the judgment should be pronounced within 90 days from the conclusion of the final arguments.
• Innovative procedure – Several new procedures have also been adopted by the Act to make the process of hearing of the disputes faster. The Act states that following the procedure which is practiced in other countries, the Commercial Courts and Commercial Divisions will hold a case management hearing before going into the detailed hearing. Case management can be defined as a preliminary hearing in which the Court hear out the parties and frame the issues on which the hearing will proceed. The Court can also decide the dates on which various steps involved in the matter will be taken up, such as filing of evidence, examination and cross-examination of witnesses and the date of hearing the arguments of the party. The time limits for agreements may also be fixed by the Court during case management. One more procedural change which has been brought about by the Act is that the parties to the case are required to file their written arguments in advance of the oral hearing. This is to be done so that each party gets the time to prepare for the counter-arguments.
• Costs – The Act has also provided some detailed guidelines with respect to the factors which the Court has to consider when giving the direction about costs, that whether one party should bear all or some of the cost of the other party, such as fees, expenses incurred in hiring lawyers, expenses in relation to witnesses, etc. the Act also states that in the regular course, the unsuccessful party will have to bear the cost of the successful party. The Act has also authorized the Court to impose costs on the parties depending on their conduct during the case. While imposing any such costs on the parties the Court should consider that whether a party has wasted the time of the Court, or refused to settle the matter by giving unreasonable expenses, or failed to comply with any direction which the Court gave during case management. The Court has also been given the authority to impose any amount of exemplary cost. It is very evident that the Act has taken a tougher stand with respect to costs. It is because the Act seeks to dispose of the matters quickly, and does not want the parties to prolong the matters unnecessarily. A party is less likely to seek adjournment if the party has to bear not only its own cost but also those of the other parties.

Limited Appeals

The Act provides a window of 60 days within which the parties can file an appeal against the order of the Court. Appeals would be filed before the Commercial Appellate Division of the appropriate high Court. The Act also states that the Appellate Division shall strive to dispose of the appeal within six months. The Act also states that the parties can appeal only against specified types of interim orders passed by the Commercial Courts and Divisions.

Concluding Remarks

The Act seems to be a piece of legislation which seeks to reduce the amount of delay in high stake commercial matters. However, the Act has been criticized because new resources aren’t used to create the Commercial Divisional Courts (in High Courts, the Commercial Division is merely to be designated out of the sitting judges in the High Court), and this could lead to further delays in matters which do not fall under the ambit of the Act. All things said, it remains to be seen how the Act works. The efficiency of any Act depends on how the related parties conduct themselves. So, only time will tell whether the Act will be able to fulfill the objectives or not, with which it was introduced.