commercial dispute
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This article is written by Gauraw Kumar, a 2nd-year student of BVP-New Law College, Pune. In this article, he covers “Commercial Courts” and tries to discuss scope and jurisdiction related to the Commercial Courts Act, 2015.

Introduction

‘Commerce’ refers to business matters such as contract, export or import, financing agreements, trade etc. Thus, Commercial Courts are made to resolve business issues such as fraud, breach of contract, unfair trade practices etc. Commercial Courts have jurisdiction to solve the issues arising in businesses. In simple words, we can say that when any business suffers a loss due to injustice in a transaction, then he can knock the door of a commercial court.

More than 3 crores cases are pending throughout the country as per the latest reports. India is the largest country by landmass and is the most populous country after China having a population of approximately 1.3 billion. Government has also given the freedom to do any type of business (some exceptions) in India. At the same time, it is also important to solve the issue raised in the business field. As per the report of The Times of India, the pendency of commercial disputes in courts have risen from day by day. It is very important that the government create a sound business environment throughout the country to attract both domestic as well as foreign investors. One of the steps, which the government can take to ensure the creation of a sound business environment is by bringing clarity to the legal regime governing the conduct of business in the country and also at the same time ensuring that the litigation process is smooth, fair and bound.

The State and Central government, have from time to time seek to amend the existing law and pass new legislation to ensure that the whole process of litigation becomes smoother and less protracted.

Thus, the Government has introduced The Commercial Court Act 2015 to resolve the issues or problems of business smoothly and quickly.

Commercial Disputes

Dispute means some type of disagreement. If it is related to the commercial matter, then we will say that it is a disagreement arising in the business where one party is not able to fulfil his promise for which he was legally bound and other parties suffer loss.

A Commercial dispute is a business dispute. It means a dispute between two businesses or dispute between business and customer/clients. A dispute is some disagreement such as infringement of contract, not deliver expected things which are mentioned in clauses of the contract, delivery of bad quality of products, invalid price, parties not filing obligation in some way etc.

Section 2(c) of the Commercial Courts Act, 2015 defines “Commercial dispute” as it is a dispute arises out of the following matters:

  1. The dispute in enforcement and interpretation of documents in ordinary transactions of merchants, bankers, financiers and traders.
  2. Export or import of merchandise or services.
  3. Issues in admiralty and maritime law.
  4. The transaction relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same.
  5. Carriage of goods.
  6. Contract related to construction and infrastructure, including tenders.
  7. Agreements relating to immovable property used in commerce.
  8. Franchising agreements.
  9. Distribution and licensing agreements.
  10. Management and consultancy agreements.
  11. Joint venture agreements.
  12. Shareholders agreements.
  13. Subscription and investment agreements pertaining to the services industry including outsourcing and financial services.
  14. Mercantile agency and mercantile usage.
  15. Partnership agreements.
  16. Technology developments agreements.
  17. Intellectual property rights relating to trademarks, copyright, patent, domain names, geographical indications and semiconductor integrated circuits.
  18. Agreements for the sale of goods or provision of services.
  19. The exploitation of oil and gas reserves or other natural resources including the electromagnetic spectrum.
  20. Insurance and reinsurance.
  21. Contract of agency related to any of the above.
  22. Other commercial disputes notified by the Central Government.

Types of Commercial Disputes

Commercial Disputes can be of two types:

  • The dispute between two businesses

In this type of Commercial dispute, there is a dispute between two businesses. Like- both engage in some type of contractual relationship with each other and breach of contract by one party, do something which is not in the contract and ignores clauses of the contract which is expected to do.

  • The dispute between business and clients/customers

In this type of Commercial dispute, there is a dispute between business and clients/customers. Like- customers dissatisfied with the product or services of a business, or customers suffer from unfair trade practices.

Commercial courts

Commercial Courts are defined in Section 2(b) of the Commercial Courts Act, 2015. Any court for the purpose of exercising the powers under the Commercial Courts Act, 2015 which is constituted by State Government at the district level, may after consultation with the concerned High Court by notification.

Section 3(3) of the Act, the State governments with the concurrence of the Chief Justice of the High Court appoint one or more persons having experience in commercial disputes to be the judges of Commercial court.

How can we file a case in Commercial Courts? (Disclosure, Discovery and Inspection)

  • The Plaintiff shall file a list of all documents and photocopies in its power, possession, control or custody pertaining to the suit, specifying whether such documents are original, office copies or photocopies and must state in brief, details of the parties to each document, mode of execution, issuance or receipt and line of custody of each document.
  • The Plaintiff shall submit a Statement of Truth from the plaintiff that all documents in the power, possession, control or custody pertaining to the facts and circumstances of the proceedings have been disclosed and copies thereof annexed with that the plaintiff does not have any other documents in its possession.
  • In the case of urgent filings, the plaintiff may seek to leave to rely on additional documents and shall file them within 30 days of filing the suits, along with a declaration on oath.
  • No plaintiff will be allowed to rely on documents which were not disclosed, save and except by leave of Court and such leave shall be granted only upon the plaintiff establishing reasonable cause for such non-disclosure.
  • The plaint shall set out details of documents which the plaintiff believes to be in its power, possession, control or custody of the defendant and which the plaintiff wishes to rely upon and seek leave for production thereof.
  • The same rule applies to the defendants in relation to the written statement/ counterclaim.
  • The duty to disclose documents continues till the disposal of the suit.
  • The plaint shall set out details of documents which the plaintiff believes to be in its power, possession, control or custody of the defendant and which the plaintiff wishes to rely upon and seek leave for production thereof.
  • Parties have the option to, with the leave of the court, deliver interrogatories in writing for the examination of opposite parties.
  • Parties must complete inspection of documents within 30 days of filing written statement. This time limit may be extended by the court.
  • A party may seek direction at any stage, for the inspection/production of documents by the other party of which inspection has been refused or documents have not been produced despite notice to produce. Such an application must be disposed within 30 days of its filing.
  • If such an application is allowed, inspection and copies of documents must be provided within 5 days of such order.
  • Every party, within 15 days of completion of inspection must file a statement of admission and denial pertaining to the correctness of contents, existence issuance/ receipt and custody of the document, along with an affidavit in support thereof.
  • Reasons for denial of a document must be provided by a party.
  • In the case of disclosures and inspection of Electronic Records (as defined in the Information Technology Act, 2000), furnishing of printouts shall be sufficient compliance. At the discretion of parties, copies of electronic records may even be furnished in electronic form in lieu of or additional to printouts.
  • Where electronic documents form part of documents on record, the declaration of oath by the party must specify:
  1. Parties to the electronic record;
  2. The manner in which such record was produced and by whom;
  3. Date and time preparation/ storage/ issuance/ receipt of such record;
  4. Source of such record and date and time when the record was printed;
  5. In case of email ids, details of ownership, custody and access to such email ids;
  6. In case of the document stored on computer/ computer resource, details of ownership, custody and access to such computer/ computer resources;
  7. Deponent’s knowledge of contents and correctness of contents;
  8. Whether the computer or computer resource used for preparing or receiving or storing such document or data was functioning properly or in case of a malfunction that such malfunction did not affect the contents of the documents stored.

Jurisdiction of Commercial Courts

Section 6 deals with the Jurisdiction of Commercial courts. The Commercial courts are made to resolve all suits and applications relating to the commercial dispute arising out of the entire territory of the State over which it has been vested territorial jurisdiction. A commercial dispute shall be related to provisions of Section 16, 17, 18, 19 and 20 of the Code of Civil Procedure 1908.

Jurisdiction of commercial divisions of High courts

Section 7 deals with the Jurisdiction of commercial divisions of High Courts. All suits and applications relating to commercial disputes of particular values filed in the High Court having original civil jurisdiction to hear and resolved by commercial division of High courts.

Commercial Division of the High Court has jurisdiction to hear all suits and applications relating to commercial disputes, specified by an act to lie in a court (not inferior to a District court) and pending on original side of High court.

All suits and applications transferred to the High Court under Section 22(4) of the Design Act, 2000 or Section 104 of the Patents Act, 1970 shall be heard and resolved by the Commercial Division of the High Court.

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Bar of Jurisdiction of Commercial Courts and Commercial divisions

Section 11 provides for bar jurisdiction of Commercial Court and Commercial divisions and provides that they shall not be empowered to decide any suit, application or proceeding related to any commercial disputes in respect of which the jurisdiction of the Civil Court is either expressly barred under any other law for the time being in force.

Concept of ‘Mediation and Settlement’

Section 12A deals with “Pre-institution Mediation and Settlement”. Mediation means resolving the dispute outside the commercial court with the help of specific authorities appointed by the Central Government under the Legal Services Authorities Act 1987. As per amendment of this Act in 2018, pre-institution mediation and settlement are essential for knocking the door of the commercial court. It means, it is mandatory to involve in mediation before knocking on the door of Commercial court.

According to Section 12A(1), a suit which does not require any urgent remedies shall not be instituted unless the plaintiff involves in remedies of pre-institution mediation in such a manner prescribed by the Central Government. Section 12A(2) states that the central government authorised authorities constituted under the Legal Services Authorities Act 1987. According to Section 12A(3), the time taken for resolving the dispute by mediation should be 3 months from the date of application made by the plaintiff. Provided that time period can be extended to 2 months with the consent of the parties. The period under proceeding of mediation will not be considered as limitation under the Limitation Act, 1963. According to Section 12A(4), when commercial dispute came to a solution or settlement, then it should be signed by both the parties along with mediator.

Appeals from decrees of Commercial Courts and Commercial Divisions

Chapter IV, Section 13(1) of the Commercial Courts Act 2015 deals with Appeals. 

  • Appeal from an order of Commercial Court below District level Judge will lie before the Commercial Appellate Division and must be filed within 60 days.
  • Appeal from an order of Commercial court at District Judge level exercising original civil jurisdiction or as the case may be, Commercial Division of the High Court will lie before Commercial Appellate Division of that High Court be filed within 60 days of such order.
  • No appeal shall lie from any order/ decree of a Commercial Division or Commercial Court otherwise than in accordance with the provisions of the Act.

According to Section 14, ‘The Commercial Appellate Court and the Commercial Appellate Division shall try to dispose of appeals filed within a period of six months from the date of filing of such appeal’.

Transfer of Pending Suits

Section 15 deals with the transfer of pending cases and the proviso to section 15(2) of the Act clearly provides that no suit or application wherein the final judgements has been reserved by the Court prior to the Commercial Division or Commercial Court shall be transferred.

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

The amendment of 2018 sought to achieve the following objectives:

  • to reduce the specified value of commercial disputes from Rs. One Crore to Rs. Three Lacs, and to enable parties to approach the lowest level of subordinate courts for a speedy resolution of commercial disputes;
  • To enable the State Governments, with respect to High Courts having ordinary original civil jurisdiction, to constitute commercial courts at the district level and to specify such pecuniary value of commercial disputes which shall not be less than Rs. three lacs and not more than the pecuniary jurisdiction of the district courts;
  • to enable the State Governments, except the territories over which High Courts have ordinary original civil jurisdiction, to designate such number of Commercial Appellate Courts at District level to exercise appellate jurisdiction over the commercial courts below the district judge level; and
  • to promote for compulsory mediation before institution of a suit, where no urgent relief is contemplated and for this purpose, to introduce Pre-Institution Mediation and Settlement Mechanism and to enable State Governments to authorise authorities constituted under the Legal Services Authorities Act, 1987 for this purpose.

Conclusion

Commercial Courts are courts for resolving commercial disputes arising in the business field. Government has introduced the Commercial Courts Act 2015 to establish a special type of court for business issues on the district level. In 2018, the amendment of the Commercial Courts Act 2015 Act came into existence in which various changes are made in the Act for the smooth functioning of commercial courts with minimum pending cases.

References


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