This article has been written by Aditi Lakhanpal.

Introduction

The Indian Government has been quite thoughtful in their platform of ‘Make in India’ and enhancing the ‘ease of doing business in India’. The prompt and effective enforcement of contracts, recovery of monetary rights, and resolution of business disputes and award of just compensation for damages are undeniably quintessential to buoy up venture and economic activity. With India aiming towards becoming a paradigm of strong regulatory framework for business and economic progress with substantial upturn in commercial undertakings, it is likely to experience an increase in a number of commercial disputes both at domestic and international level.

For the faster resolution of these disputes, one of the initiatives of the Government is enactment of a progressive legislation i.e., The Commercial Courts, 2015. The Commercial Court, Commercial Division and Commercial Appellate Division of High Courts, 2015 provides for a separate commercial court at district and High Court level. The Government aims to attain an early resolution of commercial disputes and also improve the image of the Judiciary. India leaped into the 100th rank in the World Bank’s Ease of Doing Business rankings for 2016. Early resolution of commercial disputes is sure to promote the investment friendly India. The initiatives in the form of progressive legislature is a noteworthy effort and an imperative indicator of India touching the right route further constructing veracious networks that will attract foreign direct investment as well as improve domestic business in the country. 

An effective piece of legislation can be tested on following touchstones:

• Precise and Lucid Objective of the legislation. 
• Simplified and unambiguous provisions promoting the objective of Act.
• Conducive implementation of provisions. 

The Commercial Courts Act is surely a welcome step and a wake-up call for the sluggish image of judiciary in our country, however, what needs to be seen is the impact the provisions of the new piece of legislation is capable of bringing and the hurdles in its effective implementation. 

Historical perspective 

The setting up of commercial courts in India is extensively appreciated as a stepping stone to bring about transformation in the civil justice system. In the year 2003, the law commission and its report had recommended the creation of commercial division in each High Court named as “Proposals for Constitution of Hi-tech Fast Track Commercial Divisions in High Courts” for the reason that massive ups and downs in the economic reforms of the nation post-1991; a image was formed that the Indian judicial system had shrunken due to unreasonable delays; and therefore it was the need of the hour to guarantee the quick disposal of high value commercial disputes to afford assurance to domestic as well as foreign venture capitalist.

In view of that Commercial Division of High Court Bills 2009 was introduced by Lok Sabha. Consequently after certain alterations put forward by the Select Committee of the Rajya Sabha, as well as by the Cabinet, a revised Commercial Division of High Courts Bill, 2010 was presented in the Rajya Sabha. Nevertheless, in the course of the dialogue of the above-mentioned Bill in the Rajya Sabha some members raised certain concerns so the matter was again mentioned to the Law Commission for its examination. After comprehensively scrutinizing a number of issues contained, the Law Commission finally in its 253 report had recommended for establishment of Commercial Courts, Commercial Divisions and Commission Appellant of High Court and Commercial Courts Bill, 2015 for the disposal of commercial disputes of a specified value along with disposal of cases expeditiously, fairly, and at reasonable cost to the litigants.

Law commission reports refer to the existing and efficacious models in states like UK, US, Singapore etc. It is interesting to trace the history of the origin of the ‘Commercial Courts’ in these states. The objective of the Commercial Courts in the UK was to modify its procedure to the constantly changing needs of the commercial community. With the similar objective Commercial Courts were set up in four parts on an experimental basis in New York. The Commercial Division in New York was anticipated as a vehicle for resolution of complicated commercial disputes. In cumulative there were around 12 countries including UK and US who have attained commercial developments by adopting Commercial Courts Division in their respective Judicial systems. 

Commercial Courts Act 2015- A snapshot

Due to the globalized economy, numerous Bi-lateral Investment Treaties (BITs) have been taken on by the Government. A legal forum is being favored by the states that enter into BIT’s with India in some other states although the cause of action has been ascended in India. It is simply for the reason that these states have little confidence in the Indian justice delivery system which is weighed down by unreasonable deferments. In White Industries vs Union of India, it was observed that the delay in justice delivery can have waves upon India’s treaty obligation as well as terms with other nations, eventually commerce of our country. The Commercial Courts are anticipated to overcome the delayed judicial process.

Henceforth, with the view of accelerating economic development; improving the global image of Indian justice delivery mechanism; and to improve the faith of venture capitalists in the legal ethos of the state, Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance, 2015 was put into effect by the President of India on 23rd October, 2015 with the following key features:-

Comprehensive domain of commercial disputes 

The term ‘commercial disputes’ has been defined in section 2(1)(c) of the Act which takes account of a comprehensive kind of transactions that perhaps give upswing to a commercial liaison. The Act involves the entire gamut of commercial litigation leaving very little by the merchant, banker, trader, investors etc matters concerning admiralty and maritime law, exploitation of natural resources, intellectual property rights, insurance, construction and infrastructure contracts, government contracts, immovable property etc. It is clear that the definition of commercial disputes is not only exhaustive but is also an inclusive-having room of new matters of commercial disputes in the future.

The Act has failed to take account of disputes arising out of direct and indirect taxes such as custom duties, central taxes etc., in its definition of commercial disputes. Bearing in mind that commercial divisions will have to deal with a multiple of complex commercial disputes, it will have to be seen whether these divisions will be in a locus to dispose of these difficulties at a fast pace.

Establishment of the Courts

The Act deals with the establishment of Commercial Courts (Section 3), Commercial Division of High Court (Section 4) and Commercial Appellate Division (Section 5) respectively. According to Section 3 of the Act, Commercial Courts will be constituted in each district in all states by the State Government after the consultation of the concerned High Court and will appoint one or more Judges from the cadre of Higher Judicial Service in the State. Then as per Section 4 of the Act, Commercial Divisions will be set up within the High Court by the Chief Justice of the concerned High Court which does exercise ordinary original civil Jurisdiction. Further Judges of the High Court shall be designated as Judges of such courts who have experience in dealing with commercial disputes. Last of all Section 5 of the Act provides that the Commercial Appellate Division will be set up in every High Court to hear appeals against:

1. Orders of the Commercial Court.
2. Orders of Commercial Division of High Court. 

Such Division Bench shall also be instituted by the Chief Justice of the High Court from among the Judges of the High Court who have the necessary experience in dealing with commercial disputes to be the Judges of the Commercial Appellate Division. 

It is mandatory for each Commercial Division in every High Court to have ordinary original civil jurisdiction, however, out of 24 High Courts only 5 enjoys the ordinary original civil jurisdiction that is- Bombay, Madras, Delhi, Calcutta & Delhi. So with the advent of this Act, all those states that do not exercise ordinary original civil jurisdiction will constitute commercial courts. It is interesting to note that there are no separate designated Commercial Courts; certain judges at the district court mainly will hear commercial disputes. Considering the objective of the Act i.e., speedy disposal of commercial disputes, one must make out the need for the appointment of more judges. These Commercial Courts or Divisions are being allocated to the prevailing panel of judges; henceforth they will be adjudicating these matters in addition to the matters that are already allocated to them and consequently putting more pressure on them. Therefore, this calls for the establishment of specialized Commercial Courts similar to Arbitration Centers. 

Determination of the specified value

Earlier in the principal Act only those commercial disputes were adjudicated whose value was Rs one Crore or more, however, The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018 have restricted the specified value of a commercial dispute at Rs three lakhs.

The net effect of this would be that a large number of disputes may fall within the domain of the commercial courts which were previously outside their range. This might pose difficulty in achieving the aim of the Act and of course the practical execution of the Act. In metro cities, the value of the property is usually above rupees one crore. But there is a flip side to this. Through this amendment, small venture capitalists are in a beneficial position wherein even they have access to courts. Determination of specific value should be left to the concerned High Court for the reason that economic valuation of the commercial activities varies from State to State as well as case to case.

Training of the Judges

Commercial disputes shall be heard by judges having appreciable expertise and experience in commercial law. Training of judges on newest trends, comprehensive practices, and commercial dealings are highly required. According to the Section 20 of the Act, it is the responsibility of the state government to establish requisite facilities for the training of the Judges appointed as Judges of such Commercial Courts/Divisions. It is imperative to provide proper training to the judges so as to not only have the speedier disposal of cases but to also have just judgment. Presently most of the Indian Judges are more inclined towards resolving criminal, family disputes etc., as a result, they have less experience in solving commercial disputes. Therefore putting in use the established National Judicial Academies for providing continuous training and education along with conducting separate examinations for appointment of judges will ensure that the best talent is being recruited in such Commercial Courts/Divisions. 

Infrastructure

Section 19 of the Act provides that it is the onus of the state government to make available required infrastructure, imperative for the smooth working of these courts. Presently these courts are situated in the same building as the District/High Courts itself. There is a need to have a separate building for these designated Commercial Courts/Divisions, wherein, these courts shall be furnished with hi-tech facilities such as e-filing, video conferencing of witnesses and other latest infrastructure, therefore matching the global standards. 

Appeal

Keeping in mind the objective of the Act, Section 13 provides that all appeals against the order of Commercial Court/Division shall be heard and disposed of by the Commercial Appellate Division of High Court within six months from the date of filing of such appeal. Further, the Act also provides that the Commercial Appellate Division of High Courts shall hear the appeal from the decisions of the following Tribunals:- 

• Competition Appellate Tribunal
• Debts Recovery Appellate Tribunal
• Intellectual Property Appellate Board
• Company Law Board or the National Company Law Tribunal
• Securities Appellate Tribunal
• Telecom Disputes Settlement and Appellate Tribunal. 

 Appeal with respect to international commercial arbitration shall be heard and disposed of by the Commercial Appellate Division of High Court. No doubt the time period of 6 months is aiming at the expeditious disposal of the commercial matters but there are two aspects attached to this. Firstly, where a person is not satisfied with the decision of the Commercial Courts/Divisions can move an application only to Appellate Division. In order words, the Act failed to provide a statutory right to move an application to the Supreme Court if a person is not satisfied by the decision of the Commercial Appellate Division. Secondly hearing appeals from above-mentioned tribunals might resort to overlapping of Jurisdiction. 

Transfer of existing commercial disputes

According to the section 15 of the Act, all the commercial applications undecided including the Arbitration cases shall be transferred to the Commercial Courts/Divisions from the District or High Court concerned after the constitution of these courts. However, those suits where the final decision has been held in reserve by the court earlier to the establishment of Commercial Courts/Divisions shall not be transferred. Perceiving the other side of this provision, it is comprehended that while transferring all the pending commercial disputes to such Commercial Courts/Divisions might defeat the very objective of this Act. This perhaps results in over-burdening of these Courts. Rather, it should be at the discretion of the parties as to whether they are willing to move to these Courts. 

Dominion of arbitration matters

According to the section 15 of the Act, all the commercial applications undecided including the Arbitration cases shall be transferred to the Commercial Courts/ Divisions from the District or High Court concerned after the constitution of these courts. However, those suits where the final decision has been held in reserve by the court earlier to the establishment of Commercial Courts/Divisions shall not be transferred. Perceiving the other side of this provision, it is comprehended that while transferring all the pending commercial disputes to such Commercial Courts/Divisions might defeat the very objective of this Act. This perhaps results in over-burdening of these Courts. Rather, it should be at the discretion of the parties as to whether they are willing to move to these Courts. 

Dominion of Arbitration Matters

As per Section 10 of the Act, all the matters concerning to the International Commercial Arbitration as well as Domestic Arbitration of commercial nature shall be heard and disposed of by the Commercial Appellate Division of High Court with the exception of matters involving to the nomination of arbitrators in International Commercial Arbitrations. In addition to this, matters coming from domestic arbitrations. This provision will help in developing India as a hub of institutional arbitration, attracting international venture capitalists with the motive of investment and of course providing faster and reliable mode of resolving their disputes. 

Time Lines

A time-bound remedy is indispensable for the quicker disposal of the cases, so keeping in thought the very objective of the Act certain timelines has been specified. Subsequent are the certain instances for the same:-

•  According to Section 15 of the Act, all applications to the Commercial Appellate Division shall be made within the period of 60 days from the date of the impugned decision, while the Appellate Division must attempt to dispose of the Appeal within 6 months
•  Section 16 of the Act makes it clear that written statements need to be filed within 120 days from the date of service of summons on termination of which the right shall stand forfeited.
•  The court must pronounce the decision within the time period of 90 days of the conclusion of arguments.

Such timelines shall be implemented more effectively when there will be more and more judges and less number of cases per judge for the reason that judges in India are already weighed down with the major workload. Assigning them with additional responsibility i.e., adjudicating commercial disputes may setback the aim of the legislators. 

Conclusion

Efficacy of the judicial organism is essentially associated with the progress of the nation. This new-fangled Act itself is a praiseworthy part of lawmakers in spite of certain inconsistencies. The pecuniary dominion of these Courts is near to the ground with respect to commercial cases; hence this may put a stress on such courts. Then observance to definite timelines might turn out to be a concrete task. While the comprehensive delineation of Commercial Disputes, prompt disposal and the modified provisions of the CPC that permit parties to apply for summary judgment whereby, the court could reach at a conclusion merely on the basis of written pleadings- surely going to prove beneficial in disposing of the commercial disputes backlog. This Act marks as a valiant attempt in not only refining the ease of doing business in India but also matching the international standards in the arena of the judicial system. The Act may also expedite in changing the opinion of venture capitalists regarding India as an investment hub. Only time could convey as to whether the Act shall actually envisage the commitments for which it has been legislated, however, it would not be wrong to say that this Act is a welcome endeavor. 

---

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: