Each year, the World Bank publishes a report in which it ranks countries according to the ‘ease of doing business’ there. One of the factors which it takes into account while preparing its rankings is whether a “specialized commercial court, section or division dedicated solely to hearing commercial cases” exists in a legal regime. Countries which have these courts get better rankings. In 2015, India’s Parliament enacted the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, which introduced the concept of ‘commercial courts’ in India. However, one gets the sense that the Commercial Courts Act was enacted primarily to enhance India’s rank in the World Bank index, rather than to bring about any meaningful change in the judicial system. The Statement of Objects and Reasons in support of the law said that its enactment would “improve the international image of the Indian Justice delivery system”. Whether by coincidence or otherwise, India’s ranking improved from 142 to 130 after the Commercial Courts Act was enacted. Recently, while approving amendments to the law (which have, for the moment, been enacted in the form of an ordinance), the government expressly spoke of enhancing “India’s ranking in the Ease of Doing Business”. The Commercial Courts Act has merely rebranded some of the existing courts in India, like parts of high courts and district courts, as ‘commercial courts’, without setting up any new infrastructure or appointing any fresh judicial personnel with specialised expertise.

Key concepts of the Commercial Courts

Sec. 2 (c) ‘Commercial Dispute’ and brings within its ambit disputes arising out of transactions of merchants, bankers including those relating to mercantile documents, disputes arising out of export or import of merchandise or services, issues relating to admiralty and maritime law, carriage of goods, transaction relating to aircraft, franchising agreement, distributions in licensing agreement, shareholders agreements, partnership agreements, joint venture agreements etc. The definition is exhaustive cover a wide variety of plausible business transactions. 

Section 2(i) of the Act defines ‘specified value’, which is the value of the subject matter in respect of a suit as determined in accordance with Section 12 of the Act and which shall not be less than Rs. 1 Crore

Important provisions

Section 3 provides for Commercial Courts, Commercial Divisions and Commercial Appellate Divisions;

Proviso to Section 3(1) provides that no Commercial Court shall be constituted for the territory over which the High Court has Ordinary Original Civil Jurisdiction. It is pertinent to note that the High Courts of Delhi, Mumbai, Chennai and Kolkata exercise Ordinary Original Civil Jurisdiction and therefore, for the said States, in terms of the provisions of Section 4(1) of the Act, the Chief Justice of the said High Court may by an order constitute a Commercial Division having one or more Benches consisting of a Single Judge for the purpose of exercising the jurisdiction and powers conferred on it under the Act 

Section 10(1) and (2) of the Act provides that where the subject matter of an arbitration is a Commercial Dispute of a specified value then for all applications or appeals arising out of such arbitration (international commercial arbitration or otherwise) under the provisions of the Arbitration and Conciliation Act, 1996 shall be heard and disposed off by the Commercial Appellate Division of the said High Court. 

Section 11 of the Act creates for bar of jurisdiction of Commercial Court and Commercial Divisions and provides that they shall not entertain or decide any suit, application or proceeding relating to any commercial dispute in respect of which jurisdiction of the Civil Court is either expressly or impliedly barred under any other law for the time being in force. Section 13 of the Act provides for an Appeal and the Proviso to the said Section provides that Appeal shall lie from orders passed by Commercial Division or a Commercial Court as enumerated under Order XLIII of the Code of Civil Procedure, 1908 (‘CPC’) as amended by the Act and Section 37 of the Arbitration and Conciliation Act, 1996. The Commercial Appellate Division shall endeavour to dispose off Appeals within a period of 6 months from the date of filing of such Appeal.

JURISDICTION OF COURTS

Section 15 of the Act deal with the transfer of pending Suits and the Proviso to Sub Section (2) of Section 15 of the Act clearly provides that no Suit or Application wherein the final judgment has been reserved by the Court prior to the constitution of the Commercial Division or the Commercial Court shall be transferred 

Section 16 of the Act provides for amendment to the provisions to CPC, in their application to any suit in respect of a commercial dispute of a specified value

SALIENT FEATURES OF COMMERCIAL COURTS:

 Creation of a specialized forum for disposal of commercial disputes of a specified value. 

Suitable amendments to the provisions of CPC providing timelines for completion of various processes thereby ensuring that the whole process of adjudication is time bound.

In terms of the amended provisions of Section 35(2) of CPC as a general rule the unsuccessful party will be ordered to pay costs to the successful party and in case the court seeks to deviate from the general rule then it has to record the reasons for the same in writing. 

Written Statement has to be filed within a period of 30 days and can be extended by the court to a maximum of 120 days from the date of service of the summons.

The provisions regarding making denial of submissions in the Written Statement have been made more stringent by inserting rule 3A to the provisions of Order VIII Rule 3 of the CPC.

Stringent provisions pertaining to disclosure, discovery and inspection of documents in suits before commercial division of a High Court or a commercial court (Order XI CPC) introduced in order to ensure that all documents in the power, possession, control or custody of the parties is filed along with the Plaint/Written Statement respectively with specific provisions disallowing the Plaintiff/Defendant from relying on documents which were in their power, possession, control and custody but not disclosed along with the Plaint/Written Statement or within the extended period provided with the leave of the court.

Each party to submit a statement of admission or denial of documents within 15 days of completion of inspection or any later date as fixed by the Court [Order XI Rule 4(1)].

Provisions of Order VIII Rule 1, Order VII Rule 14 and Order VII Rule 1A CPC shall not apply to suits or application before commercial divisions of High Court or commercial Courts.

The Court may decide a claim without recording oral evidence [Order VIII-A Rule 1(1)].

 A party may apply for summary judgment at any time after the summon has been served upon the Defendant taking into account the amendment made to Order XIII-A Rule 2 CPC.

Amendment to CPC to bring in fresh procedure for dispute resolution by holding management hearings. 0 Courts to hold first case management hearing not later than 4 weeks from date of filing of affidavit of admission or denial by all parties to the suit [Order XV-A Rule 1].

Courts to ensure that all arguments are closed not later than 6 months from the date for the first case management hearing [Order XV –A Rule 3]. 0 Recording of evidence to be carried out on a day to day basis until cross examination of all the witnesses is complete [Order XV-A Rule 4].

Stringent provision to the effect that case management hearing shall not be adjourned for the sole reason that advocate appearing on behalf of a party is not present [Order XV-A Rule 7] subject to application for adjournment of hearing being moved in advance and the court adjourning the matter on such an application upon payment of such cost as the court deems fit.

Party to file written arguments four weeks prior to commencing oral arguments [Order XVIII Sub-Rule 3A].

Commercial Court, Commercial Division or Commercial Appellate Division shall within 90 days of conclusion of arguments pronounce judgment [Order XX (Substitution for Rule 1)].

Provisions of Section 8 of the Act provide that no Civil Revision Application or Petition shall be entertained against any interlocutory order passed by the commercial court including an order on the issue of jurisdiction and any such challenge shall be raised only in an appeal against the decree of the commercial court.

The Government, on May 3, 2018, promulgated an Ordinance (Ordinance) amending the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Act). These amendments are an attempt to expand the scope of commercial courts in India. They will also contribute towards improving India’s ranking on the ‘ease of doing business index’ released by the World Bank (Ease of Business Report).

However, it remains to be seen whether the hastily drafted changes incorporated by way of the Ordinance, achieve the desired effect of increased efficiency in the resolution of commercial disputes or whether they add to the chaos of fluctuating jurisdictions of courts in India. The key changes or Highlights of the Amendments are

• Minimum Value of dispute (pecuniary jurisdiction) reduced to INR 3,00,000/-
• Commercial courts split in two – (i) District Judge Level & Below District Judge Level
• Commercial Appellate Courts introduced
• Mandatory pre-institution mediation prescribed
• Government to appoint commercial court judges

The amendments now make provision for constitution of two types of commercial courts in jurisdictions where the high court does not exercise ordinary original civil jurisdiction being:

1. commercial courts at the level of A district judge; and
2. commercial court below the level of a district judge.

The intention behind creating these two types of courts could be linked with the reduction of the specified value. While not stated specifically, it may be that lower value disputes would now be adjudicated by Commercial Courts below the level of a district judge and high-value disputes would go to Commercial Courts at the level of a district judge,

Commercial Appellate Court

The Ordinance further envisages the establishment of commercial appellate courts in jurisdictions where the high court does not exercise Ordinary Original Civil Jurisdiction. Appeals from commercial courts below the level of district judge shall lie before the Commercial Appellate Court. The Appeals from Commercial Courts at the District Judge level would continue to lie before the Commercial Appellate Division.

 By Dr.Sailaja.Petikam