Friday, 3 July 2015

THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND COMMERCIAL APPELLATE DIVISION OF HIGH COURTS BILL, 2015

INTRODUCTION
Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 proposes to set up commercial divisions in all high courts and district-level commercial courts in all states for speedy resolution of commercial litigations. It aims at fast-tracking commercial litigation. This Bill was first initiated by the Law Commission of India in the year 2003 by making proposal to Union Cabinet for the constitution of High Tech Fast track courts dealing with commercial cases. This proposal was accepted by the Union Cabinet and introduced in the Parliament as “Commercial Divisions of High Court Bill, 2009”. Though the 2009 Bill was approved by the Lok Sabha and the Rajya Sabha’s Select Committee made changes, but the then Union Law Minister felt the need for further changes and referred it back to the Law Commission due to various Loopholes. However the 20th Law Commission prepared two discussion papers and after circulation in the Expert Committee, in January this year, prepared the Commercial Divisions and Commercial Appellate Divisions in High Courts and Commercial Courts Bill, 2015 in the form of 253rd recommendation.

SALIENT FEATURES OF THE BILL

  • Enforcement
Sec 1(3)Different dates of enforcement shall be appointed by government for different parts of the Act and different high courts.

  • Commercial dispute
Sec 2(c) - A commercial dispute means a dispute arising out of transactions between merchants, bankers, financiers, traders, etc.  Such transactions deal with mercantile documents, partnership agreements, intellectual property rights, insurance, etc.

  • Commercial courts
SEC 3 - Commercial Courts, equivalent to district courts shall be established in those states and union territories where the High Court does not exercise ordinary original civil jurisdiction.

  • Commercial Division
Sec 3(2)(a) – In all High courts exercising ordinary original civil jurisdiction there shall be commercial division in that high court. They are to be set up by the respective state governments after consulting with their high courts.

  • Pecuniary jurisdiction
The minimum pecuniary jurisdiction of such Commercial Courts and
Commercial Division is proposed as one crore rupees. But Commercial Divisions or Commercial Courts will not have jurisdiction in matters relating to commercial dispute, where the jurisdiction of the civil court has been either expressly or impliedly barred under law, it said.


  • Commercial appellate divisions
Sec 3(3) - Commercial appellate divisions may be set up in all high courts to hear appeals against: (i) orders of commercial divisions of high courts; (ii) orders of commercial courts; and (iii) appeals arising from international commercial arbitration matters that are filed before the high courts.  Such appeals to the commercial appellate division must be made within a period of 60 days of the order of the lower court.

Further u/s 14 Any appeal filed in a high court against the orders of certain tribunals like: (i) Competition Appellate Tribunal; (ii) Debt Recovery Appellate Tribunal; (iii) Intellectual Property Appellate Board; (iv) Company Law Board or the National Company Law Tribunal; (v) Securities Appellate Tribunal; and (vi) Telecom Dispute Settlement and Appellate tribunal may be heard by the commercial appellate division of the high court if it relates to a commercial dispute.

  • Appointment of judges
Sec 5 - Judges to a commercial court will be appointed by the Chief Justice of the concerned high court, in a manner to be prescribed.  The senior most judge would be the Principal Judge, and would have the same powers as that of a Principal District Judge of a District Court. Further u/s 4 the number of high court judges that would be required for a commercial division of a high court would be determined and nominated by the Chief Justice of the High Court.  The judges must have experience in dealing with commercial disputes and the nomination would be for a period of two years, or as determined by the Chief Justice of the concerned high court.
  • Transfer of pending suits
All suits of a value of Rs one crore or more that are pending in the high court shall be transferred to the commercial division, after it is constituted. Similarly, suits currently pending in the district courts, with a value of Rs. one crore or more would be transferred to the commercial court.  However, a suit will not be transferred if a final judgment on the matter is pending.
  • Amendment to Civil Procedure Code
The amended CPC as applicable to the Commercial Divisions and Commercial Courts will prevail over the existing High Court rules and other provisions of the CPC to the contrary. The commercial court will be empowered to conduct a case management hearing where it will have all the necessary powers required to ensure the proper conduct of a trial within a specified time frame. This will include the power to fix dates for hearing, decide which issues are to be tried and witnesses to be summoned. In addition, the court will be empowered to impose costs and other penalties on parties for failure to follow the directions set out in a case management hearing.

Some of the other important changes proposed to the CPC include allowing parties to complete the discovery of documents efficiently and to apply to all documents and photocopies of documents in the power, possession, control, or custody of the parties. Further, courts to be empowered to impose exemplary costs against defaulting parties for willful or negligent failure to disclose all documents, or for wrongful or unreasonable withholding of documents for inspection.

Another amendment to CPC allows courts to have time-bound delivery of judgment. They will have to deliver judgments within 90 days from the conclusion of arguments.

ADVANTAGES
  • Speedy resolution of commercial litigation :
The most positive effect of the Commercial Divisions and Commercial Appellate Divisions in High Courts and Commercial Courts Bill, 2015 is that it will result in the speedy disposal of commercial disputes. The chief concerns are the huge pendency of cases at all levels of the judiciary, and the lack of specialists handling commercial disputes. Of the total of 32,656 civil suits pending at the five high courts with original jurisdiction in India, 16,884 (or 51.7%) are commercial disputes. The provision of case management hearing is included in the bill where commercial courts will have all the necessary powers required to ensure the proper conduct of a trial within a specified time frame. Moreover the courts have to deliver judgment within 90 days from the conclusion of arguments. With the establishment of commercial courts, commercial division and commercial appellate division the disposal of commercial cases will be at a faster rate, the pendency of commercial cases will come down resulting in speedy disposal of disputes. According to Law Commission 253rd Report the time required by High court to dispose civil cases is as follows:
Table 2.7: Breakdown of delays in disposal of civil suits in each High Court with original civil jurisdiction. High Court
Total Number of Civil Suits Pending
Number of Civil Suits pending broken up on basis of length of pendency
% of Civil Suits pending for more than 2 years
Less than Two years
Between two to five years
Between five to ten years
More than ten years.
Bombay
6081
1268
1268
1159
2386
79.14%
Calcutta
6932
787
800
1320
4025
88.6%
Delhi
12693
4707
4151
2849
1256
63.66%
Madras
6326
1536
1451
2196
1143
75.72%
Himachal Pradesh
354
75
105
75
99
78.82%
Total
32386
8373
7775
7599
8909
74.99%
If more than ten years is required to solve 75% cases than the current system has really failed and some immediate steps need to be taken.
  • Specialist handling commercial disputes :
As per the new Bill the Judges of commercial courts, commercial division and commercial appellate division shall have experience in dealing with commercial disputes. At present commercial matters are decided by Judges who may or may not may special knowledge of commercial matters. With more efficient and experience person dealing with commercial disputes, there will be satisfactory and legally correct orders and decrees which in turn would reduce the appeal to higher court.
  • Relief to investors :
With the liberalization of Indian economy in the year 1991 more foreign investment came to India. The last two decades saw a considerable change in Indian economy. With the increase in foreign investment, capture by foreign brands of Indian markets and expansion of economy gave rise to  more and more commercial dispute and increased commercial litigation. However the disposal of cases is at the same rate. This long pendency of cases causes huge problem to the investors. It takes years for the investors to get back the money involved in the litigation. Therefore with the  establishment of commercial courts these cases will be disposed of at a reasonable time limit.
  • Reasonable cost of litigation :
As cases are disposed off during reasonable time limit the cost of litigation automatically comes down.
  • Positive image of legal system among investors :
In 2014, the World Bank ranked India 142nd out of the 189 countries investigated for the Ease of Doing Business Report, slipping further from the 2013 rank of 134. One of the biggest factors behind India’s reputation as a bad place to invest is the length and cost of litigation in the country and the proposal to introduce “commercial courts” has therefore been amongst the most important. These commercial courts or commercial divisions in high courts would be fast-track courts with hi-tech infrastructure for compulsory e-filing, digitizing of documents, and case-management conferences. They would resolve disputes in high-value commercial transactions in a speedy and efficient manner. All this would change the image of Indian economy and legal system in the minds of investor. Investors would have more positive approach towards Indian legal system.
  • Economic growth :
Fast disposal of cases, low cost of litigation, positive image among investors, increased investment would definitely result in the growth of Indian economy.
  • Collection and disclosure of data :
The said Bill u/s 18 provides that the Statistical data regarding the number of suits, applications, appeals or writ petitions filed before the Commercial Court, Commercial Division, or Commercial Appellate Division, as the case may be, the pendency of such cases, the status of each case, and the number of cases disposed of, shall be maintained and updated every month by each Commercial Court, Commercial Division, Commercial Appellate Division and shall be published on the website of the relevant High Court. This provision will work as a psychological reminder to the judges to dispose the matters and confidence among litigators about the speed of disposal of cases.
  • Appeals from quasi judicial bodies :
The said bill u/s 14 also makes provision for appeal from orders and decree of various tribunals and quasi judicial bodies in matters relating to commercial disputes. This will reduce the burden of these quasi judicial bodies.
  • Strict check :
As the court will be empowered to impose costs and other penalties on parties for failure to follow the directions set out in a case management hearing, and to impose exemplary costs against defaulting parties for willful or negligent failure to disclose all documents, or for wrongful or unreasonable withholding of documents for inspection, this will act as a deterrent against the defaulting party and result in fair and fast disposal of dispute.
  • Boost commercial litigation :
With the setting up of specialized commercial courts, starting of new practices, appointment of more judges, economic growth all this will result in a boost to already flourishing commercial litigation  in India.

DISADVANTAGES
  • Neglect towards small investors
As already said earlier the commercial courts and commercial division in the high courts will deal with cases of RS one crore or above only. Therefore a civil dispute below Rs one crore even though commercial in nature will have to be filed in ordinary courts. This may result in differentiation between big and small investors, and big companies may get speedy justice with money however small investors may have to wait for years for their due.
Moreover it has same pecuniary jurisdiction for all states, however in cities like Mumbai or Delhi there are commercial disputes involving huge amount, but same is not the position in other states in India where there are large number of small investors.
  • No guarantee of success
Even though after establishing 1000 fast track courts in India there is still 32 million cases pending in Indian courts as said by law and Justice Minister Kapil Sibal said in the Lok Sabha on 23rd Dec 2013. So we hope for the best, but looking at the current reality of disposal of cases by Indian courts one cannot guarantee that the commercial courts will surely be a success.

CONCLUSION
In fast growing economy like India, with GDP of 7.3%, with huge foreign investment coming in, with fast changing market trends, with  high quality of higher judiciary and with a goal to improve legal system and become a develop economy being one side of the coin and huge pendency of cases in courts, corruption in legal system, only 0.4% of budget being allocated towards development of courts and judiciary on the other side, the Commercial Divisions and Commercial Appellate Divisions in High Courts and Commercial Courts Bill, 2015 is an appreciable initiative taken by the government to serve as a pilot project in the larger goal of reforming the civil justice system in India.

World’s developed economies like USA, UK, France, Russia etc and also commercial hub like UAE have special commercial courts and it is high time for India to have the same. And it is worth mentioning that Delhi High Court has already designated four benches as “commercial courts. According to 188th report of the Law Commission there is a recent trend in the judgments of UK and US courts of selectively applying the principle of ‘forum non-conveniens’. To explain, where a foreign entity is doing business in India with an Indian entity, the said foreign entity is today being permitted by Courts in New York and London to file claims in courts in New York or London, on the assumption that there are extraordinary delays in Indian Courts. This is being done even if no part of the cause of action has arisen in those countries. The Supreme Court of New York, New York County in the year 2003, Shinetsu Chemical Co. Ltd vs. ICICI Bank (and State Bank of India), the Court took up the case on the assumption that in India even such cases would go on for fifteen years. That case related to a suit by a Japanese company against Indian Banks on the basis of Letters of Credit (where no cause of action arose, within US). There have been significant judgments of UK Courts which like the US Courts, have generalized about delays in Indian Court. In Vishwas Ajay: 1989(2) Lloyd’s Rep. 558, a generalized plea of ‘inordinate delays’ in India of the magnitude of ten years before actions come to trial, was accepted and it was assumed that there was denial of justice abroad. The matter was continued in the English Court, rejecting the application for stay filed by the defendants.
Therefore once the Commercial Divisions and Commercial Appellate Divisions in High Courts and Commercial Courts Bill, 2015  is enacted, there will no longer be any scope for foreign courts to make generalizations or assumptions about delays in Indian Courts.

Sarosh Zaiwalla an Indian to set up UK's first Indian law firm Zaiwalla & Co in London, On his trip to India, he spoke to Economic Times on the need to improve the legal sector and throw it open to foreign law firms to make India an attractive investment destination. He said “One of the reasons FDI is not coming into India is because people are worried about the legal sector and the arbitration. When a foreign party invests millions of funds, he has a joint venture partner in India. He wants to make sure if something goes wrong, he has the help of judges or the courts. For the purpose of FDI, what's required is perception. We may be very honest, but if there's one case of corruption, it comes to your mind that the whole system is corrupt. If laws are passed but you can't implement them, you make a fool of yourself”. If India is really serious about attracting foreign direct investment, it will have to reform the legal system first. For example, the Supreme Court can have one international commercial matters bench”.

Also with the institution of the commercial divisions and commercial courts, judges must take a more active role in the resolution of the dispute; they can no longer be playing the role of a supervisor, rather they must be the manager or moderator. In this regard, an important provision in the Bill is that of “case-management hearings”. Recommended by the Law Commission after examining the practice of holding “pre-trial conferences” in Singapore, case management hearings are held within four weeks of the institution of the suit to examine the possibility of a settlement and to ensure smooth conduct by litigants. For this purpose, the judge may frame the issues for and between the parties, fix dates for evidence to be recorded, and set time limits on the oral arguments of the parties. Another provision is to award judges with the power to order an increase in court fees as a result of an increase in the number of hearings taken up, or the number of adjournments asked for, by the parties. This also widens the control that the judge has over the proceedings, besides ensuring the quick redressal of the dispute.


Therefore Commercial Divisions and Commercial Appellate Divisions in High Courts and Commercial Courts Bill, 2015 with the attributes of   benefiting  Indian economy and legal system be enacted with keeping into consideration the interest of small investors and clear demarcation of jurisdiction.

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