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.
|
||||||
6081
|
1268
|
1268
|
1159
|
2386
|
79.14%
|
||||
6932
|
787
|
800
|
1320
|
4025
|
88.6%
|
||||
12693
|
4707
|
4151
|
2849
|
1256
|
63.66%
|
||||
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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