The Commercial Courts Act: An Overview

There has been a long-standing debate on the setting up of exclusive commercial courts in India. The 188th report of the Law Commission (2003) brought attention to the worldwide criticism faced by the Indian Judiciary where the judges of developed countries were raising doubts about the capacity of Indian judges to deliver effective justice. The inordinate delay in the litigation process pestered the litigants who ventured into the Indian legal system. The international judges started hearing civil cases (supposed to come under Indian civil courts) on the grounds of the doctrine of forum non convenes. The Law Commission recommended setting up specialised commercial divisions in high courts in order to expedite the process of justice delivery. Thus, the Commercial Courts Bill was introduced in Parliament in 2009. The Bill received the assent of the President on December 31st, 2015 and came into force on October 23, 2015.

The Act was formerly known as the "Commercial Courts, Commercial Divisions, and Commercial Appellate Division of the High Court Act". By the 2018 amendment, the name was changed to "The Commercial Courts Act, 2015". This article explores some key areas relating to the Act.

What does the Commercial Courts Act Define?

The government passed the Commercial Courts Act 2015 to shorten the duration of commercial disputes that previously fell under the purview of normal lawsuits. This government action has helped both domestic and foreign investors develop confidence in the Indian markets. The Act establishes a system of commercial courts within the framework of the civil court system and grants these Courts the procedural authority they require (via relevant CPC amendments) to effectively and quickly adjudicate commercial disputes of high value.

Purpose of the Act

The sole aim of this Act is to improve India's ranking in ease of doing business and as an investment attraction. The Act basically provides for the setting up of a commercial court at district level if the high court does not have ordinary jurisdiction; and a commercial division in the high court, having ordinary original jurisdiction to try commercial disputes of a specified value of not less than Rs. 3,00,000. The Act also provides for setting up a Commercial Appellate Division for hearing appeals.

Commercial Dispute and Specified Value

The Act defines a "commercial dispute" as a dispute which includes disputes arising out of ordinary transactions of merchants, bankers, financiers, and traders; export or import of merchandise or services. And, the issues relating to admiralty and maritime law; agreements of the franchise; licence agreements; joint venture agreements; shareholders' agreements; carriage of goods; intellectual property rights; insurance; etc.

This is an inclusive definition and includes almost all disputes that could be related to commercial transactions.

The Act sets up a specified value of Rs. 3,00,000 while the maximum value is Rs. 1,00,00,000. The specified value shall be determined in the following manner −

• When the case is for the recovery of money, the amount sought to be recovered, including the interest, if any, computed up to the date of the filing of the case, shall be taken into account.

• When the case is for a moveable property, the market value of the moveable property on the date of the filing of the case shall be taken into account.

• Where the case relates to an immovable property, the market value of the immovable property on the date of the case shall be taken into account.

• Where the case relates to any other tangible right, the market value of the said right as estimated by the plaintiff shall be taken into account.

• In the event of a counterclaim, the value of the subject matter shall be taken into account.

Jurisdiction

The Commercial Courts and Commercial Divisions have jurisdiction to try all suits and applications relating to a commercial dispute of a specified value.

The Act also takes within its fold those arbitration matters where the subject matter of arbitration is a commercial dispute of a specified value. In such a case,

• The Commercial Division of the High Court will hear all appeals or applications filed on the original side of the High Court arising from arbitration.

• All appeals or applications arising out of arbitration that would ordinarily lie before the principal civil court in a district shall be heard by the Commercial Court having territorial jurisdiction over such arbitration.

Pre-instruction Mediation and Settlement

Pre-instruction Mediation and Settlement The Act provides for mandatory pre-institution mediation and settlement, except when there is any interim urgency. Every matter should undergo this mandatory pre-institution mediation and settlement process of 3 months(extendable for another 2 months with consent of the parties). A suit shall not be instituted unless the plaintiff has exhausted this remedy.

When the matter is not settled in the pre-institution mediation, only then will it come before the Commercial Court. The period occupied in pre-institution mediation shall not be computed for the purpose of limitation.

Transfer of Cases

The Act provides that all suits and applications relating to a commercial dispute of a specified value are pending −

• It shall be transferred to the Commercial Division of a high court where a commercial division has been constituted.

• Such commercial court shall have jurisdiction.

Appeal and Revision

The Act provides that an appeal against a judgement or order of the Commercial Court or Commercial Division of the High Court shall lie before the Commercial Appellate Division of the concerned High Court within a period of sixty days from the date of judgement or order, as the case may be. The Act also requires the Commercial Appellate Division to try to resolve the appeal within six months.

Case Management Hearing

The Act amends Order 15-A CPC to empower commercial courts to hold case management hearings in order to ensure that trials are conducted within a specified time frame.

Amendments to CPC

In order to ensure speedy disposal of commercial disputes, the Act prescribed amendments to the CPC in cases of commercial disputes of specified value. The amendments to the CPC relate to time-bound completion of pleadings, filing of evidence, trial, and pronouncement of judgement.

Conclusion

Commercial courts adjudicate disputes involving business that occur at work. The government proposed the Commercial Courts Act 2015 to establish a new type of district-level court for commercial disputes. In order to ensure the efficient running of commercial courts with the least amount of outstanding cases, a number of enhancements were made in 2018 to the Commercial Courts Act of 2015. However, the Act's seven-year period of existence may not have yielded the anticipated result. The Act has already undergone a significant alteration that completely changed its original goal of offering a framework for the quick resolution of "high-value" commercial disputes. Nevertheless, despite the obstacles and difficulties, the Act has improved various aspects of the nation's commercial dispute resolution procedures.

Frequently Asked Questions

Q1. How many amendments have been made to the Act?

Ans: The Commercial Courts Act, 2015 was amended in 2018 by an ordinance. The ordinance made important amendments to the Act and came into force with immediate effect. The changes specifically related to the reduction in specified value from one crore rupees to three lakh rupees, the introduction of pre-institution mediation, removal of provisions relating to counterclaims etc.

Q2. What are the key issues affecting proper implementation of the Act?

Ans: Major key issues are:

• The number of cases admitted in commercial courts will rise as the minimum value is raised to more than Rs. 3 lakh, which will slow down the processing of cases with relatively greater values. As a result, the goal underlying their establishment might be unsuccessful.

• Mere creation of commercial courts will not speed up the resolution of conflicts, rather the litigation process for commercial disputes needs reforms.

• Commercial courts may not be effective in speedy disposal of commercial disputes, unless the issues relating to vacancies of judges are resolved.

Q3. How the Act makes an attempt to reduce the huge burden of cases on courts?

Ans: The concept of pre-institution mediation settlement helps in reducing the burden on court.

Q4. Is there any provision regarding revision against orders of commercial courts under the Act?

Ans: The Act bars a revision application against an interlocutory order of a commercial division or commercial court. However, an appeal lies against the same.