Achieving expeditious and efficacious resolution of disputes areabsolutely critical to encourage investment and economic activity in the country. However, in India the large pendency of cases andshortage of judges couldbe considered an impediment in achieving the same. Thus, with a view to to overcome such impediments in relation to commercial disputes, the legislature has taken an important step by introducing the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (‘Act’).
The primary objective of the Act is to establish commercial courts atthe district level and commercial benches in thehigh courts for adjudication of commercial disputes of specified values, apart from matters connected therewith and/or incidental thereto. The Act essentially introduces the setting up of a Commercial Court at the District Court level and a Commercial Division in the High Courts having Ordinary Original Civil Jurisdiction to deal with commercial disputes of a specified value not being less than Rs. 1 Crore or such higher value as may be notified by the Central Government. All appeals from the orders of the Commercial Court/Commercial Division would lie before the Commercial Appellate Divisions to be set-up in all High Courts. The Act received assent from the President on 31st December 2015. However, the Act was deemed to have come into force on 23rd October, 2015. Commercial Dispute has been broadly defined in the Actas a dispute which includes ordinary transactions of merchants, bankers, financiers and traders and also includes issues relating to admiralty and maritime law, franchising, licensing, joint venture, management and consultancy services, shareholder agreements. It also involves violation of intellectual property rights, exploitation of natural resources including electromagnetic spectrum, contracts of agency and insurance etc. The Act clearly provides that acommercial dispute shall not cease to be a commercial dispute if it involves recovery of immovable property or for realization of monies out of immovable property given as security or any other relief relating to immovable property, or where one of the contracting parties is the State.
Constitution of Commercial Courts, Commercial Division and Commercial Appellate Divisions & Arbitration
There is a two – tier system:
i) Commercial Court or Commercial Division;
ii) Commercial Appellate Division.
State Government after Consultation with High Court will form a Commercial Court at the District Courtlevel and where High Court has Original Jurisdiction then the Chief Justice will form a Commercial Division of Single Judge.
The Chief Justice of the concerned High Court shall constitute a Commercial Appellate Division with one or more Division Benches. The Chief Justice of the High Court shall nominate such Judges of High Court who have experience in dealing with commercial disputes matter.
Transfer of Pending Suits: All suits and applications including thoseunder the Arbitration and Conciliation Act, 1996 pending in High court or Civil court willbe transferred to a Commercial Division or a Commercial Court respectively.
Arbitration: If the subject matter of an arbitration is a commercial dispute of an international commercial arbitration then it shall be heard and disposed of by a Commercial Division. If such arbitration is not an international commercial arbitration and which would lie in any principal court shall be filed in the Commercial Court exercising territorial jurisdiction.
If such arbitration is not an international commercial arbitration and which would lie in any principal court shall be filed in the Commercial Court exercising territorial jurisdiction.
Appeals from decrees of Commercial Courts and Commercial Divisions should be made to Commercial Appellate Division of that High Court within 60 days from the date of judgement or order. Commercial Appellate Divisions shall endeavor to dispose of appeals within a period of six months from the date of filing of the appeal.
Amendments to Civil Procedure Code, 1908 (CPC)
The Act contemplates certain amendments in the Code of Civil Procedure, 1908. These are
i)Disclosure, discovery, and inspection of documents in suits. All documents and photocopies in its power and possession have to be filed with the plaint itself. Similarly, a Defendant shall file a list of all documents and photocopies in its power and possession while filing the written statement. Duty to disclose documents which the party has come to the notice of the party shall continue till disposal of thesuit. All parties shall complete inspection within 30 days from the date of filing ofthe written statement. In case of disclosure and inspection of electronic records, furnishing a print out will be sufficient. Admission and denial of documents hasto be completed within 15 days of completion of inspection (Order XI is substituted);
ii) An applicant can apply for summary judgement after thesummons has been served. Summary judgement can be filed in respect of the claim, either in whole or in part. (Order XIII – A is inserted after Order XIII of the Code);
iii) This Act mandates the Courts to have case management hearings once pleadings are completed, wherein the Courts would frame issues and set dates for trial, filing written arguments and addressing arguments. Timelines are also mentioned for case management hearing. (Order XV – A inserted after Order XV of the Code);
iv) Filing of written arguments are compulsory. This Act has limited oral arguments. (Order XVIII in Rule 2, of the Code is Amended);
v) Affidavits of evidence of all witnesses whose evidence is proposed to be led by a party shall be simultaneously filed by the time directed in the first case management hearing (Order XVIII Rule 4 of the code is amended);
vi) Court may control evidence, redacting or rejecting evidence, format and guidelines of affidavit of evidence is provided (after Order XIX Rule 3 of the Code, following rules have to be inserted);
vii)Judgement needs to be provided within 90 days of conclusion of arguments. (Order XX, Rule 1 of the Code is substituted);
viii) Costs include fees and expenses of the witness incurred, also includes legal fees and expenses and any other expenses relating to proceedings. Costs have to be paid by one party, quantum of costs and when to be paid. Provision for frivolous claim for damages is also mentioned. (S.35 of the Code is substituted);
ix) Detailed provisions have been made regarding interest and its calculation. (Order VII, After Rule 2, following Rule 2A to be inserted);
x) Defendant fails to file a written statement within 30 days then he shall be allowed to file with cost as the court decides but not later than 120 days from the service of summons, then the defendant has to forfeit the right to file written statement. (Order V, Rule 1, in sub rule (1) substituted); xi) Forms of pleading in Commercial Courts (Order VI, after Rule 3, Rule 3A should be inserted);
xii)Verification of pleadings in a commercial dispute. (Order VI, after Rule 15, Rule 15A should be inserted);
xiii) Defendant fails to file a written statement within 30 days then he shall be allowed to file with cost as the court decides but not later than 120 days from the service of summons, after whichthe Defendant has to forfeit the right to file written statement. (Order VIII, Rule 1 of the Code substituted);
xiv) Denial by the defendant in suits before the Commercial Division of the High Court or the Commercial Court. (Order VIII After Rule 3, insert Rule 3A). If there are any inconsistencies between the Act and the CPC, then the provision of CPC as amended by this Act will prevail. As such, the Act will not only improve the speed at which commercial disputes attain finality, but would also improve the outlook of investors in considering India as an investment destination. It is expected that the Act is implemented by states and High Courts in its true spirit to achieve the very objects of this Act.