Analyzing the Commercial Courts, Commercial Division And Commercial Appellate Division of High Court


Preliminary Observations


There exists an ever-growing undue burden on the Indian Judiciary, which could be primarily attributed to the “avalanche” of backlogged cases and the deficiency in the country's manpower and infrastructure. More than 38 lakh cases are pending in 24 High Courts and about 60,000 in the Supreme Court, which are being heard by 21,000 Judges whereas the Law Commission recommended at least 40,000 Judges three decades ago.[1] At the rate at which the cases are increasing, the number of cases are expected to reach 15 crores, which shall require at least 75,000 Judges in the next three decades.[2] Establishing specialized statutory tribunals/ divisions/ boards to expedite the resolution of specialized disputes marks an important step of the government towards handling this backlog. Amidst this chaos of undue burden, the Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (for short “the Act”) comes as a respite at least with regard to the Commercial Disputes.


Brief Overview of the Act


With the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance, 2015 put into effect by the President of India on 23rd October, 2015, the Act in its totality was enacted on 31st December, 2015, primarily to adjudicate commercial disputes of specified value and matters connected therewith or incidental thereto.[3] The Act extends to the whole of India except the state of Jammu and Kashmir.[4]


Salient Features


  1. Exhaustive Ambit of Commercial disputes: The Act attaches an exhaustive meaning to the term “Commercial Disputes”, which includes a wide variety of transactions that may give rise to a commercial relationship. This includes ordinary transactions of merchants, bankers, financiers and traders, export or import of merchandise or services, issues relating to admiralty and maritime law, transactions related to aircraft, aircraft engines, aircraft equipment and helicopters, carriage of goods, construction and infrastructure of contracts, tenders, immovable property agreements (trade & commerce), franchising agreements, distributing and licensing agreements, joint venture agreements, shareholders agreements, services industry (subscription and investment agreements), mercantile agency & usage, partnership agreements, technology development agreements, Intellectual property rights, sale of goods or provision of services agreements, oil, gas reserves and other natural resources exploitation; insurance and re-insurance; agency contracts and other commercial disputes.[5] This covers almost all commercial disputes, which shall be adjudicated by Specialized Commercial Courts that will comprise judges specially trained to deal with Commercial Disputes.

  2. Constitution of Commercial Courts and Commercial Divisions: The State government, with consultation with the concerned High Court shall constitute the necessary number of Commercial Courts at District level and appoint one or more persons to be the Judge or Judges of such Courts, from the cadre of Higher Judicial Service in the State.[6] Further, in all high courts, having ordinary civil jurisdiction,[7] the Chief Justice of the concerned High Court shall establish a Commercial Division, having judges nominated from Judges of the High Court who have experience in dealing with commercial disputes.[8] A Division Bench shall also be constituted by the Chief Justice of the High Court from amongst the Judges of the Delhi High Court having the requisite experience in dealing with commercial disputes to be the Judges of the Commercial Appellate Division.[9]

  3. Bar & Appeals: The Act puts a bar on entertaining any civil revision application or petition against any interlocutory order or an order on jurisdiction.[10] An Appeal from the decree/decision of the Commercial Court or Commercial Division of the High Court specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908 (as amended by this Act) and Section 37 of the Arbitration and Conciliation Act, 1996, may lie to the Commercial Appellate Division of the concerned High Court, within a period of 60 days from the date of judgment or order of the Concerned Commercial Court/Division.[11]

  4. Value thresholds: The specified value for which the commercial disputes in a suit, appeal or application shall be entertained by the Commercial Courts/Divisions, shall be determined in the following manner:[12]

  • Recovery of Money – The money sought to be recovered inclusive of interest, computed up to the date of filing of the suit or application.

  • Movable Property – The market value of the movable property on the date of filing of the suit, appeal or application.

  • Immovable Property – The market value of the immovable property on the date of filing of the suit, appeal or application.

  • Other Intangible Right – The market value of the said right as estimated by the plaintiff.

  • Counterclaim – The value of the subject–matter of the commercial dispute in such counterclaim as on the date of the counterclaim.

  • Arbitration – The aggregate value of claim and counter claim, in an arbitration or commercial dispute to be considered to determining whether such arbitration is subject to the jurisdiction of a Commercial Division, Commercial Appellate Division or Commercial Court.

5. Jurisdiction over Arbitrations: All matters pertaining to international commercial arbitrations shall be heard and disposed of by Commercial Division. Appeals or applications from other arbitrations filed on the original side of the High Court shall be heard and disposed of by the Commercial Division as well.[13] Other applications or appeals that shall ordinarily lie before any principal civil court of original jurisdiction (not being a High Court) shall be heard and disposed of by a Commercial Court.[14]


6. Timelines: The Act has introduced certain timelines to be strictly adhered to, these include:


  • All appeals before the Commercial Appellate Division shall be made within sixty days from the date of the impugned judgment/order disposed of within six months from the date of filing;[15]

  • Written statements to be filed within 120 days from the date of service of summons on expiry of which, the right shall stand forfeited;[16]

  • The plaintiff to file additional documents, if any, within 30 days of filing the suit;[17]

  • Application for leave to deliver interrogatories, to be decided by the Court within 7 days from the day of filing of the said application;[18]

  • All parties to complete Inspection within 30 days of written statement or written statement to the counterclaim, whichever is later;[19]

  • Each Party to submit a statement of admissions or denials of all documents disclosed and of which inspection has been completed, within 15 days of the completion of inspection or any later date as fixed by the Court;[20]

  • Any party given notice to produce any document shall not be given less than 7 days and more than 15 days to produce or express inability with sufficient reasons to produce such document;[21] and

  • Arguments to be concluded within 6 months from the date of the First Case Management Hearing.[22]


Analysis


The Act in itself is a commendable piece of legislation and marks a valiant effort towards reduction of undue burden over the Courts in India. However, there is justified skepticism as to whether the Act shall actually envisage the purposes for which it has been enacted. One major issue that the Government needs to significantly alter is electing the Judges for the Commercial Courts/Divisions from the acting Judges of the Concerned Courts. As discussed in the foregoing paragraphs, Judges in India already have significant workload. Giving them additional adjudicatory responsibilities and further expecting them to now hear commercial disputes on an expedited basis, does not comport to reality and shall entail further burden on them. It was rightly pointed out by the Chief Justice of India that, “Efficiency of the Judicial system is virtually connected with the development of the country.”[23] Simply putting the old wine in a new bottle shall not suffice. One alternative to this could be rehiring retired Judges to head these Courts/Divisions.


The Act however does suffer from certain inconsistencies, which are being cleared by the Courts in consonance with the Government of India on case-by-case basis with specific regard to the doctrine of interpretation of statutes. For instance, the Delhi High Court in ‘Ascot Estates Pvt. Ltd. v. Bon Vivant Life Style Pvt. Ltd.’, OMP (I) (Comm.) 16/2015 decided on: 10th December, 2015 with specific regard to the contradictions being created on the basis of the term “Commercial Appellate Division” under Section 10 of the Act observed:


“41. Thus, we have no hesitation in concluding that the Ordinance can by no stretch of imagination be construed as a special enactment concerning the subject matter of arbitral disputes. Rather the said Ordinance is a law giving birth to a class of ordinary Courts of the land exclusively reserved for the adjudication of commercial disputes of the specified value. The fact that incidental reference to arbitral disputes has been made therein does not clothe the said Ordinance with the status of a special law qua arbitration. This would require sub-Section 1 and sub-Section 2 of Section 10 of the Ordinance to be read down and the words ‘Commercial Appellate Division’ to be read as ‘Commercial Division’ concerning applications or petitions against which an appeal lies under Section 37 of the Arbitration and Conciliation Act, 1996.”[24]


Subsequent to the aforementioned ruling by the Division bench of the Delhi High Court, the Government of India amended the Ordinance Bill on 16th December 2015 substituting the words, “Commercial Appellate Division” by the words, “Commercial Division” in clause 7 proviso of the Bill and Clause 10 of the Bill.[25]


Another example is ‘Guinness World Record and Ors. v. Sababbi and Ors.’, CS(OS) No.1180/2011 & connected matters, wherein the Delhi High Court was called upon to decide whether the expression “filed or pending” in proviso to Section 7 of the Act meant that the Courts designated under the Act were to entertain all pending matters, irrespective of their value? The High Court inter alia observed:


“12. Keeping in mind the original intendment of Section 7, and the words as now found in the first proviso to Section 7 of the Act of 2015, one is left in no manner of doubt that with respect to IPR matters, whose statutes and the provisions are reproduced in the above chart, such matters once they are pending in the High Court as on the date of introducing of the Act of 2015 published in the Gazette Notification dated 1.1.2016, such matters will be heard and disposed of by the Commercial Divisions of the High Court even if the pecuniary jurisdiction of these matters are below Rs.1 crore.


13. Accordingly, this Court’s conclusion with respect to the language contained in the first proviso to Section 7 of the Act of 2015 is that with respect to IPR matters covered under the different provisions of the Trade Marks Act, Copy Right Act, Designs Act, Patents Act and Geographical Indication of Goods (Registration And Protection) Act, 1999 is that the pending suits and which are the subject matter of the words “filed or pending” contained in the first proviso to Section 7 of the Act of 2015, such suits or IPR matters, even if their valuation is below Rs.1 crore, the same will be dealt with and decided by the Commercial Division(s) of the High Court if their pecuniary jurisdiction valuation is above Rs. 20 lacs (for Delhi High Court) but below Rs.1 crore.”[26]


It would however be interesting to see how the Delhi High Court decides the jurisdiction issue for the fresh Intellectual Property cases, especially after the Delhi High Court (Amendment) Bill, 2014 that came into effect in October 2015, in terms of which the pecuniary jurisdiction of the Delhi High Court has been enhanced to Rs.2 Crores by Amending the Delhi High Court Act, 1966 and the Punjab Courts Act, 1918 as in force in Delhi.[27]


Be that as it may, it is beyond any doubt that adequate implementation of the Act certainly has the potential to go a long way and shall also repose confidence in the Judicial System once again. Wide definition of Commercial Disputes, expeditious disposal and summary judgment applications in respect of certain claims of commercial disputes are sure to prove advantageous in clearing the commercial disputes backlog. In the long run, the Act could also facilitate in changing the perception of investors about India as an investment destination. After a decade of extended deliberations and the current Government’s constant endeavour to improve the Indian Judicial system, it is beyond any cavil that this Act is a welcome move - Indeed!

Disclaimer: The views and opinions expressed in this article are based on extensive and thorough research. In no way does the author or the law firm claim ownership of the ideas and concepts presented in this paper. Information so provided is to be strictly considered for general reference of the subject matter, which has been adequately referenced. Specialist advice should be sought about any specific circumstances directly from the law firm.


REFERENCES

[1] S. Prakash, ‘Burden on Judiciary: What forced CJI Thakur to break down before PM’, available at: <http://www.hindustantimes.com/india/burden-on-judiciary-here-is-why-chief-justice-thakur-broke-down/story-6gFj51AWTpuAwl8waWNPoL.html> accessed on 09th May, 2016

[2] Ibid

[3] The Commercial Courts, Commercial Division And Commercial Appellate Division of High Courts Act, available at: <http://www.prsindia.org/uploads/media/Commercial%20courts/Commercial%20courts%20Act,%202015.pdf>

accessed on 09th May, 2016

[4] Section 1(2) of the Act, Ibid

[5] Section 2(1)(c) of the Act, Ibid

[6] Section 3 of the Act, Ibid

[7] Definition: Hearing by the High Court, as a court of first instance of a case filed directly in the High Court itself.

[8] Section 4 of the Act, Id 3

[9] Section 5 of the Act, Id 3

[10] Section 8 of the Act, Id 3

[11] Section 13 of the Act, Id 3

[12] Section 12 of the Act, Id 3

[13] Section 10 of the Act, Id 3

[14] Ibid

[15] Section 14 of the Act, Id 3

[16] Point 4, Amendment of First Schedule, Id 3

[17] Order XI, Disclosure and discovery of Documents, Id 3

[18] Order XI, Discovery of Interrogatories, Id 3

[19] Inspection, Id 3

[20] Order XI, Admission and denial of documents, Id 3

[21] Order XI, Production of documents, Id 3

[22] Time limit for the completion of a trial, Id 3

[23] LiveLaw News Network, ‘Exclusive; Commercial courts cannot work the way you propose: CJI to PM’, available at < http://www.livelaw.in/commercial-courts-cannot-work-way-propose-cji-pm/> accessed on 09th May, 2016


[24] Available at < http://lobis.nic.in/ddir/dhc/PNJ/judgement/10-12-2015/PNJ10122015OI162015.pdf> accessed on 10th May, 2016

[25] Press Information Bureau, Government of India Cabinet, ‘Amendments in the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015, as introduced in the Lok Sabha’, available at

< http://pib.nic.in/newsite/PrintRelease.aspx?relid=133395 > accessed on 10th May, 2016


[26] Available at < http://lobis.nic.in/ddir/dhc/VJM/judgement/19-02-2016/VJM15022016S11802011.pdf > accessed on 10th May, 2016


[27] The Delhi High Court (Amendment) Bill, 2014, Bill No.VI of 2014, available at

<http://www.prsindia.org/uploads/media/Delhi%20high%20court/Delhi%20high%20court%20(A)%20Bill,%202014.pdf> accessed on 10th May, 2016


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