Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordianance, 2015: A Critical Appraisal

Notorious for its bursting roster, the Indian judiciary has recently been put in the limelight for its less than speedy delivery of justice. The inefficiency of our legal system has made the Indian economy a harsh place for foreign as well as domestic investment to prosper leading to potential investors moving towards more investor-friendly nations. Thus, there has been a knocking need of an efficient dispute resolution mechanism for enforcement, award and recovery related to business matters. With the infusion of foreign direct investment (the “FDI”) in the Indian economy thanks to the Modi-driven initiatives, there existed a very visible vacuum for the resolution of commercial matters. The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance, 2015 (the “Ordinance”) was recently promulgated by the President on 23?10-2015. The Ordinance has been designed as per the lessons learnt from similar legislations in the United Kingdom, Singapore, France and United States of America.
The Indian legal system had never envisaged designated commercial courts before, and thus the Ordinance comes as a breath of fresh air to the litigation-harried souls. It was common say to find certain Judges of the District Court and High Court (of original jurisdiction) who primarily heard commercial disputes. However, these Judges never heard such matters exclusively. The Ordinance provides for a specific forum that deals with only commercial matters, and thus is of immense significance to the fostering of our young economy. The article is an attempt by the authors to appraise the Ordinance in light of the need of such infrastructure.
The Ordinance is critically analysed in Part I of the article. Part II of the article witnesses the conclusion along with the authors’ humble opinion on the promulgation of Ordinance.
Part I Demystifying the Ordinance

Establishment of Forums

The Ordinance mandates commercial courts to be constituted by State notifications in consultation with the High Court. Further, if the said High Court is vested with original jurisdiction,[1] then instead of a commercial court, the Chief Justice of the High Court (the “Chief Justice”) is required to establish a commercial division within the respective High Court. The Ordinance also ensures competence in justice dispensation by putting a requirement that the Judges in such commercial courts/divisions (the “specialised courts”) should have prior experience in handling commercial disputes.[2]

Appeal mechanism

After the establishment of these specialised courts, the Chief Justice is required to establish the Commercial Appellate Divisions (the “CAD”) in the respective States. The CADs will be empowered to entertain appeals against the orders of commercial divisions and the commercial courts.[3] It needs to be noted that the CAD shall be the final adjudicator on the matter since the Ordinance does not offer a statutory right to appeal against the order of CAD in the Supreme Court. Consequently, there is a cap of one appeal per commercial dispute under the Ordinance. This appeal should be filed within 60 days from the date of decision and the Ordinance prescribes a period of six months for its disposal.
The Indian system has long since been manipulated by legal practitioners through various delay inducing tactics like appealing or filing a revision petition for interlocutory and interim orders. However, the Ordinance makes sure that this shrewd strategy does not work for commercial disputes of specified value. It explicitly provides that an appeal can be made only against certain orders of the specialised courts.[4] Section 8 of the Ordinance further provides that a revision petition cannot be filed against the interlocutory order of a commercial court and any grievance related to the order can be appealed in the final decree only.
III. Broad ambit of “commercial dispute”
The Ordinance defines commercial disputes rather widely.[5] This has been done to ensure that most transactions ensuing even a tangent of commercial hue fall within its ambit. The commercial courts/divisions will exercise jurisdiction over a wide variety of matters related to the transactions of financiers and traders, bankers and merchants. All matters related to infrastructure and construction contracts, distribution and licensing agreements, joint venture agreements, shareholder agreements, subscription and investment agreements, intellectual property rights and tenders shall be brought in these specialised courts. Commercial divisions of High Courts are further empowered to entertain matters relating to the Designs Act, 2000 and Patents Act, 1970. The Ordinance further declares[6] that merely because an action involves the recovery of immovable property or realisation of monies out of immovable property, it will not cease to be a commercial dispute. Further, if a contracting party to the dispute is the State or a governmental instrumentality or a private body carrying out public functions, even then that would not affect the nature of a commercial dispute.

Pecuniary jurisdiction

Only the commercial disputes of value more than one crore rupees are allowed to be entertained by the commercial courts/divisions. The Ordinance also provides the mode of determining the specified value[7] of a dispute under Section 12 of the Ordinance.

Transfer of pending disputes

The Ordinance explicitly provides that any commercial dispute pending before any civil court, if of specified value, shall be transferred to the commercial court or the commercial division within that State, as the case may be.

Transfer of arbitration proceedings

The Ordinance mandates that all international commercial arbitration matters which are filed in the High Court, and all domestic arbitration matters filed in the Original Side of the High Court or which would ordinary be entertained before the Principal Civil Court of ordinary jurisdiction (District Court) will now be entertained by the CAD. Further, any pending suit of specified value under the Arbitration and Conciliation Act shall be transferred to the commercial division of the High Court or district, as the case may be.[8]
VII. Amendments to the Code of Civil Procedure, 1908
The Ordinance has amended the Code of Civil Procedure, 1908 (the “CPC”) to streamline and accommodate its pecuniary mandate in respect to the specified value of commercial disputes. The amendments are enumerated as follows:

The Ordinance, streamlining to global practices, has evolved a novel provision in the CPC prescribing that Commercial Court/division shall hold a “case management hearing” (the “CMH”) for the framing of issues and timeline. This has been done to ensure an effective and efficient dispute resolution system. The Supreme Court has time and again emphasised on the importance of framing issues for the Court.[9]Taking inspiration, the Ordinance has inserted Order 15-A in the CPC[10]thus catering to the unexplored horizon of mandatory meetings regarding the fixation of timeline for various levels of litigation. The specialised courts are empowered to pass orders regarding dismissal, right to plead, and payment of costs on non-compliance of any directions provided in the CMH.
The CPC now allows the parties to such disputes to apply for a summary judgment if the court could arrive at its adjudication solely from written pleadings. Previously, suits with not much of substantive issues would still have to go through the entire process enumerated under the CPC before the case could be dispensed with. The technicalities led to unwarranted but inordinate delays, both for the parties concerned and the entire docket system. To counter this event, the Ordinance envisages a process for a summary judgment which is on similar lines to summary suits provided in the CPC. The parties can request such a judgment in all matters of specified value at any level of litigation prior to the framing of issues. For this purpose, the Ordinance has introduced Order 13-A in the CPC. If a party approaches these specialised courts before the framing of issues, the Court is empowered to adjudge if there is a prima facie case made out on merits in favour of the party concerned, and pass a summary judgment on the said premise. However, it needs to be ensured that no principle of natural justice is contravened, and for this purpose, the Ordinance also requires both litigants to provide explanations and supplementary evidence to propagate or negate the passing of a summary judgment for the dispute concerned.
The Ordinance has introduced extensive provisions in the CPC relating to the award of costs and interests for commercial disputes. Previously, the CPC allowed for imposition of nominal amount of costs[11]which did not deter the frivolous, meritless and vexatious claims and counterclaims filed to stall the due process of law. The Ordinance provides the specialised courts with the flexibility to determine the costs to be paid by the impugned party.[12]The specialised courts are also empowered under the Ordinance to impose payment of costs on the successful parties if they’ve made frivolous or meritless claims. The Ordinance, upholding the clean hands doctrine, has ensured that the erring litigants irrespective of the final decree shall be penalised for their unethical conduct.

The authors greet the proposed amendments with a smile; however, would like to express the need of clarifications for its practical implementation. There is still uncertainty regarding the application of these provisions to suits in progress before various courts. Certain States have not yet constituted these specialised courts and have deferred it to 2016 after the Ordinance is approved by Parliament.
VIII. Fixing of timelines
To ensure expeditious disposal of cases, strict timelines have been provided under the Ordinance. The authors attempt to portray the novel effort of the Ordinance through the following table:

Prescribed period

Filing the written statement
120 days from being served with the summons.

Appeal to the CAD
60 days from the date of impugned order.

Application to adduce additional documents
Within 30 days of filing the suit.

Decision on application seeking leave to deliver interrogatories
Within 7 days of filing the application.

Answer to the interrogatories
Within 10 days through an affidavit. The Court has been empowered to extend this period as per its discretion.

Inspection of documents
Within 30 days of filing the written statement.

Application seeking directions for inspection of documents
Within 30 days of filing an application for such directions.

Inspection of documents post the abovestated direction
Within 5 days of the passing of order.

Submission of statements of admission/denial of all disclosed documents
Within 15 days of completion of the inspection. The Court has been empowered to extend this period as per its discretion.

Notice to produce documents
Relevant documents to be submitted within 15 days of receiving the notice.

First CMH
Within 4 weeks of submission of admission/denial of documents by all parties to the suit.

Should be concluded within 6 months of the first CMH.

Submission of written arguments
Within 4 weeks of the commencement of oral arguments. The court is empowered to allow revised written arguments to be filed within 1 week of conclusion of oral arguments.

Within 90 days of conclusion of arguments.

Prescribing detailed procedures

The Ordinance propounds a comprehensive and transparent mechanism regarding disclosure and discovery,[13] inspection,[14] admission/denial of documents[15] and verification of pleadings.[16] The detailing of such procedure aims to combat the denials and delays of valid submissions without rationale or disclosures. The only tangible flipside to this would be the compliance with extensive filing requirements for supplementing the mechanism.
Part II Authors’ take
The authors applaud the Government’s efforts in easing out the investor pain in dispute resolution. The passage of time shall reflect the acuity with which the State Governments act in this regard and notify the constitution of such commercial courts. It comes to the authors’ notice with comfort that the ruling party at the centre also rules eleven individual States and so the Ordinance should not face much opposition on the State level. The authors contend that the Ordinance was promulgated due to political favouritism towards the capitalist markets. The Modi Government has been etched as a Government catering to the rich more than the general populace of the nation.[17] Though the allegation seemed like the opposition’s vague cacophony at first, the policy agendas of the Modi Government do not refrain from unabashed prioritising of the rich over the poor. Nevertheless, the Ordinance shall be instrumental in creasing out the legal inadequacies prevalent in the Indian scenario.
However, the clouds of uncertainty are again on the rise. With the Ordinance lapse imminent in six weeks from reassembly of Parliament, the winter session of Parliament has commenced recently on 26-11-2015. A lot would depend on the parliamentary deliberation as most States and High Courts have postponed the constitution of these specialised courts till the Ordinance is approved. The authors believe that the approval, if granted, would trigger a landmark reform in Indian litigation. The Ordinance by the virtue of the timeline prescribed and the strict compliance mechanism should go a long way in instilling confidence amongst the market investors. However, the authors opine that there are certain shortcomings that the Ordinance is plagued by.
Firstly, the pecuniary threshold for sufficing jurisdiction of specialised commercial courts is very low which might result in an overburdened roster making it difficult for the court to stick to the prescribed timeline. Further, large commercial disputes may not enjoy the legal scrutiny that could have had been a part of the legislative intent for the Ordinance. Further, this would create practical anomalies since a dispute worth 99.5 lakh rupees will be heard differently than one which is valued only 50,000 rupees more. The pecuniary limits need to be revised, as per the humble opinion of the authors.
Secondly, there exists a potential overlap between the jurisdictions of the High Court’s Commercial Divisions exercising original jurisdiction and the High Court’s Commercial Appellate Divisions dealing with arbitration matters. While Section 10 of the Ordinance mandates all applications/appeals arising from arbitrations pending before the High Court under the Arbitration and Conciliation Act to be transferred to the commercial appellate divisions of the respective High Courts, Section 15 of the Ordinance mandates all applications pending before the High Court under the Arbitration and Conciliation Act to be transferred to the commercial divisions of the respective High Courts.
Thirdly, the Ordinance although laudably introduces CMH; however, it abstains from providing the logistics regarding it. The Ordinance fails to dictate sufficient particulars regarding the procedure, venue and necessary parties to the CMH conference.
The authors would like to conclude the article by iterating a humble observation. The authors believe that mere amendments to the CPC will not bring the reform that everybody is hoping for. Litigation-related barriers are intrinsic to the Indian legal machinery. The amendments brought are indubitably a noble attempt by the legislature to oil the cranked machine; however, there is an incessant need to assess these barriers holistically. The accountability and competence of justice dispensation has suffered its share of spotlight recently with the collegiums based furore. The authors believe that until and unless there is a transparent mechanism of dispute resolution, no amount of change and legislation tinkering will mark the change that is hoped for.
*Fourth year student, BBA LLB (Business Law Hons.), National Law University, Jodhpur, [email protected], +91-9636488084.
** Fourth year student, BBA LLB (Business Law Hons.), National Law University, Jodhpur, [email protected], +91-9799558526.
     [1]  The High Courts of Himachal Pradesh, Delhi, Bombay, Calcutta and Madras exercise original jurisdiction.
    [2]  The Judges shall be appointed by the State Government in concurrence with the Chief Justice of the respective High Court.
    [3]  See S. 13, The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance, 2015 (hereinafter “Commercial Courts Ordinance”).
    [4]  Appealable orders as identified under Or. 43 of the Code of Civil Procedure, 1908 and S. 37 of the Arbitration and Conciliation Act, 1996.
    [5]  See S. 2(1)(c), Commercial Courts Ordinance.
    [6]  See Explanation to S. 2(1)(c), Commercial Courts Ordinance.
    [7]  See S. 2(i), It provides that “Specified value in relation to a commercial dispute shall mean the value of the subject-matter in a suit as determined in accordance with S. 12 which shall not be less than one crore rupees or such higher value, as may be notified by the Central Government.”
    [8]  It needs to be noted, however, that a suit in which the final judgment has been reserved, it shall not be transferred.
    [9]  Ramrameshwari Devi v. Nirmala Devi, (2011) 8 SCC 249, para 14.
  [10]  See S. 17, Commercial Courts Ordinance.
  [11]  S. 35-A, Code of Civil Procedure, 1908 puts a cap of Rs 3000 beyond which no compensatory cost can be granted.
  [12]  See Cl. 2, Schedule, Commercial Courts Ordinance.
  [13]  See Or. 11, R. 1 CPC (Discovery by interrogatories: R. 2) via Cl. 4, Schedule Commercial Courts Ordinance.
  [14]  See Or. 11, R. 3 CPC via Cl. 4, Schedule, Commercial Courts Ordinance.
  [15]  See Or. 11, R. 4 CPC via Cl. 4, Schedule, Commercial Courts Ordinance.
  [16]  See Or. 6, R. 15-A CPC via Cl. 4, Schedule, Commercial Courts Ordinance.
  [17]  Abhinav Bhatt (Ed.), Yours is a “Suit-Boot ki Sarkar”, Rahul Gandhi Attacks Government in Parliament, NDTV, 20-4-2015 as available on <>.

Source: Legal news India

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