This article is authored by Anmol Chaudhary, who has recently finished the Integrated Course (B.A. LL.B.) at the University School of Law, Rayat Bahra University, Mohali, Punjab throughout the internship at LeDroit India.
KEYWORDS:
∙ Commercial Courts Act, 2015
∙ Dispute resolution
∙ Commercial litigation
∙ Ease of doing business
∙ Judicial reform
∙ India judicial system
∙ Landmark Judgments
1. ABSTRACT:
The Commercial Courts Act of 2015 came into existence to both enhance business operations through faster dispute settlement and provide efficient solutions for commercial matters which involve substantial financial stakes. This paper evaluates the success of the Act in speeding up dispute resolution since its implementation by investigating legal modifications alongside institutional performance alongside case processing statistics and stakeholder feedback. The research evaluates the effects of later modifications including the 2018 and 2022 amendments which broadened jurisdictional scope and procedural options. The study uses actual commercial court data together with case timelines and important court decisions to measure performance. The study reveals that although infrastructure development and awareness have improved there are ongoing issues with procedural delays and judicial staff shortages and inconsistent implementation throughout states which limit the Act’s maximum potential. The paper offers policy and institutional recommendations to reach the desired efficiency and efficacy of commercial litigation.
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2. INTRODUCTION:
The Commercial Courts Act of 2015 explains that commercial disputes stem from regular business dealings between merchants and bankers and traders and financiers. The law includes disputes regarding mercantile documents along with export or import of merchandise and sale of goods and distribution and licensing agreements and joint ventures and shareholders agreements and subscription and investment agreements and intellectual property rights and insurance and reinsurance and contracts for services and construction and infrastructure contracts and other commercial matters.
The Act establishes a particular monetary threshold which determines if commercial disputes qualify to be handled by Commercial Courts. The 2018 amendment to the Act sets the minimum dispute value at three lakhs rupees or the Central Government can establish a higher amount. The value requirement exists to direct only high-value commercial cases toward these specialized courts.
The domain of commercial disputes does not encompass specific matters which are explicitly removed from its scope. The domain of commercial disputes does not cover issues concerning immovable property used for personal purposes and cases under the Indian Succession Act, 1925 and the Hindu Marriage Act, 1955 or comparable personal laws.
3. STRUCTURE AND JURISDICTION OF COMMERCIAL COURTS IN INDIA: The Commercial Courts Act, 2015 establishes a tiered structure for adjudicating commercial disputes:
∙ Commercial Courts: These are established at the district level in all jurisdictions, except in areas where High Courts have ordinary original civil jurisdiction.
∙ Commercial Divisions: These are set up in High Courts that have ordinary original civil jurisdiction. ∙ Commercial Appellate Divisions: These are established in all High Courts to hear appeals against decisions of Commercial Courts and Commercial Divisions.
The jurisdiction of these courts extends to all suits and applications relating to commercial disputes of the specified value. They have the authority to try all suits of a commercial nature, including counterclaims. Commercial Courts exercise jurisdiction over international commercial arbitration matters, even in cases where the subject matter of the arbitration is not a commercial dispute of the specified value.
The Act also provides for the transfer of pending suits that meet the criteria of commercial disputes to the appropriate Commercial Courts or Commercial Divisions. This ensures that all relevant commercial matters are heard by these specialized courts, promoting consistency and expertise in commercial dispute resolution.
The legislation establishes a procedure to move ongoing legal cases that qualify as commercial conflicts toward their proper Commercial Courts or Commercial Divisions. The system guarantees that every relevant commercial case will receive its hearing from specialized courts which leads to uniformity and professional handling of commercial conflicts.
4. KEY PROVISIONS OF THE COMMERCIAL COURTS ACT, 2015:
The Commercial Courts Act, 2015 establishes the framework for district-level Commercial Courts and High Court Commercial Divisions. The Act grants state governments together with their High Courts the authority to form Commercial Courts at district levels through Section 3. The Higher Judicial Service of the state provides judges who lead these courts.
Section 4 of the Act permits the establishment of Commercial Divisions within High Courts that hold ordinary original civil jurisdiction according to the territorial jurisdiction of High Courts. The Chief Justice of the applicable High Court assigns judges who possess expertise in commercial dispute resolution to these divisions.
According to the 2015 Commercial Courts Act, commercial courts and high court commercial divisions have the authority to decide business disputes worth at least one crore rupees. This cap is lowered to three lakh rupees by the Ordinance.
Even in areas where high courts have regular original civil jurisdiction, the Ordinance permits state governments to set up district-level commercial courts.
State governments may establish district-level commercial appellate courts to hear appeals from commercial courts lower than a district judge in areas where high courts lack original jurisdiction.
The 2018 amendment to the Act expanded the formation of Commercial Courts by introducing new provisions. The amendment enabled Commercial Courts to be established within territories where High Courts have ordinary original civil jurisdiction including Chennai, Delhi, Kolkata, Mumbai and Himachal Pradesh.
5. CASE MANAGEMENT HEARINGS:
The Law Commission Reports clearly specified that Commercial Courts were meant to adopt a fast-track procedure in the resolution of commercial disputes. This fast-track procedure would be similar to fast-track arbitration referred to in the 176th Report on ‘Arbitration and Conciliation (Amendment) Bill, 2002’, subject to suitable modifications for the purpose of fast-track procedure in a civil court. The CCA, 2015 adopted this suggestion and designated strict timelines with respect to filing of pleadings, framing issues and dealing with discovery or document production requests. These courts can further hold case management hearings where at a preliminary stage itself, the court would fix specific dates for the filing of evidence, and date of hearing arguments. Additionally, under Order 57 of the Civil Procedure Code, Commercial Courts can also order summary judgment at any stage in the litigation process prior to framing of issues.
The Law Commission Reports clearly specified that Commercial Courts were meant to adopt a fast-track procedure in the resolution of commercial disputes. This fast-track procedure would be similar to fast-track arbitration referred to in the 176th Report on ‘Arbitration and Conciliation (Amendment) Bill, 2002’, subject to suitable modifications for the purpose of fast-track procedure in a civil court. The CCA, 2015 adopted this suggestion and designated strict timelines with respect to filing of pleadings, framing issues and dealing with discovery.
6. COSTS:
The Law Commission Reports explain that infrequent imposition of costs leads to increased frivolous litigation and delaying tactics in commercial suits which have no connection to actual case expenses. The CCA 2015 grants Commercial Courts broad authority to apply cost penalties against parties who lack reasonable claims while failing to make settlement efforts and causing delays in matter resolution. The Act makes changes to the CPC system for determining cost payment responsibilities and establishes specific timeframes and amounts for cost settlements.
7. APPEALS:
The Commercial Courts Act (CCA) 2015 establishes two appellate judicial systems after the 2018 amendments. The 2018 amendment to the CCA establishes two appellate structures which operate differently based on High Court jurisdictional powers. Commercial Courts that operate below the district judge level have their appeals heard by Commercial Appellate Courts at the district level while the next level of appeals goes to Commercial Appellate Divisions within High Courts. The High Court which hold original jurisdiction hear appeals from both district-level Commercial Courts and High Court Commercial Divisions through their Commercial Appellate Divisions. All appeals under Order 43 CPC are brought before these courts because they specify which CPC orders can be appealed. The CCA 2015 includes an interesting limitation on appeal rights despite its six-month appeal period for disposal because it restricts the ability to file appeals. According to Section 8 of the CCA, 2015 no civil revision application or petition will be accepted against any interlocutory order of a Commercial Court, including its jurisdictional orders.
8. INFRASTRUCTURE AND TRAINING OF THE JUDGES OF ‘COMMERCIAL COURTS’:
The Law Commission in their 188th and 253rd Reports stressed upon the requirement of sufficient number of judges with ‘adequate’ experience in civil and commercial laws in position to man the Commercial Courts. The Select Committee of Rajya Sabha while criticizing the 2009 Bill suggested that the existing vacancies in High Courts need to urgently filled up since these benches would face an increased workload due to the bulk transfer of commercial matters from district courts. The 253rd Report suggested that judges of the commercial court need to have ‘demonstrable expertise and experience’ in commercial litigation and would be appointed from amongst the higher judicial service. This new and separate cadre of judges would be selected through a well-defined recruitment process and entitled to a higher pay scale and better perquisites. They would also receive special training for six months at the National Judicial Academy or relevant State Judicial Academy with a view towards their continuous professional education.91 In spite of such detailed attention, the CCA, 2015 addressed this issue superficially. Even though Sections 19 and 20 stipulate that the State government is in charge of providing these courts’ judges with sufficient infrastructure and training resources, the absence of legislative mandates on High Courts and State Governments have effectively renamed existing courts as commercial courts due to infrastructure and judicial selection.
9. RECENT AMENDMENTS TO THE COMMERCIAL COURTS ACT:
∙ The Commercial Courts (Amendment) Act 2018: Key Changes:
The Commercial Courts (Amendment) Act 2018 made important changes to the original Commercial Courts Act 2015. One key change was lowering the pecuniary jurisdiction threshold from Rs. 1 crore to Rs. 3 lakh. This change allowed more commercial disputes to be handled by these specialized courts.
The amendment also established Commercial Courts at the district level. This aimed to make it easier for people to access justice for commercial disputes in places outside the High Courts’ jurisdiction.
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Another important addition was the Pre-Institution Mediation and Settlement (PIMS) under Section 12A. This rule requires parties to try mediation before filing a suit, unless they need urgent interim relief. The mediation process must be finished within three months from the application date, with a possible two month extension.
∙ Impact of Amendments on Pecuniary Jurisdiction and Case Management:
The reduction in financial limits has led to a significant increase in the number of cases that qualify as commercial disputes. This change has made specialized commercial courts more accessible to small and medium enterprises involved in lower-value disagreements.
The introduction of PIMS has greatly affected case management. By requiring parties to try mediation before going to court, the amendment aims to lessen the load on courts and encourage quicker resolution of disputes. Successful mediations lead to settlements that have the same status and effect as arbitral awards under Section 30 of the Arbitration and Conciliation Act, 1996.
The establishment of Commercial Courts at the district level has extended the reach of these specialized courts. This change has reduced the need for litigants to travel to High Courts for commercial matters, which may speed up the resolution process.
∙ Technological Advancements in Commercial Dispute Resolution:
The 2018 amendment also highlighted the role of technology in resolving commercial disputes. The Act now requires the setup of a system for electronic filing (e-filing) of pleadings, documents, and applications.
Additionally, the amendment brought in rules for keeping electronic records of evidence and for using video conferencing to record witness statements. These updates aim to simplify the litigation process and cut down on delays.
The Commercial Courts (Statistical Data) Rules, 2018, were also put in place. They require all Commercial Courts to track and report on the number of suits, applications, and appeals filed and resolved. This information must be posted on the respective courts’ websites, which promotes transparency and allows for better monitoring of their performance.
These technological updates, along with the other changes, show a strong effort to modernize and speed up the process of resolving commercial disputes in India.
10. LANDMARK JUDGMENT:
∙ Kandla Export Corporation vs M/S. Oci Corporation: the Supreme Court of India clarified that appeals against the enforcement of foreign arbitral awards are governed solely by Section 50 of the Arbitration and Conciliation Act (A&C Act), not Section 13 of the Commercial Courts Act, even if the award is enforced by a Commercial Division of the High Court. This decision emphasizes that the A&C Act is a self-contained code for arbitration matters, and its specific provisions, including those limiting appeals, take precedence.
∙ Alexander Luke vs. Aditya Birla Money Ltd.: the Division Bench of the High Court of Kerala had the opportunity to analyses the question as to whether an appeal from an order passed by the Commercial Court/Additional Subordinate Judges Court in a matter which arises under the Arbitration and Conciliation Act, 1996 would be appealable before the High Court as an arbitration appeal. The issue arose as a preliminary objection as to maintainability of the arbitration appeal and the grounds raised by the counsel for the respondent was that Section 10(3) of the Commercial Courts Act would have an overriding effect over the provisions of the Arbitration Act and thus, the appropriate forum to raise an appeal against the order passed by the Commercial Court would be the District Court, as per Section 3-A of the Act, 2015.
∙ Shwas Homes (P) Ltd. v. Union of India: the petitioners had sought to challenge the validity of Sections 2(1)(i), 3, 629, 730, 10, 1131, 1232, 12-A33, 15, 1934 and 2135 of the Commercial Courts Act as the same are arbitrary, discriminatory and ultra vires the Constitution of India as also prayed to quash the Notification dated 24-2-2020 issued by the Government of Kerala, designating subordinate courts as commercial courts. Even though the learned Single Judge had addressed the anomalous situation created with the advent of Commercial Courts, whereby a commercial dispute which arises from an award or proceeding under the Arbitration Act which is below the specified value, that is pecuniary value of Rupee three lakhs will be considered by the District Court with an appeal lying to the High Court while an identical dispute of the specified value will have to be decided by the Commercial Court with an appeal to the District Court, after a considered view of the dictums laid down in M.G. Mohanty case36 and Jaycee Housing case37, the Court upheld the provisions of the Commercial Courts Act as such a merely distinction is not sufficient to bring out arbitrariness nor the same can be rendered to be ultra vires the Constitution.
11. HOW COMMERCIAL COURTS ARE ESTABLISHED UNDER THE ACT?
The Act: The Act, under Section 3, says that the State Governments may, after consultation with the concerned High Court having jurisdiction in relation to the State, by notification, specify such pecuniary value of the commercial disputes […] 260 words, 1 image, reading time ~ 1:02 1 comment only for The Commercial Court Act – is passed by Parliament and now open to public scrutiny. The Government of State may also establish commercial courts at the level of the High Court where the High Court exercises original civil jurisdiction.
12. MAY AN ACTION BE INITIATED UNDER THE ACT WITHOUT FIRST GOING THROUGH MEDIATION?
Under the Act, parties must seek to settle their commercial disagreements through mediation before filing a suit with the commercial court. But where the party commencing the dispute applies for some interlocutory relief from the commercial court then the dispute does not have to be referred to mediation. The mediation is provided by the Government under the Legal Services Authorities Act, 1987.
13. HOW AND WHEN CAN AN APPEAL BE MADE AGAINST THE ORDER OF A COMMERCIAL COURT?
The appeal from the order of a commercial court below district level lies to the commercial appellate court at the district level. Also, the order from a commercial court at district level or the commercial division of a High Court can be appealed to the commercial appellate division of the High Court. The Act provides that an appeal will lie from the “decision” of the Commercial Court or Commercial Division of a High Court to the Commercial Appellate Division of that High Court within a period of sixty days from the date of “judgment” or “order” as the case maybe. The Act also provide that the court dealing with an appeal against an order passed by a commercial court must attempt to dispose off the same within a period of six months from the date of filing of such appeal.
14. WHAT IS A CASE MANAGEMENT HEARING ACCORDING TO THE ACT?
After the parties have filed their affidavit of admission or denial of documents, the court must set a timeline for conducting the trial by a case management hearing. During the case management hearing the court will set the date for the following landmarks of the trial:
∙ the date upon which the affidavit of evidence is to be filed by the parties
∙ the date upon which the oral evidence of witnesses is to be recorded before the court ∙ the date upon which written arguments are to be filed before the court by the parties ∙ the date upon which oral arguments are to be made by the parties before the court ∙ the time limits for the parties and their advocates in making oral arguments.
In setting the timelines out, the court must ensure that the parties complete their arguments within six months from the date of the first case management hearing.
15. CONCLUSION:
It is absolutely apparent that a sound dispute resolution leads to effective enforcement of contract. Effective enforcement of contract helps safeguard the commercial interests constituted in a contract. Safeguarded interests instill confidence in the investor. Investors invest and the money hence flows in which allows industries to set up in the Country. Investments and industries from international investors helps accelerate India’s growth almost instantly, entitling India to higher GDP, more national income, more employment, more stability in the economy, favourable forex, adequate forex reserves, modernization and technologies
acquiring.
Since it is our collective obligation to fairly and amicably address business issues with the methods possible through legal remedies available to us. We as professionals will surely achieve our aim to be “Viksit Bharat” by 2047 if we can help the industry and regulator through our highest level of professionalism, educated awareness and effectively use alternative dispute resolution procedures.
16. REFERENCES:
∙ The Commercial Courts Act, 2015
∙ Clash of the Courts — An analysis into the complications intertwined in the Commercial Courts Act, 2015
∙ Commercial Courts In India
