Towards further improving India’s ranking in the World Bank’s ‘Doing Business Report’, which, inter alia, considers dispute resolution environment in a country as one of the parameters for doing business, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018 (“Ordinance”) was promulgated on 3rd May, 2018. The Ordinance sought to amend The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (“Principal Act”) and came into force with immediate effect.
Further thereto, The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill, 2018 (which sought to replace the Ordinance), has been passed by both the houses of the parliament and has received the Presidential assent on 20th August 2018. It is deemed to have come into force from 3rd May 2018 as the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018 (“Amendment Act”).
Salient features of the Amendment Act can be divided into two parts, as enumerated below:
Provisions amended by the Amendment Act:
Reduction in the specified value
Earlier, pecuniary jurisdiction of the said bodies were – all commercial disputes involving claims of INR 1 Crore or more.
However, the Amendment Act has reduced this limit to – at least INR 3 Lakhs or a higher value to be notified by the Central Government.
Constitution of Commercial Courts, where High Courts have ordinary original civil jurisdiction
Earlier, Commercial Division were to be set up in High Courts which already exercised ordinary original civil jurisdiction and Commercial Courts (equivalent to District Courts) were to be set up in states where the High Courts did not have ordinary original civil jurisdiction.
However, the Amendment Act has removed this limit and allowed states to constitute Commercial Courts where High Courts have ordinary original civil jurisdiction.
Earlier, counterclaims, of at least INR 1 Crore, filed in a Civil Court, were transferred to the Commercial Division of the High Court or a Commercial Court, as the case may be.
The Amendment Bill has removed this provision in its entirety.
New concepts introduced by the Amendment Act:
Constitution of Commercial Appellate Courts
Except the territories over which the High Courts have ordinary original civil jurisdiction, state governments may notify Commercial Appellate Courts at the district judge level. Appeals against the order of a Commercial Court (below the level of a district judge) will lie before the Commercial Appellate Court.
A new chapter on Pre-Institution Mediation and Settlement has been incorporated, which provides that:
- where no urgent relief is sought by the parties, mandatory mediation shall be conducted in such manner and procedure as may be prescribed by rules made by the Central Government.
- mediation may be conducted by authorities constituted under the Legal Services Authorities Act, 1987 (such as the National and District Legal Services Authority).
- mediation process is required to be completed within a period of 3 months and may be extended by another 2 months.
- during the period that parties remain occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963.
- signed settlement between the parties will have the same effect as an arbitral award under the Arbitration and Conciliation Act, 1996.
It is anticipated that, reduction of the specified value of commercial disputes from INR 1 Crore to INR 3,00,000/- will enable the parties to approach the lowest level of subordinate courts for speedy resolution of commercial disputes and will create a positive image amongst the investors about the strong and responsive Indian legal system.
However, it has also been argued that the transfer of all commercial disputes above INR 3 Lakhs may overburden the Commercial Courts and defeat the objective with which they were established. This appears to be yet another attempt at tribunalisation or separating from the premier institutions of the judiciary, namely the high courts, disputes in relation to vast number of commercial transactions which was not the intention of the Principal Act. It appears to be a propagandist amendment without any real merit. Only time will tell how the Amendment Act will take effect.
Also, one will have to wait to see, how the compulsory mediation and settlement mechanism may be utilised for adjudicating commercial disputes and for matters connected therewith.
Megha Manjunatha, Associate