The
Commercial Courts, Commercial Division and Commercial Appellate Division of
High Courts Act, 2015 was widely hailed as a seminal legislation and a
significant step towards enhancing India’s stature in the Ease of Doing
Business index.
The said Act
was recently re-christened as ‘The Commercial Courts Act, 2015’ (“the
Act”) by way of an Ordinance, which
ushered in certain significant amendments to the statute as it was originally
enacted.
The
Act, amongst others, provides for the constitution of Commercial Courts,
Commercial Appellate Courts and Commercial Divisions of High Courts to
adjudicate commercial disputes having a value, originally of at least one crore
rupees, which has since been reduced to three lakh rupees by the Ordinance.
The
Commercial Courts are to be constituted at the district level by the state
government, after consultation with the concerned High Court.
As far as
the High Courts having ordinary civil jurisdiction are concerned, the Chief
Justice is required to constitute a Commercial Division having one or more
Benches consisting of a Single Judge for exercising jurisdiction under the Act.
The Chief Justice is also required to constitute Commercial Appellate Divisions
having one or more Division Benches for purposes of exercising the jurisdiction
and powers conferred on it under the Act.
The term
‘Commercial Dispute’ is defined in the widest possible terms so as to cover
within its ambit almost all kinds of disputes in relation to a ‘commercial
transaction’, including disputes relating to transactions between merchants,
bankers, financiers, traders, etc. and in relation to shareholders
agreements, mercantile documents, and partnership agreements, amongst others.
The Act
further provides that the provisions of the Code of Civil Procedure, 1908
(“CPC”) shall, in its application to any suit in respect of a commercial
dispute of a specified value, stand amended in the manner specified in the
Schedule.
It is
worthwhile to note that the Act contemplates certain significant departures from
the CPC, which appear to be aimed at expediting the procedure of resolution of
suits involving commercial disputes.
Some of
these provisions are as under:
1. Order XI
(introduced in substitution of Order XI of the CPC)
A plaintiff
or a defendant is required to file a list of all documents
(and copies) in its power, possession, control and custody pertaining to the
suit, including not only documents relied upon in the plaint or the written
statement, but also documents relating to any matters in question in the
proceedings, irrespective of whether they are in support of or adverse to the
plaintiff or defendant’s case [Rules 1(1) and 7 of Order XI]. Further, the
plaint and written statement should contain a mandatory declaration on oath
from the plaintiff or defendant, as the case may be, that all such documents in
its power, possession, control and custody have been disclosed and that the
plaintiff or defendant does not have any other documents [Rules 1(3) and 1(9)
of Order XI]. It is also provided that the duty to disclose documents which come
to the notice of a party shall continue till the disposal of a suit [Rule 12 of
Order XI].
2. Order
XIII A
The Court is
entitled to decide a claim (or part thereof) pertaining to any Commercial
Dispute without recording oral evidence [Rules 1(1) and 1(2) of Order XIII A]. Such summary
judgment may be granted where, on an application filed in that regard, the Court
considers that: (a) the plaintiff or defendant has no real prospect of
succeeding or successfully defending a claim; and (b) there is no other
compelling reason why the claim should not be disposed of before recording of
oral evidence [Rule 3 of Order XIII A].
The Court
also has the power and discretion to do any of the following:
· pass
orders directing judgment on the claim;
· pass
a conditional order;
· dismiss
the application;
· dismiss
part of the claim and pass a judgment on the remaining part of the claim;
· strike
out the pleadings;
· pass
further directions to proceed for a Case Management Hearing.
3. Order XV A
The Court
shall hold the first Case Management Hearing not later than four weeks from the
date of filing of affidavits of admission or denial of documents by the parties
[Rule 1 of Order XV A].
In a Case
Management Hearing, the Court, after hearing the parties and once it finds that
there are issues of fact and law that require to be tried, may pass an order
[Rule 2 of Order XV A]:
·
framing issues between the parties after examining pleadings, documents and
documents produced before it, and on examination conducted by the
Court under Rule 2 of Order X, if required;
· listing
witnesses to be examined by the parties;
· fixing
the date by which affidavits of evidence are to be filed by the parties;
· fixing
the dates on which evidence of the witnesses of the parties are to be recorded;
· fixing
the date by which written arguments are to be filed before the Court by the
parties;
· fixing
the date on which oral arguments are to be heard by the Court; and
· setting
time limits for parties and their advocates to address oral arguments.
4. Order
XVIII
Parties are
required to file succinct written submissions within four weeks prior to
commencing oral arguments. No adjournments are to be ordinarily allowed for
purposes of filing the written submissions unless the Court, for reasons
recorded in writing considers it necessary. The Court also has the power to
limit the time for oral submissions having regard to the nature and complexity
of the matter.
5. Order XIX
The Court
has the power to regulate the evidence as to the issues on which it requires
evidence and the manner in which such evidence may be placed before the Court.
Further, the affidavit of evidence has to comply with certain requirements, as
prescribed.
6. Order XX
The
Commercial Court, Commercial Division, or Commercial Appellate Division shall
pronounce judgments and issue copies to all parties within ninety days of
conclusion of arguments. Unfortunately, the construct and manner of implementation of the
Act has, figuratively speaking, turned out to be a case of old wine in a new
bottle.
Firstly, the
‘constitution’ of a new hierarchy of Courts under the Act is a misnomer, since
all that the Act does is to entrust this specialized jurisdiction of Commercial
Disputes to the existing hierarchy of High Courts exercising ordinary original
civil jurisdiction and district courts in other States.
Secondly,
although the Act provides that the CPC will, in its applicability thereto,
stand amended in several respects, the fact that the same hierarchy of Courts
has been entrusted with both commercial and non-commercial matters (often
appearing in a common cause list on a given day), has seriously whittled down
the efficacy of the Act.
Further, on
a practical level, it is generally observed that these Courts even deploy a
common diary of dates while deciding upon the scheduling of a commercial matter.
Given the
said practical challenges, it is indeed doubtful whether the salutary
objectives of the Act can be achieved. Our past experience with similarly
progressive statutes (the curious case of the Arbitration and Conciliation Act,
1996 immediately comes to mind) cautions us not to be overly optimistic on that
front.
In the
author’s view, it is of utmost importance that a database of Judges who have
‘real’ experience in dealing with commercial disputes is prepared and
maintained. On a pedantic and perhaps more expedient view of this essential
pre-requisite, judges of the High Court and district judges are often presumed
to possess such experience by dint of their seniority alone.
However,
that may appear to be a rather simplistic view of the matter. In fact,
experienced litigators would attest that one of the most prevalent and
oft-repeated comments heard in Court, when a plaintiff embroiled in commercial
disputes seeks to expedite his/its matter, is on the lines of ‘there is no
urgency in your matter; you can always be compensated by interest and costs’.
Therefore,
the need of the hour is to man the Courts constituted under the Act with judges
who have proven specialized experience, knowledge and expertise of handling
commercial disputes in an adjudicatory capacity or as legal practitioners,
coupled with ‘training and continuous education’ of the judges so selected in
terms of Section 20 of the Act.
If
implemented in right earnest, this could become the impetus for the Act to
become a game changer as it would not only ensure that the Courts constituted
under the Act would be better equipped to approach its implementation in an
organized and concerted manner but would also allow for formulation of a
consensus on the ‘best practices’ to be adopted by such Courts.
Further, the
conventional view of the Court as being a ‘passive’ arbiter of commercial
disputes will have to give way to a ‘pro-active’ approach if the provisions of
the Act are to be given full amplitude and play in their implementation.
The Court
will have to be cognizant of the trade practices, transactional models and
structures, customs and usages typical to particular categories of commercial
disputes and in many cases, the approach taken by Courts in foreign
jurisdictions on similar disputes/issues. The Court will also have to
subject every case to a rigorous and critical scrutiny at every stage and
employ the ‘tools’ provided by the statute, even suo motu (wherever
permissible), with the over-riding objective being speedy and just resolution.
Lastly, and
perhaps, most importantly, since every hearing in a matter means expending of
valuable public time by the Court and cost by the exchequer and the parties
concerned, it is necessary, nayimperative, that any adoption of
deleterious and time-wasting tactics be curbed with an iron hand and that the
time lines prescribed in the statute are uncompromisingly treated as sacrosanct.
In his
celebrated treatise Justice, Courts and Delays, Mr Arun
Mohan argues that in addition to costs which are compensatory in
nature, and often only notional, actual reform requires “removal of incentives
for delay or the advantages gained thereby”. This requires the Court to strike
an equitable balance between the relative disadvantage that a plaintiff is already
burdened with while approaching the Court and the natural tendency of a
defendant to stall an effectual adjudication of a matter by resorting to
hyper-technical and dilatory tactics.
Recently, Chief
Justice of India Dipak Misra suggested that the High Courts
form think tanks of judges, lawyers and academicians to consider and
explore innovative modes and
initiatives to reduce delays and pendency of cases.
Undoubtedly, such a consultative process amongst the stakeholders is the need
of the hour.
In the
context of the Commercial Courts Act, introspection on some, if not all, of the
issues raised above will help advance the spirit behind the Chief Justice’s
clarion call.
Original Article by By Ajit
Warrier - Partner at Shardul Amarchand Mangaldas & Co.
