In 2014, the World Bank ranked India 142nd out of the 189 countries investigated for the Ease of Doing Business Report, slipping further from the 2013 rank of 134. One of the biggest factors behind India’s reputation as a bad place to invest is the length and cost of litigation in the country and the proposal to introduce “commercial courts” has therefore been amongst the most important. These commerical courts or commercial divisions in high courts would be fast-track courts with hi-tech infrastructure for compulsory e-filing, digitising of documents, and case-management conferences. They would resolve disputes in high-value commercial transactions in a speedy and efficient manner.
History of the commercial courts proposal
In 2003, the Law Commission of India’s “Proposals for Constitution of Hi-Tech Fast Track Commercial Divisions in High Courts” were accepted by the Union Cabinet and introduced in the Parliament as the Commercial Divisions of High Courts Bill, 2009. It was approved by the Lok Sabha and the Rajya Sabha’s Select Committee made changes, but the then Union Law Minister felt the need for further changes and referred it back to the Law Commission. Later, the 20th Law Commission prepared two discussion papers and after circulation in the Expert Committee, in January this year, prepared the Commercial Divisions and Commercial Appellate Divisions in High Courts and Commercial Courts Bill, 2015 (“the Bill”) and released it in the form of its 253rd Recommendation.
Constitution and jurisdiction of commercial courts
The constitution and jurisdiction of the proposed commercial courts in India is slightly complicated. Since the aim is to ensure that commercial disputes are quickly resolved, the commercial division of each high court in the country would need to be the court of first instance for such disputes and must necessarily enjoy ordinary original civil jurisdiction. However, only 5 of the 24 high courts, that is, the High Courts of Bombay, Madras, Calcutta, Delhi, and Himachal Pradesh, possess ordinary original civil jurisdiction. When the High Court of Judicature at Hyderabad is not invested with ordinary original civil jurisdiction therefore, the commercial division of the High Court will be able to exercise such jurisdiction.
Due to such differences in jurisdiction, the Bill proposes to constitute a commercial division for those high courts which possess ordinary original civil jurisdiction and for those without the requisite jurisdiction, to constitute commercial courts in that state or union territory.
The other issue is that pecuniary jurisdictions differ among the high courts. The proposal is for all commercial disputes with a value of over Rs. 1 crore to be heard by the commercial divisions of high courts or the commercial courts. The pecuniary jurisdiction of the Bombay and Calcutta High Courts is 1 crore. In the Madras High Court, it is Rs. 25 lakhs, in Delhi, it is Rs. 20 lakhs, and it is Rs.10 lakhs in Himachal Pradesh. In order to maintain uniformity and more importantly, to pass the constitutional test of non-discrimination, the Bill proposes to raise the pecuniary jurisdiction of the Himachal Pradesh, Madras, and Delhi High Courts to Rs. 1 crore and only then constitute a commercial division within them. In other states and union territories, commercial courts will be constituted with the requisite pecuniary jurisdiction.
Appointment and training of judges
Judges in the commercial divisions of high courts and in commercial courts are proposed to be nominated by the chief justice of the respective high court, having regard to their expertise and experience in commercial litigation. Since commercial disputes, for instance, those relating to intellectual property laws, are highly technical in nature and require specialist knowledge on the subject, the Law Commission also recommended that such judges be regularly trained to impart knowledge on the latest trends and global good practices in commercial transactions.
Role of judges
While the introduction of commercial courts in India is a positive step for reducing the backlog of cases and ensuring the speedy redressal of disputes, there is a need for a more fundamental modification to the litigation culture in India. At present, adjournments are granted without any consequences, litigants regularly indulge in delaying tactics, and judges take far too long to deliver judgments after arguments have ended. The pace and intensity of litigation is decided by the litigants, which is a dangerous practice because it means that the country’s dispute resolution is litigant-controlled, instead of judge-controlled.
With the institution of the commercial divisions and commercial courts, judges must take a more active role in the resolution of the dispute; they can no longer be playing the role of a supervisor, rather they must be the manager or moderator. In this regard, an important provision in the Bill is that of “case-management hearings”.
Recommended by the Law Commission after examining the practice of holding “pre-trial conferences” in Singapore, case management hearings are held within four weeks of the institution of the suit to examine the possibility of a settlement and to ensure smooth conduct by litigants. For this purpose, the judge may frame the issues for and between the parties, fix dates for evidence to be recorded, and set time limits on the oral arguments of the parties.
Another provision is to award judges with the power to order an increase in court fees as a result of an increase in the number of hearings taken up, or the number of adjournments asked for, by the parties. This also widens the control that the judge has over the proceedings, besides ensuring the quick redressal of the dispute.
Definition and monetary value of “commercial dispute”
The definition of a “commercial dispute” in the Bill is very wide with enough scope for future additions. It covers more or less every kind of commercial transaction of interest to foreign and Indian investors.
As discussed before, the value of a dispute must be not less than Rs. 1 crore to qualify as a commercial dispute for the purposes of the Bill and in order to be tried in the commercial divisions and commercial courts.
The Bill also provides for amendments to the Code of Civil Procedure, 1908 to apply to the commercial divisions and commercial courts in India and make the resolution of commercial disputes faster and more efficient. These include directions for filing written statements and documents within a specified time period, a stricter court fees and costs regime, time bound oral arguments and delivery of judgments, and a new procedure of “summary judgment”.
The 2009 Bill provided for appeals from the commercial divisions and the commercial courts to be heard by the Supreme Court of India, but the Law Commission found this provision to be ill-advised. Turning the Supreme Court into the court of first appeal for every commercial dispute will only add to the already existing backlog of cases as every party involved in a transaction valuing 1 crore or more will necessarily have the means to appeal. As such, the overall time taken to resolve the dispute will increase, defeating the very purpose of the Bill.
Instead, the Law Commission has recommended the constitution of commercial appellate divisions within the high courts, which will be empowered to hear appeals from orders of the commercial divisions and the commercial courts.
The Law Commission has also recommended that when constituting the commercial divisions of high courts, they should be situated, wherever possible, in the same building as the high court itself. The states and union territories which will establish commercial courts may do so in buildings different from that of the high court of the state.
Once established, the courts must be equipped with facilities supporting video-conferencing, e-filing, computerisation of evidence and audio-visual recording of proceedings, among other global best practices. This will ensure that the evidence is well-managed and the general conduct of proceedings is regulated.
Commercial courts in other countries
England and Wales: There are two established commercial courts in England and Wales – the Commercial Court and the Technology and Construction Court, both of which are divisions of the Queen’s Bench Division of the high courts in the country.
In order to dispose cases expeditiously and efficiently, the procedural law in the country includes the provision of “overriding objective.” This gives the courts the power to initiate settlements, issue directions regarding the timely production of evidence and completion of arguments, and order either party to pay costs to the other, if it has breached procedural rules or taken undue advantage of the court’s time and resources.
France: In France, commercial disputes are heard in the Tribunal de Commerce or TDC; a court specialised in commercial litigation. Judges of the TDC are normally lay judges, but have extensive training in the law relating to their respective fields.
In order to maintain efficiency, if a dispute is one of great urgency, or there is danger of irreparable harm, or the issues of facts and law are clearly in favour of the moving party, an expedited proceeding or référé may take place in the TDC. In such a proceeding, a judgment may be obtained in a matter of days or a couple of weeks. The French judicial system also does not award large-scale punitive damages or allow class-action suits, both of which limit the exposure to liability of companies doing business in the country.
However, the lack of strict case-management practices means that despite hearing only commercial disputes, the TDC takes on an average 1-2 years to dispose off a case.
Germany: The citizens of Germany repose great confidence in their judicial system, mainly because of the Advisory Council’s many efforts to make the system quick, efficient, and modern. The country does not have specialised commercial courts; the judicial system constitutes three separate court systems: the ordinary courts, the specialised courts, and the constitutional courts and within the ordinary court system, the Landgericht courts serve as the court of first instance for commercial cases above DM 10,000. The judges in the Langericht courts usually comprise of a professional judge and two lay judges nominated from the private sector.
These courts have been successful in contributing to the swift clearance of cases, mostly because of the strict enforcement of procedural time limits.
Singapore: With the advent of new institutions and judicial procedures over the last few decades, Singapore has quickly emerged as a dispute resolution hub. A unique legal culture exists in Singapore which the Law Commission’s 253rd Recommendation has very rightly taken inspiration from: the right to bring a legal action in court carries with it the strict duty of respecting court procedure and time.
In 2002, specialist commercial courts were set up in Singapore: the Admiralty Court and the Intellectual Property Court, which are presided over by judges with expertise in maritime law and intellectual property law respectively. Singapore also established the Singapore International Commercial Court in 2015 to cater to high-stakes, cross-border commercial transactions in the region and the rest of the world. These courts, combined with a practice of strict case management, make Singapore a haven for international and domestic dispute resolution.
The new government of India has promised to make India an attractive place to invest and one of the ways to do so is to set up robust infrastructure for the disposal of commercial disputes. While it is clear that the Indian judicial system can only benefit from instituting separate commercial divisions and commercial courts, they must be backed by a more fundamental change to the litigation culture, strong case-management practices, and a commitment by the litigants and judges alike, to deliver disputes in an efficient and time-bound manner.
(Prapti Patel is a student of the Indian Law Society’s Law College in Pune.)