Thursday, 12 November 2015

THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND COMMERCIAL APPELLATE DIVISION OF HIGH COURTS ORDINANCE, 2015

INTRODUCTION
The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 was brought into force through the promulgation of the ordinance on 23rd of October, 2015. The same has been re-drafted in view of the recommendations made by the Law Commission of India in its 253rd Report which provides for the constitution of Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes claiming a specified value of not less than Rs 1 crore. The term “commercial dispute” has been given a very wide scope in the definition clause. It includes ordinary transaction of merchants, bankers, financier, traders, exports or imports of merchandise or service, carriage of goods, transaction related to aircrafts, distribution and licensing agreements, agreement for sale of goods, insurance, re-insurance, commercial disputes as notified by Central Government, etc.
The Ordinance aims to promote economic growth by simplifying procedure of redressal of commercial disputes and thereafter improving the faith of investors and business houses in the India judicial system. The establishment of Courts and benches solely for the adjudication of such disputes will also reduce the time taken during litigation.
KEY PROVISIONS OF THE ORDINANCE
     I.        Definitions

The ordinance provides for various essential provisions coupled with some important definitions.

a.    Commercial dispute: A commercial dispute is defined to include any dispute related to transactions between merchants, bankers, financiers, traders, etc. Such transactions deal with mercantile documents, partnership agreements, intellectual property rights, insurance, etc.

b.    Commercial courts: As per the Ordinance, Commercial courts, equivalent to district courts, may be set up in all states and union territories, by the state governments after consulting with their respective high courts.

c.    Commercial Divisions in high courts: Commercial divisions may be set up in those high courts which exercise ordinary original civil jurisdiction, that is, the High Courts of Delhi, Bombay, Calcutta and Madras. They are to be set up by the respective state governments after consulting with their high courts. Such bench shall consist of a single judge, nominated by the Chief Justice of the High Court.

d.    Commercial appellate divisions: Commercial appellate divisions may be set up in all high courts to hear appeals against: (i) orders of commercial divisions of high courts; (ii) orders of commercial courts; and (iii) appeals arising from arbitration matters that are filed before the high courts. The chief justice of the High Court shall nominate such judges of the High Court who have prior experience in dealing with commercial disputes to be appointed as judges in appellate divisions.

   II.        Constitution and Jurisdiction of Commercial Courts

a.    Constitution- The state government may, in consultation with the High Court constitute such number of commercial courts at a district level as it may deem necessary. However, no commercial court shall be constituted where the High Court has ordinary original civil jurisdiction. The judges of commercial courts shall also be appointed by the State Government after consultation with the Chief justice of the High Court from the cadre of Higher judicial services in the state.

b.    Jurisdiction of commercial courts and commercial division of high courts: The commercial courts shall entertain all suits related to commercial disputes wherein the value of the subject matter shall not be less than 1 crore or such higher value as may be notified by the Central Government.

c.    Jurisdiction in case of Arbitration Matters: In case the subject matter of an arbitration is a commercial dispute of specified value (i.e. Rs 1 crore or above) and any application or appeal has been filed in the High Court, the same shall be heard and disposed by the Commercial Appellate Division of such High Court. This shall also include any application or appeal that has been filed at the original side of the High Court. This provision applies to all arbitration proceedings irrespective of if it is an international commercial arbitration or not. However, if any appeal or application arising out an arbitration which would ordinarily lie before the principal civil court of original jurisdiction in a district shall now be filed before the commercial court in the district having jurisdiction over such arbitration.

d.    No such suit, application or petition shall be entertained by the commercial court or the commercial division in respect of which the jurisdiction of the civil court is expressly or impliedly barred under any other for the time being in force.

 III.        Calculation of Specified Value (i.e Valuation of the subject matter)

a.    In case the relief sought is for recovery of money, the money sought to be recovered including the amount of interest shall be taken into account for determining such Specified Value.

b.    In case the relief sought relates to movable property or to a right therein, the market value of the property as on the date of filing the suit shall be taken into account for determining such Specified Value.

c.    In case the relief sought pertains to immovable property or to a right therein, the market value of the property as on the date of filing the suit shall be taken into account for determining such Specified Value.

d.    In case the relief sought pertains an intangible right, the market value of the said rights as estimated by the Plaintiff shall be taken into account for determining such Specified Value.

e.    In case any counter claim is raised in any suit, the value of the subject matter of the commercial dispute in such counter claim as on the date of the counter claim, shall be taken into account. ]

f.     In case of Arbitration: The total value of the claim and counter claim shall be the basis of determining if such arbitration is subject to the jurisdiction of  a Commercial court or commercial division.

 IV.        Appeals and Transfer of Pending Suits

a.    Appeals to the commercial appellate division must be made within a period of 60 days of the order of the Commercial Division or Commercial Court. The commercial appellate division shall dispose of such appeals within a period of 6 months from the date of filing of the appeal.

b.    Transfer of pending suits: All suits of a value of Rs 1 crore or more that are pending in the high court shall be transferred to the commercial division after it is constituted. Similarly, suits currently pending in the district courts, with a value of Rs. 1 crore or more would be transferred to the commercial court. However, a suit will not be transferred if a final judgment on the matter is pending.

   V.        Amendments to the provisions in Code of Civil Procedure for the purpose of this ordinance.

The Schedule to the Ordinance provides for certain amendments to the provisions of the CPC for the purpose of trial of a suit in respect of a commercial dispute. Following are some of the amendments:-

·         At the time of institution of suits under Section 26 of CPC, affidavit has to be filed under Order VI, Rule 15A so as to keep a record of the various commercial disputes filed.
·         The Court has the discretion to determine cost under Section 35 of CPC to decide which party will be liable to pay the cost, the quantum of cost and when the cost has to be paid. The term “costs” has also been widened to include fees and expenses incurred by witnesses, legal fees and any other expense incurred in connection with the proceeding.
·         Section 35A (2) has been omitted.

·         After the expiry of the first 30 days provided to the defendant to submit written statement, the court has the discretion to grant to the defendant a maximum extension of one hundred and twenty days from the date of service of summons to file their written statement in Order V, Rule 2 and also in Order VIII, Rule 1.
·   
      A separate form has been provided in Rule 3A of Order VI for pleading in Commercial Courts. Further Rule 15A has been added for the verification of pleadings in such courts.

·      Rule 2A has been added to Order VII which provides for seeking of interest under Section 34 in commercial disputes.

CONCLUSION

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Court Ordinance, 2015 has created a separate section in the Indian Judicial system for the adjudication of commercial disputes falling within its ambit. The primary objective of the Ordinance is the speedy disposal of matters which are commercial in nature. Procedural law has also been amended as well as created to cater solely to commercial disputes in order to facilitate the smooth functioning of Commercial Courts. The Ordinance is a boon for those investors and businessmen who have been stuck in litigation due to the long pendency of matters before courts which deal with matters related to diverse fields of civil law. 

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