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04 Nov 2015

Special courts to adjudicate commercial disputes in India

On 23rd October 2015, the President of India promulgated a new ordinance called “The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance 2015”. This is an important Ordinance in the larger context of making it easy to do business in India, as it seeks to create a separate set of courts and appellate mechanism to address “commercial disputes”, which the ordinance defines as those disputes arising out of:

 

  • Ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents including enforcement and interpretation of such documents.
  • Export or import of merchandise or services.
  • Issues relating to admiralty and mercantile law.
  • Transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters.
  • Carriage of goods.
  • Construction and infrastructure contracts including tenders.
  • Agreements relating to immovable property used exclusively in trade and commerce;
  • Franchising, distribution, and licensing agreements;
  • Management and consultancy agreement;
  • Joint venture and shareholders agreements.
  • Subscription and investment agreements pertaining to services industry including outsourcing and financial services.
  • Mercantile agency and mercantile usage.
  • Technology and development agreement.
  • Intellectual property rights relating to registered and unregistered trademarks, copyrights, patent, design, domain names, geographical indications and semiconductor and integrated circuits.
  • Sale of goods and provisions of services,
  • Exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum.
  • Insurance and reinsurance.
  • Contracts of agency relating to any of the above.

Such other commercial disputes as may be notified by the Central Government.

This Ordinance envisages State Governments constituting Commercial Courts at the district level after consultation with the concerned High Court. Commercial courts will have jurisdiction to try all suits and applications arising within the entire territory of the state over which it has territorial jurisdiction.  All existing commercial cases are envisioned to be transferred to these commercial courts. If any arbitration application regarding commercial application is pending, it too is expected to be transferred to the Commercial Court or Commercial Appellate Division. 

There is special provision made for determining the specific value in terms of movables, immovables, intangibles etc. Commercial courts will conduct a case management hearing with respect to the pending matters and give directions for speedy disposal of the same. Any person aggrieved by the decision of the commercial court or Commercial Division of the High Court may appeal to the Commercial Appellate Division. All Appeals will be disposed of within six months.

Statistical data of the cases, applications and writs will be maintained and published every month in the website of the relevant High Court. The High Court will have the power to notify practice directions. State Governments shall be bound to provide infrastructure facilities to the Commercial Courts and Commercial Appellate Division. State Governments will also have to establish training facilities for judges appointed to the Commercial Courts and Commercial Appellate Division.

Commercial courts will follow the procedures laid down in the Code of Civil Procedure, 1908.  The Provisions of the CPC in respect of Commercial Disputes shall stand amended and is specified in the schedule of the ordinance.

 Some important changes arising out of this Ordinance are listed below:

  • Section 35 of the CPC is amended to add wider powers with respect to ordering costs in relation to proceedings. While deciding costs, the court can consider the conduct of the parties, result of the proceeding, whether the claim or counterclaim was frivolous, whether settlement procedure was unreasonably refused, whether the frivolous claim resulted in wasting time of the court, and such other matters. This will definitely bring a welcome change in terms of litigation strategies and tactics, with frivolous and delay tactics being penalized.
  • New forms introduced for submission of pleading and verification of pleading.
  • Order 8 Rule 1 is amended whereby on expiry of 120 days after receipt of service of summons, written statement shall not be taken on record.
  • If Defendant disputes jurisdiction of the commercial court, s/he should narrate the reasons for doing so and shall state which court ought to have jurisdiction. If the Defendant disputes Plaintiff’s valuation, he should give his own statement of value.

 

  • Any allegations in Plaint that are not denied as stipulated in Rule 3A shall be considered as admitted. If any facts are denied, defendant should state reasons for denial and if he intends to put forth a different version, s/he must state his/her own reason.
  • Order 11 of CPC has been extensively amended. All documents relating to the case shall be filed along with the Plaint. Plaintiff is even mandated to produce documents relating to the matter in question irrespective of whether the same is in support of or adverse to the Plaintiff’s case. In case of urgent filings, the court can grant leave to file documents. Plaintiff shall not be allowed to rely on any documents which are not produced along with the Plaint. Similarly, Defendants are allowed to produce all documents along with the written statement and not thereafter. Parties are allowed to deliver interrogatories to the other. Court may impose exemplary cost if anyone willfully or negligently fails to disclose documents. Parties should make a statement of admissions and denials explicitly with respect to correctness and contents of documents, existence and execution of documents, issuance and custody of document. Each party shall set out reasons for denying the document. Bare and unsupported denials shall not be deemed to be denials of the document.
  • With respect to electronic records, specific provisions have been made stating that furnishing of printouts, supported with an oath, shall be sufficient compliance.
  • Many sections of CPC have been made not applicable to commercial courts. A new Order 13A has been inserted whereby court can decide a claim even without having oral evidence.
  • A new Order 15A has been added whereby courts shall hold a “case management” hearing within 4 weeks immediately after admission or denial of documents by all the parties. “Case management” is a new approach in India. The intent of “case management” hearings is for the court to come up with a timetable after consulting all parties. (In the current scenario, each party operates independently of the others). After hearing the parties, the court will pass an order for framing of issues, listing witnesses to be examined by the parties, fixing date of submitting evidence, fixing date of oral arguments, setting time limit for lawyers to make oral submissions etc. In every “case”, arguments must be closed not later than 6 months from the first “case management” hearing. If successful, this is a significant step towards streamlining the process of justice delivery in India, specifically by reducing the scope for time-wasting tactics that often drag litigations for years.
  • Non-appearance of an advocate on the case management hearing shall not be a reason for adjourning the hearing. Only time will tell how successful this laudable step will be in curbing a commonly-used tactic.

 

As explained above, this Ordinance will have far-reaching implications in the disposal of commercial disputes. As such, it is indeed a welcome development. However, it remains to be seen how many State Governments will support this change by proactively providing infrastructure for commercial courts and effectively implement the spirit of this Ordinance. Of course, much also depends on what form the legislation will finally take after it comes up for discussion in the parliament.

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