Salient Features of the Bill

(a) Commercial Dispute:

Under the Bill, a comprehensive definition of “Commercial Dispute” has been provided which means

“a dispute arising out of ordinary transactions of merchants, bankers and traders such as those relating to enforcement and interpretation of mercantile documents, export or import of merchandise, affreightment, carriage of goods, franchising, distribution and licensing agreements, maintenance and consultancy agreements, mercantile agency and mercantile usage, partnership, technology development in software, hardware, networks, internet, website and intellectual property such as trademark, copyright, patent, design, domain names and brands and such other commercial disputes which the Central Government may notify”.

The explanation to the definition clarifies that a dispute, which is inherently commercial, shall not cease to be a Commercial Dispute merely because it also involves an action for recovery of immovable property, for realization of monies out of immovable property given as security or for taking any other action against immovable property. Further, a dispute will be deemed to be a commercial dispute if the immovable property involved in the dispute is used for trade or any commercial use. Also, an application under section 34 or section 36 or an appeal under section 37 of the Arbitration and Conciliation Act, 1996 shall be deemed to be a commercial dispute if the amount in dispute or claim relates to a Specified Value. Therefore, the Bill proposes a wide, exhaustive and exclusive definition of Commercial Dispute which encompasses within its scope disputes not only between tradesmen but also relating to commercial property, both immovable and movable including intangible property like patents, copyrights, trademarks, etc. It also empowers the Central Government to add to the list of Commercial Disputes as and when necessary.

(b)Jurisdiction:

As per the provisions of the Bill, the Commercial Division of the High Court shall exercise its jurisdiction in the following cases:

1. suits relating to Commercial Disputes of Specified Value and any execution proceedings arising thereof

2. suits, applications, appeals (including appeals from single judge of High Court) or proceedings relating to Commercial Disputes of Specified Value pending in the High Court or the courts subordinate to the High Court and transferred to the Commercial Divisions

3. appeals against interim orders passed in suits by subordinate courts to the High Court where the Commercial Dispute is of Specified Value

4. applications under Sections 34 and 36 and appeals under Sections 37(1)(a) or (2) of the Arbitration and Conciliation Act, 1996, provided they are of Specified Value.

Further, the Bill also proposes to amend the Arbitration and Conciliation Act, 1996 appropriately to include Commercial Divisions within the definition of Court.

However, Commercial Disputes on which other Courts or Tribunals have exclusive jurisdiction will not go before the Commercial Division.

(c) Procedure:

The manner of determination of the Specified Value in a suit, appeal or application is specified in Section 8 of the Bill which overrides any conflicting provision for valuation under any law for the time being in force. Depending on the subject matter of the suit, appeal or application, for determining the specified value the following shall be taken into account:

• the money sought to be recovered under suit plus interest if any, or
• the market value of the moveable property or immoveable property, or
• the market value of the intangible rights as estimated by the plaintiff, or
• the value of the commercial dispute in the counter-claim

The above values are calculated as on the date of filing of the suit, appeal, application or counter-claim. The suits, appeals or applications arising under the Bill are to be adjudicated upon by the judges of High Court and the procedure to be followed by the Commercial Divisions is the same as specified in the Code of Civil Procedure, 1908 (“CPC”), except to the extent otherwise provided under this Bill.


The Bill specifies the documents to be filed along with the plaint and allows the service of summons on the defendant through electronic mail. Specific timelines for filing of written statement, counter claims and rejoinder have been stipulated to speed up the proceedings. The Commercial Division may also appoint a Commissioner for conducting the cross examination and re-examination of witness and parties. The Bill also empowers a single judge of the Commercial Division to hold case management conferences, fix schedules for finalization of issues, cross-examination of witnesses, filing of written statements and oral submissions, record evidence and appoint Commissioners. All parties must file the written submission before commencement of oral submissions.

The Commercial Division is required to pronounce the judgment within 30 days of the conclusion of the argument. In case of an application arising under Section 34 or 36 and appeals under Section 37(1) (a) and (2) of the Arbitration and Conciliation Act, 1996, the Commercial Division would need to make efforts to dispose the matter within one year of serving notice on the opposite party. Appeals against the order and decree passed by the commercial division are to lie before the Supreme Court.

Critical Analysis

Advantages:

(i) The Bill is undoubtedly a step forward to enable fast and efficient delivery of justice in India and has manifold advantages. This Bill seeks to bring in uniformity across the country with regard to Commercial Disputes of a Specified Value as such disputes would be dealt with by the Commercial Divisions of High Courts. This will help reduce the burden on the District Courts and facilitate the speedy disposal of cases in India.

(ii) A laudable provision in the Bill is that it mandates the plaintiff to file documents like inter alia affidavits containing his as well other witnesses’ statements in examination- in-chief, application for discovery and production of documents and all other material considered necessary by him at the time of filing the plaint itself to quicken the process. Under the normal court procedure, these documents are usually filed at the time of trial and would add to the delay owing to the several adjournments taken by the parties to file the same.

(iii) Further the provision of allowing a single judge of the Commercial Division to fix schedules for finalization of issues, cross-examination of witnesses, filing of written statements and oral submissions, record evidence etc. during case management conferences is a radical change introduced by this Bill and will help the object of disposing the matter in an efficient manner within 2 years. Also empowering the same court i.e. the Commercial Divisions with power to execute its own decrees and orders would further hasten the process.

(iv)  Another positive step is the provision empowering the Commercial Division to appoint a Commissioner with considerable experience to conduct the cross examination and re-examination of parties and witnesses. Delegating the process of cross examination and re-examination will speed up the hearing of the case. The Bill also emphatically mandates the Commercial Divisions to pronounce judgment within 30 days from the conclusion of arguments which gives hope of timely justice to the aggrieved. A direct appeal to the Supreme Court also avoids the long and often perilous appeals procedure under the CPC.

(v) The Bill has derived further impetus from revolution in technology and has allowed the service of summons and issuance of copies of the judgments via email. Currently, under the CPC onlyforeigners without an agent in India could be served via email. However, for Commercial Disputes, the Bill has broadened the scope and has legalized service of summons through email on any defendant.

(vi) Establishment of commercial courts in UK and US (especially London and New York) are undoubtedly some of the most successful and enduring instances of judicial administration and have been applauded by the business community. A step in the same direction by India not only projects its determination to fast track justice but also to meet the demanding world standards. This should fortify the trust of foreign investors in the Indian Judicial system and further encourage foreign investment.

Disadvantages:

Inspite of the aforesaid advantages of the Bill, the said Bill also contains certain serious lacunas or loopholes which needs to be addressed before the Bill comes into force.

(i) It appears from the definition of ‘commercial dispute’ that it covers ‘realisation of monies out of immovable property given as security’. In all likelihood, all recovery of debts due to banks and financial institutions, wherein the amount due exceeds Rs.5Cr hereafter would be through the Commercial Division of High Courts. However, in terms of section 18 (Bar of Jurisdiction) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 read with section 6 of the Draft Bill the jurisdiction of the “Commercial Division” of the High Courts would be ousted, in view of the statutory bar in both the legislations. This kind of dichotomy will give rise to enormous confusion in the both the bar and bench and lead to utter confusion. These conflicts shall need to be addressed accordingly.

(ii) Additionally, in most of the disputes, pending before the courts, government is a party. Definition of ‘commercial dispute’ should specifically include disputes with both State and Central Government as well as Public sector enterprises wherein they are a party to the contract, pursuant to the tender provisions or otherwise. This is essential to achieve the object of the Bill, which is to resolve disputes involving high stakes speedily and effectively and thereby facilitating increase in commerce and trade.

(iii) It is pertinent to note that even Specific performance suits with specified value would be a ‘commercial dispute’, if the immovable property involved in the dispute is put to commercial use. However, the expression ‘commercial use’ is also not defined and may lead to further interpretational issues/debates/contradictory positions being taken by different High Courts.

(iv) When the Debts Recovery Tribunals (DRTs) were set up, we have all witnessed, in-ordinate delay in setting up of DRTs as well as in getting the matters transferred to DRTs. Cases which were pending before various courts for quite a long period were in fact heard afresh by DRTs, as per the new procedures prescribed (insisting on submission of paper books and hearing the matter afresh etc.,). This has also resulted in delaying the matter further. Setting up of Commercial Division of High Courts would also lead to a similar situation. Further wrongful transfer of a matter to the Commercial Division of a High Court by a court can also lead to unnecessary delays.  Therefore, the issue of transfer of cases to the Commercial Division will have to be look from technical and logistical perspective to avoid unwarranted delays.

(v) Draft envisages that before the legislation comes into force in a particular state, the Central Government will be consulting the Chief Justice of the concerned High Court as well as the concerned State Government or State Governments. This may result in Commercial Division of High Courts being set up in different state at different point of time and can create confusion in matters wherein the jurisdiction for dealing with the matters involving ‘commercial dispute’ can lie in either of the jurisdiction.

(vi) Further, scope of the expression ‘commercial dispute’ needs to be clarified further, so as to remove the existing ambiguity. What all matters would lie before the Commercial Division of a High Court needs to be clarified. Otherwise once a matter gets transferred maintainability would have to be decided first as per Section 8(2) of the draft Bill and thereafter there is a chance of the matter getting transferred back to the original court. This also can delay the whole process. On such a decision by Commercial Division of a High Court, an appeal may lie before Supreme Court as per section 13(2) of the Bill. Whole scheme of the legislation is based on the definition of expression ‘commercial dispute’.  

(vii) In terms of section 9(3) of the draft Bill for the purpose recording statement in cross examination and re-examination of parties and witnesses, the Commercial Division may appoint an advocate of not less than 20 years standing at Bar as Commissioner. When an advocate can become a High Court judge with a lesser standing 20 years experience requirement is on the higher side and this will create dissent amongst the members of the Bar Further, it is recommended that Senior Civil Judge can act as Commissioner. Already, the lower judiciary is short on man power, which is one of the primary reasons for large number of pending cases in the judicial system. This recommendation in the draft Bill would only increase the work load of the lower judiciary, which may eventually cause more delay.

(viii) Further, situations wherein cross examination and re-examination of parties and witnesses would be permitted also have to be made clear. This cannot be granted as a routine, as this would only help in delaying the process.

(ix) It is envisaged that commercial dispute with high threshold value would be dealt on fast track basis. However, consequences of non compliance of the timeframe stipulated in the legislation/time frame fixed through case management conferences by the judge are not seen provided. What needs to be addressed is proper identification of reasons for delay and an effective mechanism to address each such areas of delay.

(x) Section 10 provides for certain decision by bench of two judges. However, there are no clear provisions for situations to resolve the deadlock, if these two judges differ.

(xi) The anomalous position that for disputes involving low stakes, there will be a three tier dispute resolution, whereas for resolution of disputes, involving high stakes, there would be only two tier mechanism also needs to be addressed.

Concluding Comments

To conclude, the following important issues needs to be considered seriously before the draft Bill comes into force:

• Whether transferring of “commercial disputes” from the lower courts will, in effect reduce the burden of the lower courts and lead to speedy disposal of matters?
• Whether the suggestion a single judge to manage the volumes of cases be workable and lead to efficient implementation of the laws and fasten the disposal process or would be further lead to the clogging of the courts?

Apart from addressing the aforesaid issues, the legislature may consider the following points:

(i) Insertion of provisions in the draft Bill similar to the existing practice of submitting to a dispute resolution mechanism, through arbitration, may be provided so that if the disputing parties are agreeable, such matters can be dealt before Commercial Division of a High Court, subject to the minimum pecuniary limits. This would also help in resolution of commercial disputes involving high stakes and the clauses submitting to the jurisdiction of a Commercial Division of a High Court can form part of the contract. This can be by way of separate agreement, once a party in dispute raises a claim exceeding Rs.5 crs. Limiting the scope of appeal in cases wherein Parties submitting to the jurisdiction of Commercial Division of a High Court can also be though of by making the judgement binding on both the Parties as in the case of dispute resolution by arbitration.

(ii) In general, before setting up of Commercial Division of a High Court thorough assessment of existing cases which are likely to be transferred, its status etc., needs to be carried out.
(iii) Possibility of arranging sitting of Commercial Division of a High Court Benches at various centres also may be explored, depending upon the volume of cases that are likely in a particular centre.