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Construction : Legal Zone | December 2015 | Source : CW-India

Towards Dispute Resolution

SAHIL NARANG and ASHWINI CHAWLA examine the Commercial Courts, Commercial Division and Commercial Appellate Division Of High Courts Ordinance, and its likely impact.

Earlier this year, the Rajya Sabha had referred the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill 2015 to the department-related Parliamentary Standing Committee on Personnel, Public Grievance, Law and Justice. While the report of the said Committee is awaited, the President of India has promulgated an eponymous Ordinance.

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance 2015 (´Ordinance´) was promulgated on October 23, 2015. In its 253rd Report (January 2015), the Law Commission of India had envisaged the setting up of the Commercial Courts, Commercial Division and the Commercial Appellate Division as a ¨pilot project¨, keeping in mind the larger goal of reforming the civil justice system in India, with a view to ensuring that cases are disposed off expeditiously, fairly and at a reasonable cost to the litigant.

This article examines the key characteristics of the Ordinance, and its likely impact.

Adjudicatory mechanism under the Ordinance
In view of the coming into force of the Ordinance, a ´commercial dispute´ in which the subject matter of the suit is valued at Rs 1 crore or more, will now be adjudicated by Commercial Courts at the District level, or by the Commercial Division within High Courts having ordinary original civil jurisdiction (ie, the High Courts of Delhi, Bombay, Calcutta, Madras and Himachal Pradesh). Notably, the Ordinance prescribes that all judges appointed by the state government to Commercial Courts, or nominated by the Chief Justice of the High Court to the Commercial Division or the Commercial Appellate Division, must have experience in dealing with commercial disputes.

Disputes to which the Ordinance applies
The definition of ´commercial dispute´ in the Ordinance, although quite widely worded, merely prescribes the broad contours. The aforesaid definition specifically includes within its sweep, all disputes arising out of, inter alia, (i) ordinary transactions of merchants, traders, bankers and financiers; (ii) construction and infrastructure contracts (including tenders); (iii) distribution and licensing agreements; (iv) shareholders´ agreements; (iv) JV agreements; (v) technology development agreements; (vi) exploitation of oil and gas reserves or other natural resources; and (vii) insurance and re-insurance. The Central Government may notify any other category or kind of dispute as a ´commercial dispute´.

Impact of the Ordinance on pending suits and arbitration proceedings
With the coming into force of the Ordinance, all pending suits and applications (including applications under the Arbitration and Conciliation Act, 1996) will now be transferred to the Commercial Court (if pending before a civil court), or to the Commercial Division within the High Court (if pending before such High Court), respectively. The aforesaid is subject to the exception of those suits or applications in which the final judgment is reserved by the Court prior to the setting up of the judicial infrastructure under the Ordinance. Further, all applications or appeals arising out of any arbitration under the Arbitration and Conciliation Act 1996, in which the subject matter is a ´commercial disput´ to which the Ordinance applies, will now be transferred to the Commercial Appellate Division within the High Court (if already pending before such a High Court).

Applicable procedure: Amendments to the CPC
The Ordinance requires Commercial Courts and the Commercial Division of the High Court to try a suit transferred to it or filed before it in accordance with the provisions of the CPC, as amended by the Ordinance.

Certain significant amendments such as ´case management hearings´, clearly defined timelines, costs regime discouraging frivolous litigation, etc, have been brought about by the Ordinance to the CPC, with the underlying intention being to limit the scope for procedural delays, bring more clarity to the applicable rules, and discourage frivolous claims by litigants.

Appeals
Any person aggrieved by any decision taken by the Commercial Courts or the Commercial Division of a High Court may appeal against the same to the Commercial Appellate Division within such High Court. Notably, the Commercial Appellate Division is to ´endeavour´ to dispose off such appeals within six months.

In conclusion
The actual effect of the Ordinance will be known only as and when Commercial Courts and the Commercial Division within High Courts are set up by the state government and the Chief Justice of the High Court, respectively.

Nonetheless, the Ordinance tried to overhaul the existing judicial infrastructure vis-a-vis high value commercial disputes. It is therefore likely that parties may in the near future choose between resolving commercial disputes in accordance with the Ordinance, and referring the same to arbitration.

It can be said that the Ordinance, which not only carves out a separate regime under existing judicial infrastructure but brings about far-reaching amendments to the CPC, is likely to facilitate foreign investment and, in turn, the all-round development of the Indian economy.

About the Authors:
Sahil Narang and Ashwini Chawla are Senior Associates at Khaitan & Co.

 
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