The Commercial Courts Act, 2015: Bridging the gap between Promise and Reality

Bar & Bench August 17 2018

Ajit Warrier

“Rules of procedure are not by themselves an end, but are a means to achieve the ends of justice, and the tools forged are not intended as hurdles to obstruct the pathway to justice…Procedure is meant to subserve and not rule the cause of justice.” - Justice, Courts and Delays by Arun Mohan, Senior Advocate.

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 was widely hailed as a seminal legislation and a significant step towards enhancing India’s stature in the Ease of Doing Business index.

The said Act was recently re-christened as ‘The Commercial Courts Act, 2015’ (“the Act”) by way of an Ordinance, which ushered in certain significant amendments to the statute as it was originally enacted.

The  Act, amongst others, provides for the constitution of Commercial Courts, Commercial Appellate Courts and Commercial Divisions of High Courts to adjudicate commercial disputes having a value, originally of at least one crore rupees, which has since been reduced to three lakh rupees by the Ordinance.

The Commercial Courts are to be constituted at the district level by the state government, after consultation with the concerned High Court.

As far as the High Courts having ordinary civil jurisdiction are concerned, the Chief Justice is required to constitute a Commercial Division having one or more Benches consisting of a Single Judge for exercising jurisdiction under the Act. The Chief Justice is also required to constitute Commercial Appellate Divisions having one or more Division Benches for purposes of exercising the jurisdiction and powers conferred on it under the Act.

The term ‘Commercial Dispute’ is defined in the widest possible terms so as to cover within its ambit almost all kinds of disputes in relation to a ‘commercial transaction’, including disputes relating to transactions between merchants, bankers, financiers, traders, etc. and in relation to shareholders agreements, mercantile documents, and partnership agreements, amongst others.

The Act further provides that the provisions of the Code of Civil Procedure, 1908 ("CPC")shall, in its application to any suit in respect of a commercial dispute of a specified value, stand amended in the manner specified in the Schedule.

It is worthwhile to note that the Act contemplates certain significant departures from the CPC, which appear to be aimed at expediting the procedure of resolution of suits involving commercial disputes. Some of these provisions are as under:

1. Order XI (introduced in substitution of Order XI of the CPC)

A plaintiff or a defendant is required to file a list of all documents (and copies) in its power, possession, control and custody pertaining to the suit, including not only documents relied upon in the plaint or the written statement, but also documents relating to any matters in question in the proceedings, irrespective of whether they are in support of or adverse to the plaintiff or defendant’s case [Rules 1(1) and 7 of Order XI].

Further, the plaint and written statement should contain a mandatory declaration on oath from the plaintiff or defendant, as the case may be, that all such documents in its power, possession, control and custody have been disclosed and that the plaintiff or defendant does not have any other documents [Rules 1(3) and 1(9) of Order XI].

It is also provided that the duty to disclose documents which come to the notice of a party shall continue till the disposal of a suit [Rule 12 of Order XI].

2. Order XIII A

The Court is entitled to decide a claim (or part thereof) pertaining to any Commercial Dispute without recording oral evidence [Rules 1(1) and 1(2) of Order XIII A].

Such summary judgment may be granted where,on an application filed in that regard, the Court considers that: (a) the plaintiff or defendant has no real prospect of succeeding or successfully defending a claim; and (b) there is no other compelling reason why the claim should not be disposed of before recording of oral evidence [Rule 3 of Order XIII A].

The Court also has the power and discretion to do any of the following:

  • pass orders directing judgment on the claim;
  • pass a conditional order;
  • dismiss the application;
  • dismiss part of the claim and pass a judgment on the remaining part of the claim;
  • strike out the pleadings;
  • pass further directions to proceed for a Case Management Hearing.

3. Order XV A

The Court shall hold the first Case Management Hearing not later than four weeks from the date of filing of affidavits of admission or denial of documents by the parties [Rule 1 of Order XV A].

In a Case Management Hearing, the Court, after hearing the parties and once it finds that there are issues of fact and law that require to be tried, may pass an order [Rule 2 of Order XV A]:

  • framing issues between the parties after examining pleadings, documents and documents produced before it, and on examination conducted by the Court under Rule 2 of Order X, if required;
  • listing witnesses to be examined by the parties;
  • fixing the date by which affidavits of evidence are to be filed by the parties;
  • fixing the dates on which evidence of the witnesses of the parties are to be recorded;
  • fixing the date by which written arguments are to be filed before the Court by the parties;
  • fixing the date on which oral arguments are to be heard by the Court; and
  • setting time limits for parties and their advocates to address oral arguments.

4. Order XVIII

Parties are required to file succinct written submissions within four weeks prior to commencing oral arguments. No adjournments are to be ordinarily allowed for purposes of filing the written submissions unless the Court, for reasons recorded in writing considers it necessary. The Court also has the power to limit the time for oral submissions having regard to the nature and complexity of the matter.

5. Order XIX

The Court has the power to regulate the evidence as to the issues on which it requires evidence and the manner in which such evidence may be placed before the Court. Further, the affidavit of evidence has to comply with certain requirements, as prescribed.

6. Order XX

The Commercial Court, Commercial Division, or Commercial Appellate Division shall pronounce judgments and issue copies to all parties within ninety days of conclusion of arguments.

Unfortunately, the construct and manner of implementation of the Act has, figuratively speaking, turned out to be a case of old wine in a new bottle.

Firstly, the ‘constitution’ of a new hierarchy of Courts under the Act is a misnomer, since all that the Act does is to entrust this specialized jurisdiction of Commercial Disputes to the existing hierarchy of High Courts exercising ordinary original civil jurisdiction and district courts in other States.

Secondly, although the Act provides that the CPC will, in its applicability thereto, stand amended in several respects, the fact that the same hierarchy of Courts has been entrusted with both commercial and non-commercial matters (often appearing in a common cause list on a given day), has seriously whittled down the efficacy of the Act.

Further, on a practical level, it is generally observed that these Courts even deploy a common diary of dates while deciding upon the scheduling of a commercial matter.

Given the said practical challenges, it is indeed doubtful whether the salutary objectives of the Act can be achieved. Our past experience with similarly progressive statutes (the curious case of the Arbitration and Conciliation Act, 1996 immediately comes to mind) cautions us not to be overly optimistic on that front.

In the author’s view, it is of utmost importance that a database of Judges who have ‘real’ experience in dealing with commercial disputes is prepared and maintained. On a pedantic and perhaps more expedient view of this essential pre-requisite, judges of the High Court and district judges are often presumed to possess such experience by dint of their seniority alone.

However, that may appear to be a rather simplistic view of the matter. In fact, experienced litigators would attest that one of the most prevalent and oft-repeated comments heard in Court, when a plaintiff embroiled in commercial disputes seeks to expedite his/its matter, is on the lines of ‘there is no urgency in your matter; you can always be compensated by interest and costs’.

Therefore, the need of the hour is to man the Courts constituted under the Act with judges who have proven specialized experience, knowledge and expertise of handling commercial disputes in an adjudicatory capacity or as legal practitioners, coupled with ‘training and continuous education’ of the judges so selected in terms of Section 20 of the Act.

If implemented in right earnest, this could become the impetus for the Act to become a game changer as it would not only ensure that the Courts constituted under the Act would be better equipped to approach its implementation in an organized and concerted manner but would also allow for formulation of a consensus on the ‘best practices’ to be adopted by such Courts.

Further, the conventional view of the Court as being a ‘passive’ arbiter of commercial disputes will have to give way to a ‘pro-active’ approach if the provisions of the Act are to be given full amplitude and play in their implementation.

The Court will have to be cognizant of the trade practices, transactional models and structures, customs and usages typical to particular categories of commercial disputes and in many cases, the approach taken by Courts in foreign jurisdictions on similar disputes/issues.

The Court will also have to subject every case to a rigorous and critical scrutiny at every stage and employ the ‘tools’ provided by the statute, even suo motu (wherever permissible), with the over-riding objective being speedy and just resolution.

Lastly, and perhaps, most importantly, since every hearing in a matter means expending of valuable public time by the Court and cost by the exchequer and the parties concerned, it is necessary, nay imperative, that any adoption of deleterious and time-wasting tactics be curbed with an iron hand and that the time lines prescribed in the statute are uncompromisingly treated as sacrosanct.

In his celebrated treatise Justice, Courts and Delays, Mr Arun Mohan argues that in addition to costs which are compensatory in nature, and often only notional, actual reform requires "removal of incentives for delay or the advantages gained thereby". This requires the Court to strike an equitable balance between the relative disadvantage that a plaintiff is already burdened with while approaching the Court and the natural tendency of a defendant to stall an effectual adjudication of a matter by resorting to hyper-technical and dilatory tactics.

Recently, Chief Justice of India Dipak Misra suggested that the High Courts form think tanks of  judges, lawyers and academicians to consider and explore  innovative modes and initiatives to reduce delays and pendency of cases. Undoubtedly, such a consultative process amongst the stakeholders is the need of the hour.

In the context of the Commercial Courts Act, introspection on some, if not all, of the issues raised above will help advance the spirit behind the Chief Justice’s clarion call.

The author is a Partner at Shardul Amarchand Mangaldas & Co. He specialises in the Dispute Resolution and Litigation Practice.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Further, the views in this article are the personal views of the author.