Commercial Courts Act set to streamline litigation

By Subhajit Banerji and Suvarna Mandal, Saikrishna & Associates
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The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, received presidential assent on 31 December 2015. It had been in force since 23 October 2015 due to the earlier ordinance on commercial disputes.

Subhajit Banerji
Subhajit Banerji

The act is aimed at setting up a specialized commercial court at district level and a commercial division in the high court having ordinary original civil jurisdiction to adjudicate “commercial disputes” having a “specified value”, i.e. ₹10 million (US$150,000) or above. The term “commercial disputes” encompasses all types of disputes involving commercial transactions as well as intellectual property rights (IPR).

Section 7 of the act was amended to change “filed” to “filed or pending”. The section now reads: “All suits and applications relating to commercial disputes of a Specified Value filed in a High Court having ordinary original civil jurisdiction shall be heard and disposed of by the Commercial Division of that High Court: Provided that all suits and applications relating to commercial disputes, stipulated by an Act to lie in a court not inferior to a District Court, and filed or pending on the original side of the High Court, shall be heard and disposed of by the Commercial Division of the High Court.”

The interpretation of section 7 and the amendment was discussed in Guinness World Records Limited and Ors v Sababbi and Ors, which pertained to whether IPR cases valued under ₹10 million were to be transferred to district courts. It was held that by adding the words “or pending” the legislative intent with respect to pending IPR disputes was clear and consequently all IPR cases that had been transferred to district courts were ordered to be transferred back to the commercial division of the high court.

The act brings about significant amendments to the Code of Civil Procedure, 1908 (CPC), as regards the trial of commercial disputes, introducing new procedures with stricter timelines, and concepts such as “case management hearing” and “summary judgment”, which are new to the Indian judicial system. Some key changes to the CPC are:

(1) A written statement must be filed within 30 days (maximum 120 days from the date of service of summons). The court has the discretion to extend the timeline subject to recording its reasons in writing and to impose costs for delays. For delays beyond 120 days, the court does not have the discretion to allow the written statement.

(2) Stringent procedures for disclosure and discovery of documents have been prescribed. All documents in the plaintiff’s possession (even if adverse to the plaintiff’s case) need to be disclosed on filing of the suit, and the filing of additional documents is restricted.

(3) Inspection of documents has been restricted to 30 days from filing of the written statement or written statement to the counterclaim, whichever is later. Similarly, the timeline for filing the statement of admission and denial of documents has been restricted to 15 days from the completion of inspection of documents (or any later date as fixed by the court).

(4) Denial of documents and pleadings needs to be specific and expressly laid out with reasons for such denial. Bare and unsupported denials of documents will not be deemed to be denials, and costs may be imposed for the undue refusal to admit a document.

Suvarna Mandal
Suvarna Mandal

(5) Case management hearings have been introduced to enable timely management and adjudication of disputes. The first such hearing is to be held within four weeks from filing the affidavits of admission and denial of documents by all parties, after which the court is to pass orders framing the issues between the parties and fixing dates for recording evidence of the witnesses, filing written submissions, oral arguments, etc. The arguments must be closed within six months from the date of the first case management hearing.

(6) A party in a suit may, after the service of summons to the defendants and before the framing of issues by the court, apply for summary judgment, by which the court may decide a claim without recording oral evidence. This allows a dispute to be disposed of in six to eight months. The grounds for summary judgment are: (a) the plaintiff has no real prospect of succeeding in the claim or the defendant has no real prospect of defending the claim; and (b) there is no other compelling reason why the claim should not be disposed of before recording oral evidence.

(7) After the conclusion of oral arguments, the court has 90 days to deliver the judgment in a case.

(8) Each commercial court, commercial division and commercial appellate division must keep statistics regarding filing, pendency and status of matters before it and these statistics are to be published and updated every month on the high court’s website.

From the above timelines, it appears that commercial disputes should be disposed of within an average of 12 to 14 months. The act benefits and saves the time of all the players involved – the courts, litigants and lawyers. This will go a long way in redeeming the image of the Indian court system, increasing confidence and ease of doing business, and reducing the pendency rate of litigation.

Subhajit Banerji is a senior associate at Saikrishna & Associates, where Suvarna Mandal is an associate. The views expressed in this article are personal.

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