Monday, December 28, 2009

New Commercial Courts Bill to bring about radical reform in the adjudication has been sent to Select Committee

A Bill providing for speedy disposal of commercial cases by commercial divisions of High Courts in the country has been sent to the Select Committee of Parliament because Rajya Sabha members wanted a thorough discussion on it.


Under the new law, the commercial divisions of the High Courts were proposed to take up cases worth Rs 5 crore and above and follow a fast track procedure for the disposal of such cases.

Judges with aptitude in accountancy and commercial matters were proposed to be allocated to this division in various High Courts.


In its recently concluded Winter Session, the lower house of Parliament, the Lok Sabha, passed 'The Commercial Division of High Courts Bill', 2009. The Bill which is based on the recommendations of the 188th Report of the Law Commission of India aims at the adjudication of big ticket commercial disputes, Rs. 5 crores or above, within a timespan of one year.


The Statement of objects and reasons of the bill provides that due to phenomenal changes that have taken place in India in the last decade leading to enormous growth in our commercial and industrial sectors. The policies of the Government have changed radically from 1991, the year in which our economy was opened up to foreign investment in a big way. Privatization, liberalization and globalization have resulted in a big boost to our economy. At the same time, world has become very much competitive. With such rapid increase in our commerce and trade, commercial disputes involving high stakes are increasing. Unless, there is a new and effective mechanism for resolving them speedily and effectively, progress will be retarded. Against the aforementioned background, the Law Commission of India in its 188th Report on "Proposals for Constitution of Hi-Tech Fast Track Commercial Division in High Courts" has recommended the constitution of Commercial Division in each High Court. The Law Commission had examined the feasibility of 'Commercial Division' in the High Courts in India on the model of the Commercial Division in the High Courts of UK, USA and certain other countries. The Law Commission recommended the creation of 'Commercial Division' with High- Tech facilities in each High Court so that they may handle 'commercial cases' of high threshold value on fast track basis.


At the Joint Conference of Chief Ministers of the States and Chief Justices of the High Courts held on 16th August, 2009 in New Delhi, the 188th Report of the Law Commission of India on constitution of Commercial Division in High Courts was considered and a decision was taken in the said meeting to the effect that Commercial Division be constituted by the High Courts within itself as and when legislation in this regard is enacted by the Parliament.


Constitution of commercial division within a High Court will have many advantages. As of now, pecuniary jurisdiction of Civil Courts for trying civil disputes including  commercial disputes differs from State to State. In some States, District Courts are having unlimited pecuniary jurisdiction and in some other States, original jurisdiction of higher pecuniary value is vested with the High Court. States where District Courts are having unlimited pecuniary jurisdiction, the orders, judgments or decrees passed by these District Courts are appealable before the High Court. However, upon setting up of Commercial Division in High Courts, all the commercial disputes of high threshold value (Rs.five crore or higher value as may be specified) will be filed in the High Court and would be dealt with by the Commercial Division. It would speed up the disposal of these cases as District Courts would have no jurisdiction in such cases. Commercial Division of High Court would be Court of original jurisdiction for such cases.

 The specified value which is the minimum threshold limit can be enhanced by the Central Government in consultation with the concerned High Court and the State Government by notification and different values can be specified for different High Courts. The Commercial Division shall follow Fast Track procedure for the disposal of cases. The said procedure is prescribed in the Bill itself. Power of execution of decree and orders passed by the Commercial Division are also proposed to be vested in the Commercial Division. Fast Track procedure would definitely curtail the time taken in disposal of such cases.


The Commercial Division shall, within thirty days of the conclusion of argument, pronounce judgment and copies thereof shall be issued to all the parties to the dispute through electronic mail or otherwise. A single judge sitting in the Commercial Division may hold one or more case management conferences; fix a time schedule for finalisation of issues, cross-examination of witnesses, filing of written submission and for oral submission; provide for record of evidence in cross-examination and re-examination; appoint commissioner for recording of cross-examination or re-examination provided any order for the purpose of fixing limits which may lead to the disposal of the matter for default or ex parte, shall be passed by a Bench of two Judges.


As of now, applications for setting aside of arbitration awards under section 34 and execution of arbitral award under section 36 of the Arbitration and Conciliation Act, 1996

have to be filed in the 'Court' as defined in clause (e) of sub-section (1) of the said Act. Such court is the Principal Civil Court of original jurisdiction in a District. District Court is normally a principle civil court of original jurisdiction. Similarly appeal under section 37 of the said Act against granting or refusing to grant any measure under section 9; and setting aside or refusing to set aside an arbitral award under section 34 of the said Act lie to the court authorised by law to hear appeals from original decrees of the Court passing the order. Further appeal against order of arbitral tribunal accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or granting or refusing to grant an interim measure under section 17 lie to a court as defined in clause (e) of sub-section (1) of section 2 of the said Act, i.e. District Court. As per this procedure, a party desirous of delaying an arbitration award has ample scope for adopting delaying tactics by challenging the award or other orders of the arbitral tribunal by starting the litigation right from the District Court level. This defeats the spirit of arbitration which is meant to be a speedy alternate mode of dispute resolution.


To overcome this problem it is proposed that the Commercial Division will also entertain applications under sections 34 of the Arbitration and Conciliation Act, 1996 for setting aside of arbitral award, under section 36 of the said Act for execution of arbitral award and appeal under section 37 where the arbitration relates to or within the scope of the commercial disputes of the specified value. For this purpose, consequential amendments are also proposed in the Arbitration and Conciliation Act, 1996.


An appeal against the order and decree passed by the Commercial Division shall lie before the Supreme Court. The decision to constitute Commercial Division is entirely within the discretion of the High Courts and the State Governments. According to the second proviso to subclause (3) of clause 1 of the Bill, the provisions of the proposed Act can be made applicable to a High Court only in consultation with the concerned Chief Justice and the concerned State Government or State Governments. Thus, sufficient time will be available to assess the likely impact on the workload on the High Courts before the constitution of the Commercial Division and enactment of the legislation will not immediately lead to an increase of workload upon the High Courts.


The proposed definition of 'commercial disputes' covers even IP disputes as is obvious from the following definition in Section 2 of the Bill: (a) "commercial dispute" 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.

Typically the court assuming original jurisdictions in most commercial disputes are the District Courts. For examples the Patents Act, the Trademarks Act and the Copyirght Act all name the District Court as the court of first instance before which a suit for infringement can be filed. Normally law suits cannot be filed directly before a High Court. A High Court is usually confined to hearing appeals from District Court apart from being the only courts in a State to exercise writ jurisdiction. The only exception to this rule are the High Courts of Bombay, Madras, Calcutta, Delhi and Jammu & Kashmir. The first three were set up by the British in the 19th Century through the Indian High Courts Act, 1861. The Delhi High Court was created as recently as 1966 and is definitely the most dynamic of all these High Courts. These 5 High Courts have Original Jurisdiction i.e. lawsuits of a particular valuation can be filed directly in these High Courts provided that the High Court has the territorial jurisdiction to try these cases. Normally the territorial jurisdiction of these High Courts does not extend beyond the boundaries of the cities in which these Courts are based.

Most IP infringement suits are filed in these High Courts which have original jurisdiction as Indian District Courts are woefully underequipped to adjudicate complex high value commercial disputes. This is not to say that the High Courts, with original jurisdiction, are brimming with resources but there is no arguing that these Courts are definitely better off than the District Courts both in terms of resources and manpower.

 By setting up dedicated Division Benches in all 21 High Courts across the country this Bill will bestow Original Jurisdiction on all High Courts making them the epicentre of all commercial litigation in indiviudal states. This makes a lot of sense because most businesses are based out of the capital cities of individual states and High Courts are usually situated in these capital cities.

Image of Bombay High Court. Photo Credit: Nichalp. The 'Unbelievable' Procedural Reforms: Apart from consolidating the forums of high value commercial disputes this Bill brings in absolutely unbelievable reform in the procedural laws of India. Currently the only time limit in the Code of Civil Procedure, 1908, is the 30 days time limit to file the written statement (this is the first pleading filed by the defendant in response to the lawsuit filed by the Plaintiff).

This amendment, which was introduced in 2002, signficantly fast-tracked the process because until this statutory time limit was introduced the normal practice for the Defendants was to delay filing a written statement for upto a year after the suit had been filed. With the 30 days time limit being enforced strictly by judges Defendants actually began to file written statements within the 30 days time limit.


The truly revolutionary provision of the Bill however is Section 9(5) which requires the Commercial Division to pronounce a judgment within 30 days of arguments concluding and the matter being reserved for Orders. This is absolutely revolutionary because Indian judges, even judges of the High Court can take upto one year to pronounce Orders on an application for interim injunction in cases of patent infringement. Such a delay is simply outrageous. Having said that it can expected that there will be significant opposition from the judiciary to imposing this 30 day limit.


Another significant change introduced by the Bill is the introduction of case management conference presided by one of the Judges of the Commercial Division, to fix schedules, dates along with time limits for oral arguments.

The above timelines have been drafted with a view to ensure that judgment is pronounced with a year of the law suit being filed.

Given the fact that most IP disputes do not even reach the stage of evidence in the one year period, this Bill is definitely good news  The proposed Commercial Division Bill attempts to replicate this success by introducing time limits for every stage of a lawsuit. The Bill also proposes to consolidate the pleadings. Under the current law the only requirement at the stage of filing the suit is to submit a Plaint with some supporting documents. A plaint is limited to facts and involves no law. It basically lays out the cause of action and the relief that is requested from the Court. As per Section 9(2) of the proposed bill the Plaintiff will have to file the following pleadings and evidence along with the Plaint at the very initial stage of the lawsuit:


The Defendant in turn has to reply within 30 days. Additional evidence may be filed at the time of trial. The cross examination of witnesses on their examination in chief affidavits will be outsourced to a Court Commissioner who may either be a retired judge or a lawyer of some standing. This is one recommendation which will go a long way in fast-tracking commercial disputes because cross examination is the most time consuming component of a trial. This is a landmark step taken by the Govt of India.Let us wait and watch that upto what extent our law minister Virappa Moily gets success in passing the bill from Rajya Sabha. I have some reservations over the bill that i will be discussing in subsequent blogs.

Source: Spicy IP

Dr.Tabrez Ahmad,
Associate Professor of Law,
KIIT University, Bhubaneswar, India,
Research Papers: