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The Commercial Courts Act was implemented on 23rd October, 2015. This Act provided for the making of Commercial Courts and such other Courts in the State High Courts that would be specifically dealing with the commercial matters, direct or indirect, of up to a specific monetary amount. The State Governments of all States, except the State of Jammu and Kashmir, would be setting up such Commercial Courts at the District Level, enshrining them with the proper powers and jurisdiction to handle the concerned matters.
This constitution was to be generally done after discussion with the State High Courts and these governments may also set up the limit of the maximum monetary value with which these Courts can deal with to be three lakhs or higher, either for the entire state or just a part of it. The jurisdiction limit of these Commercial Courts, area wise, is also at the discretion of the states. This Act was brought into force for setting down a proper procedure and for quicker solving of disputes of commercial nature. It laid down strict timelines for the filing of documents and for the announcement of judgments.
With the 2018 amendment of the Act, mediation was made compulsory for all the disputed parties to go in for mediation before bringing the case to the Court. ‘Mediation’, according to the Black Law’s Dictionary, means “Intervention; interposition; the act of a third person who interferes between two contending parties with a view to reconcile them or persuade them to adjust or settle their dispute.” In layman terms it is known as the “out of Court settlement”. Mediation was never very popular when it came to solving commercial disputes but slowly, it is gaining a foothold in the Indian judiciary system. This is a quicker, cost-effective way of resolving disputes, thus, shedding the over-burdened judiciary with the weight of the back logged cases.
Salient features of the Act:
- Three Courts: Commercial Court, Commercial Appellate Court and Commercial Division.
- It would solely be dealing with transactions related to monetary exchanges with commercial value.
- A ‘specified value’ is a limit which has been set for dealing with matters not below the sum of Rs. three lakhs.
- The Act facilitates adequate as well as continuous training of the appointed judges to deal with such matters.
- Multiple amendments to the Civil Procedure Code of 1908 have been brought into force with this Act.
- Appeals would be time bound and would have to be disposed off within a period of six months.
- The relief to seek mediation would have to be exhausted before approaching the Court.
- Judges having experience with commercial disputes would be the one which would be nominated and appointed by the Chief Justice of the High Courts.
- Section 2(1) (c): This section deals with the definition of “Commercial Dispute”. It includes various specific transactions of the monetary kind. It is of the exhaustive kind.
- Section 2(1) (e): The term “Specified Value” has been mentioned here. Earlier this value was one crore but then was amended to three lakh rupees. This clause specifies that disputes below the quoted figures would not be entertained in such Courts.
- Section 3: The State Governments were to indulge in constitution of the Commercial Courts, Commercial Appellate Courts and Commercial Division was to be done after consultation with the respective State High Courts. Appropriate authority and jurisdiction would be installed with such Courts.
- Section 6: This enshrines upon these Courts the jurisdiction to try all the pleas within the territories that it has been permitted to operate in.
- Section 10: This section provides that all the pleas and appeals of matters related to arbitration shall be dealt with the provisions as laid under Arbitration and Conciliation Act, 1996.
- Section 12A: This section mandates it for non-urgent disputes to go exhaust the relief of mediation before approaching the Court.
- Section 13 and 14: Appeals against the verdict has to be filed within sixty days. Appeals have to be disposed off or resolved within six months of the filed appeal.
- Section 16: The Act brings in multiple amendments to the Code of Civil Procedure, 1908 which have been mentioned under this section.
- Section 17: A record has to be maintained of all the cases which have come into the Court, their hearings, the appeals filed and the status of the case along with other details.
- Section19: The infrastructure of these Courts shall be provided by the respective State Governments.
- Section 20: There is this provision for the appointment of judges with experience in this field and to provide them with appropriate training as well.
- Section 22: If there arises in difficulty in the implementation of this Act within the initial two years, then the Central Government may make provisions for the removal of that difficulty.
Clauses regarding mediation:
Mediation has existed in India but has not been a usually sought option. Industrial Disputes Act’s Section 4(1) provides for the mediation of industrial disputes through mediation. There have also been instances where the Court has ordered for the parties to first make attempts to resolve the dispute through mediation. In M Siddiq (D) Thr Lrs v. Mahant Suresh Das & Ors, when the appeals against the High Court’s order was filed in the Supreme Court, the apex Court first directed the concerned parties to seek mediation.
The Commercial Courts Act’s Section 12A provides that the parties in dispute first have to approach the relief of mediation before approaching the Court to try to dissolve their discourse. Parties seeking urgent interim relief are exempted from this following this otherwise compulsory step. Commercial Courts (Pre-Institution Mediation and Settlement) Rules of 2018 have to be followed while going in for mediation. Parties are initially granted a period of three months to file the documents and complete the procedure of mediation; this period can be extended for two more months with the consent of the parties. As per these same Rules, confidentiality has to be maintained by the mediator(s) while dealing with each party. They cannot disclose information of the other party to their counters during any of these mediation sittings.
If a settlement is arrived at during the mediation process, it will enjoy the position of arbitral award as has been provided under Section 30(4) of the Arbitration and Conciliation Act of 1996. This agreement has be in the written form and be signed by the involved parties.
In the case, M/s M.K. Food Products v M/s S.H. Food Products, a civil petition was filed in the Commercial Court on the matter of copyright infringement seeking urgent interim relief but was rejected by the Court deeming for it not to be an urgent matter that needed immediate attendance and was directed to first go through the procedure of mediation. An appeal against the same was filed in the Telangana High Court. The High Court ruled that such matters would fall under the category of parties pleading urgent interim relief and should not have been rejected in the Commercial Court for not the seeking mediation as the first attempt to relief.
Critical analysis of the Act:
There are some flaws in the introduced Act. The same are:
- There is a time limitation for the disposal of the appeals which are filed but the Act lacks a period of time bound for the original pleas which are filed. The appeals have to be dealt with within a maximum period of six months but no maximum period of resolving the original dispute has been set. Had this been mentioned, it would have made the Act more effective and the ultimate goal of solving commercial disputes and differences would be achieved better.
- There is no specific procedural system for the appointment of judges to these specialized courts. A transparent and objective method where the judges have to pass an exam which would qualify them to handle such matters should be implemented. They should be granted appropriate remuneration along with latest training and facilities.
- The Act must facilitate for the adoption of more technologically advanced procedures and ways. The Act accepts Electronic Records as admissible documents as proof but has not provided for e-filing, conduction of hearings and witness testimonies through video conferencing. This would make solving of these commercial rifts much easier and faster.
This Act has primarily been brought into the country’s judicial system to boost the business and solve these commercial disputes and differences in a quick and efficient manner. These Courts have been set up to break the notion of Court processes being cumbersome and long drawn. It brings a change into the civil justice system of India and due to there being a quick and systematic procedure which solves business rifts; it invites and attracts major investors, charging the economy of the country.
The Act ensures coordination between the High Courts and the State Governments. All the details have been very specifically and meticulously been laid down in the Act, thus, making the implementation even easier. Provision of proper definitions and processes, developed infrastructure, well trained judges and a record system are all the plus points of this Act.
Its provision of mediation has also brought ease and efficiency in the methods of solving these disputes. It highlights another ways of seeking relief for those involved in businesses. Though, mediation has been a part of the judicial system for a long period of time, it is the mindset and the attitude which proves to be a roadblock. The Act mandates approaching mediation primarily; this initiative is a step towards justice being provided at the earliest with low cost procedures. It will help mediation gain a proper foothold in the relief sought by the commoners.
Author: Letishiya Chaturvedi from Narsee Monjee School of Law, Mumbai.
Editor: Akshat Mehta from Institute of Law, Nirma University.