India: Ordinance For Establishing Commercial Courts Promulgated By The President Of India

Last Updated: 5 November 2015
Article by Agram Legal Consultants

On October 23, 2015, the President of India promulgated the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 ("Commercial Court Ordinance") for the creation of Commercial Courts, Commercial Division and Commercial Appellate Division in High Courts. The Ordinance, which comes into effect immediately, is a step towards swift disposal of commercial disputes of a specified value. Salient features of the Ordinance are summarised below:

1. The courts constituted under the Ordinance will have jurisdiction over "commercial disputes" inter alia disputes relating to transactions of merchants, bankers, financiers and traders, distribution and licensing agreements, construction and infrastructure contracts, including tenders, intellectual property rights, subscription and investment agreements, joint venture agreements, shareholders agreements, and such other commercial disputes as may be notified by the Central Government. The Commercial Division of a High Court ("HC") will also preside over matter transferred to the HC under the Design Act, 2000 or the Patents Act, 1970;

2. It is clarified that a commercial dispute will not cease to be commercial dispute merely because it involves actions for recovery of immovable property or for realisation of monies out of immovable property or for State or any other governmental instrumentality or a private body carrying out public functions is a contracting party to such a dispute;

3. The value of the subject matter of a commercial dispute will be determined as per the provisions of the Ordinance, which shall not be less than `10,000,000 (Indian Rupees Ten million) or such higher value as may be notified by the Central Government ("Specified Value");

4. No Commercial Court will be constituted for a territory over which a HC exercises ordinary original civil jurisdiction. The State government in consultation with the concerned HC will, by notification, specify the jurisdiction of the Commercial Court;

5. The State government in consultation with the concerned HC, by notification, may constitute Commercial Courts at district level whereas the Chief Justice of a concerned HC will have the power to constitute Commercial Division bench(s) and Commercial Appellate Division bench(s) for the concerned HC ("CAD");

6. The State Government in concurrence with the Chief Justice of the concerned HC will have the power to appoint one or more person(s), having experience in dealing with commercial disputes, to preside over Commercial Courts as judge(s);

7. The Commercial Division of a HC will have jurisdiction over all suits and applications relating to commercial disputes of a Specified Value filed in a HC exercising ordinary original civil jurisdiction, including a commercial dispute suit filed in a court, not lower than a District Court;

8. If a counter claim is filed in a suit before a civil court relating to a commercial dispute of a Specified Value, such a suit will be transferred to the Commercial Division of a HC or a Commercial Court, as the case maybe;

9. No civil revision application or petition against interlocutory orders of a Commercial Court will be permitted. Appeals will only be permitted against decrees of the Commercial Courts;

10. Applications or appeals relating to international commercial arbitration under the provisions of the Arbitration Act, filed in a HC and suits relating to domestic commercial arbitration filed on the original side of the HC or that would ordinarily be filed before the principal civil court of ordinary jurisdiction in a district, will be heard and disposed of by the CAD. Commercial Courts/Commercial Divisions will not have jurisdiction over suits, application and proceedings in which the jurisdiction of civil courts have been expressly/impliedly barred;

11. The Specified Value of a suit or application will be determined by taking into account the subject matter of the case, including the relief sought, market value of the immovable property or rights involved or the counter- claim;

12. Appeals against the decisions of a Commercial Courts/Commercial Divisions of a HC will lie with the CAD. Appeal will have to be preferred within a period of 60 (sixty) days from the date of the order or judgement and CAD will endeavour to dispose of the same within a period of 6 (six) months;

13. Pending suits under the Arbitration Act, relating to a commercial dispute of a Specified Value in a HC and a principal civil court will be transferred to the Commercial Division of that HC and the district, respectively. However, suits in which the final judgment have been reserved, prior to the constitution of the Commercial Divisions/Commercial Courts shall not be transferred;

14. The provisions of the Code of Civil Procedure, 1908 ("CPC"), as amended by the Ordinance will have to be followed by the Commercial Divisions/Commercial Courts;

15. In a case where the rules of a HC or any amendment to CPC made by a State government are in conflict with the provisions of the CPC as amended by the Ordinance, the latter will prevail.

The creation of commercial courts should reduce the number of pending suits and the burden on existing courts having jurisdiction over commercial disputes. Although timelines have been set within the Commercial Court Ordinance for the completion of proceedings, only practical application of the ordinance will show the actual implementation of the ordinance.

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.

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