India: Appeals Under The Commercial Courts, Commercial Division And Commercial Appellate Division Of High Courts Act, 2015 – A Legal Quagmire

Last Updated: 24 April 2018
Article by Ajit Warrier and Aditya Nayyar

Introduction

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 ("the 2015 Act"), which provides for "the constitution of Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of specified value and matters connected therewith or incidental thereto" is one of the most significant pieces of legislation enacted by Parliament in recent times. It mandates the constitution of Commercial Courts by the State Government at the District level after consultation with the concerned High Court, except for the territories over which a High Court exercises ordinary original civil jurisdiction.1 In the case of High Courts which exercise ordinary original civil jurisdiction, the 2015 Act provides for constitution of the Commercial Division2 and Commercial Appellate Divisions3 by the Chief Justice of the High Court.

The term 'commercial dispute' includes within its ambit a wide and diverse range of disputes.4 The term 'specified value' in relation to a commercial dispute means the value of the subject matter of a suit to be determined in terms of Section 12 of the 2015 Act, which shall not be less than one crore rupees or such higher value as may be specified by the Central Government.

This paper focuses on Section 13 of the 2015 Act, specifically sub-section (1) and its proviso, relating to appeals from decrees of Commercial Courts and Commercial Divisions, and how, in the author's view, certain judicial precedents have inordinately narrowed down the scope of the main appeal provision by giving an overly expansive interpretation to the proviso. In the view of the author, the resultant imbroglio is capable of resolution by making certain timely amendments in the 2015 Act.

Background

Section 13 of the 2015 Act provides for 'Appeals from decrees of Commercial Courts and Commercial Divisions'. Section 13(1) of the 2015 Act provides that an appeal will lie from a 'decision' of the Commercial Court or Commercial Division of a High Court to the Commercial Appellate Division of that High Court within a period of sixty days from the date of 'judgment' or 'order', as the case may be. The proviso to this sub-section states that an appeal shall lie from such orders passed by a Commercial Division or a Commercial Court that are specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908 ("the Code")5, as amended by the 2015 Act, and Section 37 of the Arbitration and Conciliation Act, 1996 ("the 1996 Act")6.

Section 13 of the 2015 Act, in the same breath, refers to 'decrees', 'decision', 'judgment' and 'order', which are terms having different connotations in law. The term 'decree' has not been defined under the 2015 Act and, in light of Section 2(2),7 , we may refer to the definition of 'decree' under the Code where a 'decree' has been defined to mean the formal expression of an adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit. Similarly, the term 'judgment' has been defined under the Code to mean the statement given by the Judge of the grounds of a decree or order. Further, the term 'order' has been defined under the Code to mean the formal expression of any decision of a Civil Court which is not a decree.

Analysis

Rules of Interpretation of a Proviso

It is, by now, well settled that the normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which, but for the proviso, would be within the purview of the enactment.8 In the words of Hidayatullah, J., "As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment, and, ordinarily, a proviso is not interpreted as stating a general rule"9. Further, Kapur, J. held that "The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso, would fall within the main enactment. Ordinarily it is foreign to the proper function of proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment".10

In a recent judgment in Delhi Metro Rail Corporation v. Tarun Pal Singh and others,11 the Supreme Court of India, after referring to a plethora of previous Indian and foreign judgments on the scope and ambit of a proviso, stated that a proviso may serve four different purposes:

  1. qualifying or excepting certain provisions from the main enactment;
  2. it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable;
  3. it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; or
  4. it may be used merely to act as an optional addendum to the enactment with the sole object of explaining the real intention of the statutory provision.

Role of the Proviso to Sub-Section (1) of Section 13 – Possible Theories

Pertinently, the proviso to sub-Section (1) of Section 13 does not say that an appeal under sub-Section (1) shall lie only from such orders that are specifically enumerated under Order XLIII of the Code, as amended by the 2015 Act, and Section 37 of the 1996 Act. Indeed, if the proviso was to be read in that manner, it would completely overlap and subsume the generality of sub-Section (1) of Section 13 and hence cease to be a proviso. Further, such an interpretation would beg the question as to how it would be consistent with the words 'decision' or 'judgment' employed in sub-Section (1).

A more plausible interpretation could be that the said proviso is only in the nature of an optional addendum to sub-Section (1) of Section 13, which has been inserted to explain the real intention of the sub-Section. If that is so, then the proviso is only intended to clarify that, notwithstanding the generality of sub-Section (1) of Section 13, appeals would also lie from orders passed by a Commercial Division or a Commercial Court, as enumerated under Order XLIII of the Code (as amended by the 2015 Act) and Section 37 of the 1996 Act.

The Kandla Export Corporation judgment

In a recent judgment in Kandla Export Corporation and another v. M/s. OCI Corporation and another12, the Supreme Court was faced with the issue whether an appeal, not provided for under Section 50 of the 1996 Act,13 would nonetheless be maintainable under Section 13(1) of the 2015 Act. The Court answered the said question in the negative and held that Section 13(1) of the 2015 Act cannot be invoked to file an appeal in cases where such orders are not specifically appealable under Section 50 of the 1996 Act. The Court proceeded on the basis that Section 50 is a provision contained in a self-contained code on matters pertaining to arbitration and therefore exhaustive in nature.

The Supreme Court also referred to Section 37 of the 1996 Act14 and justified the inclusion of the said subject matter in the proviso by theorizing that this was probably done ex abundanti cautela, i.e., by way of abundant caution. Another reason, according to the Supreme Court, was that, as Section 37 itself was amended by the Arbitration Amendment Act, 2015 which came into force on the same day as the 2015 Act, Parliament thought, in its wisdom, that it was necessary to emphasise that the amended Section 37 would have precedence over the general provision contained in Section 13(1) of the 2015 Act. The Court noted that the amendment of 2015 introduced one more category into the categories of appealable orders in the 1996 Act, namely, a category where an order is made under Section 8 refusing to refer parties to arbitration. The Court, therefore, surmised that Parliament may have found it necessary to emphasize the fact that an order referring parties to arbitration under Section 8 is not appealable and would not be covered under Section 13(1) of the 2015 Act.

The Problem

So far so good. However, the Supreme Court also took the view in the Kandla Export case that orders that are not specifically enumerated under Order XLIII of the Code would not be appealable, although the maintainability of an appeal under Section 13(1) in the context of Order XLIII was not a matter in issue in that case.

The said observation of the Supreme Court, with utmost respect, fails to consider that the two categories of appeals enumerated under the proviso, i.e., under the Code and under the 1996 Act, are not on a similar footing. The deductive logic employed by the Supreme Court to come to this conclusion may also not be apposite so far as appeals under Order XLIII of the Code are concerned.

In case of the 2015 Act,15 Parliament has, in the Schedule, introduced various new provisions in the Code or, alternatively, omitted or substituted certain other provisions of the Code. These include, amongst others, insertion of Order XIII-A (summary judgment) and Order XV-A (Case Management Hearing), on the one hand, and amendment of Order XVIII (Hearing of the Suit and Examination of Witnesses) and Order XIX (Affidavits), on the other. However, Order XLIII (Appeals from Orders) remains untouched. Therefore, if the Supreme Court's view is assumed to be correct, it would appear that no appeal would lie against any order or decision or judgment of a Commercial Court or the Commercial Division of a High Court that may be passed in respect of any of the matters covered in the Schedule to the 2015 Act, although these amendments effected to the Code in the Schedule are quite substantial in nature.

Was this the intention of the Parliament? It would appear not, if one were to consider the insertion of the words 'as amended by this Act' immediately after the reference to Order XLIII of the Code in the proviso to sub-Section (1) of section 13 of the 2015 Act. Indeed, quite to the contrary, it would appear that, while the legislature probably intended to amend Order XLIII of the Code, while drafting the proviso the said aspect was completely lost sight of by the draftsman while enumerating the amendments to be effected in the Code by way of the Schedule. If that is so, then this omission would, in the view of the author, not be capable of being supplied by the courts in view of the well settled principle that the court cannot supply casus omissus.16

Further, a question would arise whether, for the purposes of the 2015 Act, the Parliament intended to include, within the ambit of the proviso, an 'order' or 'decision' that may be passed by the Commercial Court or Commercial Division but which is not specifically enumerated under Order XLIII of the Code. This issue assumes significance since Order XLIII of the Code has not been specifically incorporated by the legislature in the 2015 Act and, therefore, a view could be taken that the legislature never wanted to bring within the ambit of Order XLIII such an 'order' or 'decision'. However, even if that were so, it is difficult to see why such appeals would nonetheless not lie under the general and all-encompassing language of sub-Section (1) of Section 13 of the 2015 Act.

Such an interpretation would also find support from a reading of sub-Section (2) of Section 13 which states that, notwithstanding anything contained in any other law for the time being in force or Letters Patent of a High Court, no appeal shall lie from any order or decree of a Commercial Division or Commercial Court otherwise than in accordance with the provisions of 'this Act' (referring to the 2015 Act). In this regard, the Supreme Court has held that the High Court cannot be divested of its Letters Patent jurisdiction unless provided for expressly or by necessary intendment in some special statute.17 In the context of the 2015 Act, this intention may be evident from Section 21 which states that the provisions of the Act will prevail over the provisions of other Acts.

Given that the 2015 Act takes away recourse to other laws for the time being in force or the Letters Patent for purposes of filing an appeal from an order or decree of a Commercial Division or Commercial Court, the argument that Section 13(1) should receive a wider construction and not be limited to or constrained by the proviso would certainly be persuasive for this reason also.

An alternative interpretation?

Interestingly, a similar issue had previously come up before the Bombay High Court in Hubtown Limited v. IDBI Trusteeship Service Limited,18 where it was held that the ambit of sub-Section (1) of Section 13, which uses the words 'decision', 'judgment' and 'order', is broader and would cover appeals arising out of orders other than the limited categories of orders falling under Order XLIII of the Code. The Bombay High Court held (and, in the author's view, rightly so) that an appeal against an order which has a tinge or colour of a 'judgment', as laid down by the Supreme Court in Shah Babulal Khimji v. Jayaben D. Kania,19 would be maintainable under Section 13(1), being a 'judgment' within the meaning of the Code. The correctness of the said judgment of the Bombay High Court is presently pending consideration before the Supreme Court.

The Way Forward

Pending such consideration and as things presently stand, the interpretation of Section 13(1) given in the Kandla Export case (supra) is certainly restrictive and renders the main provision of Section 13(1) otiose. The interpretation of the Supreme Court also leads to the question - what was the reason for the legislature to insert Section 13(1) in the first place, if only the proviso was to completely govern the field of appeal?

The obvious answer, in light of the principles of interpretation of a proviso outlined above, is that Section 13(1) gives a substantive right to any person aggrieved by a 'decision' of the Commercial Court or Commercial Division of a High Court and the proviso to Section 13(1) only clarifies that the said right of appeal is also available in respect of 'orders' as enumerated under the provisions of Order XLIII of the Code, as amended by the 2015 Act, and Section 37 of the 1996 Act. Of course, the contrary argument could be that giving such a wide connotation to Section 13(1) may open the floodgates for filing of appeals against every order passed by the Commercial Courts or Commercial Divisions which may, in turn, frustrate the legislative intent behind providing for expeditious adjudication of commercial disputes.

The author is of the view that pending resolution of the legal quagmire arising from the divergent judicial interpretations as outlined above, there would be greater clarity on this matter if Parliament were to amend Order XLIII of the Code and incorporate additional heads of appealable orders in the said Order, insofar as its applicability to the 2015 Act is concerned20. Such a step may go a long way in providing succour to litigants who are, by dint of an expansive interpretation of a proviso, being unduly deprived of the valuable avenue of appeal provided for under Section 13(1) of the 2015 Act.

Footnotes

1 Section 3

2 Section 4

3 Section 5

4 Section 2(c)

5 Order XLIII provides that appeals shall lie from certain specified orders under the provisions of Section 104 of the Code.

6 Section 37 of the 1996 Act enumerates the orders from which an appeal shall lie to the Court authorised by law to hear appeals from original decrees of the Court passing the orders.

7 Section 2(2) of the 2015 Act states that "The words and expressions used and nor defined in this Act but defined in the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872, shall have the same meanings respectively assigned to them in the Code and the Act."

8 Kedarnath Jute Manufacturing Co. Ltd. v. Commercial Tax Officer, AIR 1966 SC 12, p.14 (para 8); Ishvarilal Thakorelal Almaula v. Motibhai Nagjibhai, AIR 1966 SC 459, p.465.

9 Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha, AIR 1961 SC 1596, p. 1690.

10 CIT, Mysore etc. v. Indo Mercantile Bank Ltd., AIR 1959 SC713, p. 717.

11 2017 SCC Online SC 1548.

12 Civil Appeal No. 1661-1663 of 2018 and SLP (Civil) No. 28582-28584 of 2017, judgment dated February 07, 2018.

13 Section 50, falling in Part II of the 1996 Act, provides for categories of orders passed by the Court which are appealable.

14 Section 37, falling in Part I of the 1996 Act, provides for categories of orders passed by the Court or the arbitral tribunal which are appealable. The said provision mentions that no other appeals, other than as specifically enumerated, shall lie.

15 Section 16(1) of the 2015 Act states that the provisions of the Code shall, in their application to any suit in respect of a commercial dispute of a Specified Value, stand amended in the manner as specified in the Schedule.

16 Mukund Dewangan v. Oriental Insurance Co. Ltd. (2017) 14 SCC 663, Hansraj Gupta v. Dehra Dun-Mussoorie Electric Tramway Co. Ltd. 1932 SCC Online PC 71, Kamalaranjan Roy v. Secy. of State 1938 SCC Online PC 54 and Karnataka State Financial Corpn. V. N. Narasimhaiah (2008) 5 SCC 176.

17 Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2011) 8 SCC 333.

18 2016 SCC Online Bom 9019.

19 (1981) 4 SCC 8.

20 On 8th March, 2018 the Union Cabinet has reportedly approved the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill, 2018 for introduction in the Parliament, which seeks to make certain amendments to the 2015 Act, including reduction of the specified value of a commercial dispute to Rs. 3 lakhs from the present Rs. 1 crore.

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(s).

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