India: The Commercial Courts, Commercial Division And Commercial Appellate Division Of High Courts (Amendment) Act, 2018

Last Updated: 10 September 2018
Article by AMLEGALS  

INTRODUCTION

The objective of Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (the Principal Act) was speedy resolution of commercial disputes.

The "Commercial disputes" have been defined with an inclusive definition and it covers almost all disputes arising out of the commercial activities.

HIGHLIGHTS OF THE AMENDMENT

SECTION 2

Definition of Commercial Appellate Courts has been inserted under Section 2(1)(a) of the principal Act by renumbering the existing Section to 2(1)(aa). The definition of Commercial Appellate Courts reads as follows:

"Commercial Appellate Courts means the Commercial Appellate Courts designated under section 3A."

The definition of Specific Value under Section 2(1)(i) has been amended which reads as follows:

"Specified Value, in relation to a commercial dispute, shall mean the value of the subject matter in respect of a suit as determined in accordance with Section 12 which shall not be less than three lakh rupees or such higher value, as may be notified by the Central Government."

Enhanced Value - This is the most important amendment. The ceiling limit of value has been reduced from Rs.1 Crore to Rs. 3 Lakhs only. It has widened the pecuniary jurisdiction of the Commercial courts.

SECTION 3

State Government - With this amendment, the State Government have been conferred with the power to constitute a Commercial Court at district level, in states where High Courts exercise ordinary original civil Jurisdiction.

Earlier the commercial divisions of High Courts were established in places where the High courts have Original Ordinary Jurisdiction.

Pecuniary Jurisdiction - Along with such constitution, the state government can specify the pecuniary jurisdiction for such courts, which shall not be less than Rs. 3

lakhs and nor will be higher than the district courts pecuniary jurisdiction in that state.

This may create a situation where two states will have different pecuniary limit for their Commercial Court but in any case it won't be less than Rs. 3 lakhs.

SECTION 3A

The Section 3A has been inserted to the principal Act, which reads as follows :

"3A. Except the territories over which the High Courts have ordinary original civil jurisdiction, the State Government may, after consultation with the concerned High Court, by notification, designate such number of commercial appellate courts at District Judge level, as it may deem necessary, for the purpose of exercising the jurisdiction and powers conferred on those courts under this Act."

Establishment of Commercial Appellate Courts - Under Section 3A, the Amendment Act introduces the establishment of Commercial Appellate courts in jurisdictions where the Ordinary Original Jurisdiction of the High court does not exist.

Where High Courts already had jurisdiction then appeal against the order of Commercial Court will lie with Appellate Division of High Court.

For others it will be with Appellate Court at District level only. This will result Appeals from commercial courts below the district judge level would lie before such courts.

SECTION 9

The amendment omits the Section 9 of the principle Act, due to the reduction in the specified value and taking into consideration the existing burden on the commercial courts.

CHAPTER IIIA

SECTION 12A

Chapter IIIA has been inserted in the principal Act which consists of Section 12A,

"12A. (1) A suit, which does not contemplate any urgent interim relief under this act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the central government.

(2)....(3) .... (4) ...

(5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996."

The advent of the Pre-Institution Mediation process in matters where no urgent, interim relief is required will give an opportunity to the parties to resolve the dispute outside the ambit of the court.

The Settlement arrived at via such mechanism shall be equivalent to an arbitral award passed under Sub-Section (4) of Section 30 of the Arbitration and Conciliation Act, 1996.

Such a step will help reinforcing investor's confidence and trust in the speedy resolution of commercial disputes.

SECTION 13

The amended Sub-Clause 1 of Section 13 of the principal Act reads as follows:

"(1) Any person aggrieved by the judgement or order of a commercial court below the level of a district judge may appeal to the commercial appellate court within a period of sixty days from the date of judgment or order."

As mentioned above the Amendment Act establishes Commercial Appellate Courts in jurisdictions where the High courts do not exercise Ordinary Original Jurisdiction, wherein the appeal shall me made within 60 days from the day of the judgement or order of the Commercial Court.

SECTION 14

Section 14 of the principal Act reads as follows:

"14. Expeditious disposal of appeals- The Commercial Appellate Court and Commercial Appellate Division shall endeavor to dispose of appeals filed before it within a period of six months from the date of filing of such appeal."

Time Period of Disposal- The disposing of the appeal within a time period of 6 months from the day of filing the appeal is a step towards safeguarding the rights of the innocent parties involved in the matter.

SECTION 21A

Section 21A has been inserted to the principal Act.

Pre-Institutional Mediation- This Section empowers the Central Government to prescribe rules for the Pre-Institution Mediation process under Section 12A and any other matter which requires such rule making by the Government, subject to the approval of the Parliament.

This casts a duty on the Government to ensure that the intent of the legislature behind this provision is met by making a positive use of this power and developing a proper Centre for this mediation along with experienced mediators and infrastructure facilities.

PROSPECTIVE EFFECT

Section 19 of the Amendment Act states as follows:

"19. Save as otherwise provided, the provisions of this Act shall apply only to cases relating to commercial disputes filed on or after the date of commencement of this Act."

The Amendment Act provides for a prospective effect in order to not disturb the authority of the judicial forum adjudicating the commercial matters presently as per the principle Act.

The matters pending as of now before other courts shall not be transferred to Commercial Courts.

In addition to the above-mentioned alterations, the scope of Chapter II and Section 20 of the principal Act have been extended to the Commercial Appellate Courts by addition of the words 'Commercial Appellate Courts' to the heading of Chapter II and Section 20 of the principal Act.

CONCLUSION:

India will finally have exclusive Commercial Courts for a wider horizon of commercial disputes in as much as it shall have jurisdiction even for disputes as small as an amount of Rs. 3 lakhs and more which previously was contained for only disputes involving Rs. 1 Crore and above.

The specialized courts will evolve with speedy trial and corrective results in corrective disputes as well. This is a measure seen as second biggest reform for speedy trail in commercial disputes after Arbitration & Conciliation Act was amended to expedite the arbitration process in India.

The changes are in line with a vision to boost the foreign investor's confidence and to facilitate an ease of doing business in India.

The year 2016 to 2018 has resulted into some drastic changes in law and its structure which in medium to long term will enhance the image of Indian Legal System.

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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