On 3rd May 2018, an ordinance amending the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, ("Act") was promulgated. The ordinance makes important changes to commercial litigation in India and comes into force with immediate effect but applies only to proceedings instituted after the commencement of the ordinance.
The significant changes are:
Specified value: The ordinance enables the State Government to extend the Act to matters valued above INR Three Lakhs (USD5,000 approx), whereas earlier it only applied to matters above One Crore (USD150,000 approx).
Establishment of new commercial courts: State governments are now authorized to establish distinct commercial courts at the level subordinate to that of a High Court, even in places where a High Court is a court of first instance.
Pre-institution mediation: Mediation has now been made compulsory in all cases except in suits or applications in which urgent interim relief is sought. The government is required to notify the designated authority to conduct mediation. The designated authority is required to complete the process of mediation within three months. The settlement arrived at by such mediation will have the status and effect of an arbitral award. However, as no authority has been designated, this change in law is ineffective for the time being.
The name of the Act has been changed from 'Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015' to the 'Commercial Courts Act, 2015.'
Earlier state governments could appoint judges of the Commercial Courts only with the concurrence of Chief Justice of the High Court. Pursuant to the ordinance, state governments can appoint commercial court judges without the approval of the Chief Justice of the High Courts. This is an important change as it enables the executive to make quick judicial appointments to commercial courts, without the involvement of the higher judiciary which is time consuming.
The proposed changes are positive and designed to ensure that commercial litigation in India mirrors international best practice. However, the success of these newly created commercial courts in India is yet to be felt and as with other newly launched regulations in India such as RERA, IBC etc commercial litigation will gain credibility only if the time lines under the Act are adhered and the twin evils of delay and cost are banished.
Posted on 18 June 2018 by Zarir Bharucha
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