Commercial courts are set up under the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015 (as amended in 2018), for deciding upon commercial disputes as defined in Section 2(c) of the said Act. Commercial disputes shall mean all transactions between merchants, bankers, financiers, and traders relating to any commercial aspect. Within its ambit are claims or applications or transactions concerning maritime and admiralty law and those relating to aircraft and its accessories, farther extending to the carriage of goods, construction and infrastructure contracts, and agreements relating to immovable property exclusively used for trade or commerce. It further includes franchising, distribution and licensing agreements, management and consultancy agreements, joint ventures, and shareholders agreements. Other areas covered by commercial disputes relate to subscription and investment agreements in the services industry, mercantile agency and usage, partnership agreements, technology development agreements, intellectual property rights, and agreements for sale of goods or services. The ambit further extends to exploitation of natural resources and insurance and re-insurance.
In HPL, India Ltd. v. QRG Enterprises & Ors, 2017 SCC OnLine Del 8147, the Hon’ble High Court of Delhi established that a commercial dispute does not cease to be a commercial dispute merely because it also involves the recovery or realization of immovable property or if one of the contracting parties is a state entity or a private body discharging public functions. relating to procedural compliance in commercial disputes. Another feature of the Act is that commercial courts are required to deal with suits having a minimum value of three lakh rupees, which would attach focused and speedy attention to high-stake commercial matters. Recently in Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP & Anr. (2020 SCC OnLine SC 132), the Supreme Court has held, in, that a dispute pertaining to lease of property would fall within Section 2(c) while giving an expansive meaning to the term 'commercial disputes'.
Step by Step Procedure under the Act
Procedure before the aforesaid commercial courts is governed by the Code of Civil Procedure 1908 (CPC) as amended. The following steps encompasses the adjudicating procedure ensured by the Act and the CPC 1908.
First of all, it should be verified as to whether the suit lies within the pecuniary jurisdiction and specified value as defined under Section 6 of the Commercial Courts Act, 2015, and most importantly, whether the commercial court can entertain the issue in hand. In commercial suits from the Arbitration Award, depending on the aggregate value of claim and counter claim of arbitration of specified value will be adjudicated according to jurisdiction as per section 10 of the act. The specified value of the subject matter will be determined according to section 12 of the act, which takes into account necessary criteria for diverse types of commercial suits.
The second step is that Section 12A of the Act prescribing Pre-Institution Mediation and Settlement, an imperative pre-condition before institution of a commercial suit. This provision requires that all commercial matters unless urgent or seeking interim relief orders are required to comply to this condition of pre-mediation for upto five months with an initial period of three months extendable by two more months with the consent of the parties. It has been held. It was clarified beyond doubt by the Hon’ble Supreme Court in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt Ltd. (2022 SCC OnLine SC 1028), that the pre-institution mediation under Section 12A was mandatory and if not complied with, the suit could be dismissed. Every settlement arrived at during preinstitution mediation shall be reduced into writing and signed by the parties and the mediator. Such settlement is treated on par with an arbitral award under Section 30 of the Arbitration and Conciliation Act, 1996, which has been upheld in the case of M/S Shree Vishnu Constructions v. The Engineer in Chief Military Engineering Services & Ors. (2020 SCC OnLine SC 1561). If the mediation is not successful or if urgency is felt, then the case is taken up by the commercial court without pre-mediation. This procedure, in fact, ensures efficient management of commercial disputes and makes provision for their resolution and maintenance of the integrity of the commercial judiciary system.
Third step is filing of Plaint as per Order VII and Written statement as per Order VIII CPC respectively and every page of the document is to be signed by the parties. The Plaint which shall be accompanied by a statement of truth as required by Order 6 Rule 15A of the amended CPC, failing which the same may be returned by the court. Besides the Plaint, a list of documents must be filed under Order 11 Rule 1 of the CPC. The Plaintiff also has the liberty to file any additional documents within 30 days of commencing institution of the suit, as per Order 11 Rule 1(4). If the documents as disclosed by the plaintiff or by defendant are of electronic nature, a declaration on oath under Order 11 rule 6 of the code, furthermore the submitting party has to ensure that the declaration includes the all the necessary details as per rule 6(3), else the court can reject to take the document on record. If certain documents are in the custody of the defendant or with a third party and are not in the custody of the plaintiff, it has to give the reasons for non-availability and may pray for Leave to file such documents under Order 11 Rule 1(6) of CPC. It is mandatory that, after the Defendant is served with summons, a written statement has to be filed within 30 days from the date of service but not later than 120 days from the date of service, as provided in Order 8 Rule 1 of CPC. On failure, he forfeits the right to file a written statement. Any averments in the plaint may be specifically denied by the Defendant under Order 8, Rule 5A. The Written Statement has accompanied by an affidavit of Admission & Denial of the documents the plaint.
Fourth procedural step is the disclosure, discovery and inspection of documents under Order 11 of the CPC. Order 11 Rule 2 deals with procedure of discovery by interrogatories which enables either party in manner prescribed in Form 2 – Appendix C with leave of court to deliver written interrogatories seeking particulars, admissions or document production relating to any matter in question in suit. Such applications should be decided by the court within 7 days from the date of filing. Where a party is served with interrogatories, he shall answer the same within 10 days by affidavit in Form No. 3 of Appendix C of the CPC. Where the answers are insufficient or omitted, an applicant may, by an application to the court, pray for compelling discovery and such discovery can be ordered by affidavit or otherwise oral examination. Under Order 11 Rule 3, the parties are required to make inspections of all disclosed documents within a period of 30 days. If a party feels that certain documents have not been disclosed properly by the other party, then it may file an application before the court for inspection under Rule 3(2) of the said order, after giving prior notice. Such applications have to be disposed of by the court within 30 days of its filing, comprising of all replies and rejoinders. No Party can rely on any undisclosed document without leave of the court. The court has the power to impose costs on parties who do not comply with provisions of disclosure or inspection. It is in this backdrop that the application of these provisions has been reiterated time and again by the Hon'ble Supreme Court in the judgment reported as HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. & Ors. (2021 SCC OnLine SC 21), wherein the judgment granting leave for discovery and inspection of documents has been upheld stating that the same is of utmost importance for the adjudication of a complex commercial dispute. This is followed by admission and denial of documents under Order 11 Rule 4. Wherein each party shall submit a statement of admission or denial of all documents disclosed and of which the inspection is completed. This statement along with an affidavit has to be filed within 15 days of the completion of inspection or any later date fixed by the court. Statement of admission and denial should contain regarding correctness of contents of a document, Existence of a document, Execution of a document, Issuance or receipt of a document, Custody of a document.
The fifth step involves a case management hearing, wherein the Court is required to conduct the first hearing no later than four weeks from the date of filing the affidavit of admission or denial of documents by all parties involved in the suit. At the conclusion of such hearing, upon considering the pleadings, documents and arguments, the Court may determine whether there are factual and legal issues to be tried and may frame such issues. It may further set dates for filing of affidavits of evidence, written arguments and oral arguments. It ensures all arguments are concluded within a period of six months from the date of the first Case Management Hearing. To ensure that the suit is disposed of within the stated timeline and to achieve that end, the Court may pass various orders. Before framing the issues, application for summary judgment under Order XIII may be entertained if filed by the parties. Apart from that, the Court may pass orders to direct the parties to file document compilations or pleadings, grant adjournments, summon parties for examination, strike off irrelevant witness names or evidence, direct separate trials on a specific issue, record evidence through a Local Commissioner, reject affidavits containing irrelevant or inadmissible material, or delegate evidence recording to an appointed authority. The orders of the Court may in some circumstances impose conditions, and may also state the consequences of disobedience, including awarding costs, or even dismissing the plaint or allowing the suit if disobedience is contumacious or repeated. If the possibility of settlement exists, the Court may compel the appearance of parties during the Case Management Hearing. This ensures that the cases are progressed effectively, and the timelines are managed, leading to fast resolution of disputes.
Judgment would be pronounced thereafter within 90 days of conclusion of arguments in lieu of Order 20, Rule 1.
Appeal under Commercial Courts Act 2015
As per Section 13 of the Commercial Courts Act, 2015, an appeal may be made to the Commercial Appellate Court or the Commercial Appellate Division from the judgment of a commercial court or commercial division, as the case may be, within 60 days from the date of judgment by any party aggrieved. Additionally, within its scope falls appeal under Section 37 of the Arbitration and Conciliation Act, 1996. Commercial Courts Act. Section 8 of the Act has provided that no civil revision petition or application shall be entertained against any interlocutory order of the commercial court, including orders touching jurisdictional issues. Such matters may be raised only in an appeal against the final decree of the commercial court, provided under Section 13. Appeals to the Commercial Appellate Court and the Commercial Appellate Division have to be disposed of within six months from the date of filing.
Power of Summary Judgment with Commercial Courts
Summary judgments are well established in the United States, the United Kingdom, and Canada. Under Order 13A in India, an application for a summary judgment could be made at any time following the serving of the summons on the defendant and not after the court frames the issues. The court may award summary judgment, either that the plaintiff has no real prospect of succeeding on the claim, or the defendant no real prospect of successfully defending the claim. For example, in the event of wrongful underpayment or failure to pay sums contractually due, summary judgment has been awarded where the defendant has admitted the payment or non-payment, or that it is clearly established by the documents. In the case of Campus Eai India Pvt. Ltd. v. Neeraj Tiwari [CS(OS) 482/2016, Delhi High Court], the court permitted an application made by the defendant for summary judgment based on a report from an independent third-party expert who has not found any evidence of plagiarism in respect of a charge of plagiarism of the software. Another scenario is where the court could grant summary judgment if there is no other compelling reason for the claim to proceed to the recording of oral evidence.
Transfer of Cases to Commercial Courts
Section 15 of the Act provides that all suits and applications pending in a High Court in its commercial division or in a civil court in district, arising out of the provisions of the Arbitration and Conciliation Act in relation to commercial dispute of specified value, shall be transferred to a commercial court. However, suits or applications in which the final judgment has been reserved by the court prior to the constitution of the commercial division or the commercial court cannot be transferred to the commercial court.
Merits and Demerits
Certain advantages that have accrued from the Act are speedy disposal of suits, cost penalties to keep advocates diligent in their progress and processes like case management & summary judgments which waste less court time. The Hon'ble Delhi High Court has observed in the case of Kirusa Software Pvt. Ltd v Rattan India Power Ltd 2018 SCC OnLine Del 10450 that direct results of this act were large reduction in case backlog and swifter disposal times.
Contrasted with this, in the case of new systems, challenges are immediate for spreading procedural knowledge and setting of precedents because the implementation is still recent. The Hon’ble Karnataka High Court in the Reva Electric Car Co. Pvt. Ltd. vs Green Mobil India Pvt. Ltd. (2020 SCC OnLine Kar 565) observed that the training and awareness issues are more rampant amongst the practicing members of the legal fraternity as also the litigants towards the new procedural requirements under this Act.
Conclusion
Coming into effect of Commercial Courts Act, 2015, has brought organization in the handling and disposal of commercial disputes, a successful model for organised legal processes for other civil or criminal matters that could lead to increasing overall capability. This finds explanation from the case of Kandla Export Corporation & Anr. v. OCI Corporation & Anr. [(2018) 9 SCC OnLine 6], wherein it was held by the Hon’ble Supreme Court that this Act has played an important role in facilitating quick disposal of commercial litigation, ease of doing business, and provisions for the resolution of complex commercial disputes in an effective manner.