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Easing commercial litigation

Easing commercial litigation
For the country’s corporate sector apprehensive of long pendency in courts and protracted litigation on commercial disputes for resolution, help is at hand at long last. The NDA government has set off a flurry of activities on this front to give a whiff of long-felt comfort to assuage investors’ enduring worries on this count. In the ongoing winter session of Parliament, the Law Commission of India’s report with its draft bill on Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015 was tabled. Subsequently, the House Panel on Personnel, Public Grievances, Law and Justice under the  chairmanship of E.M. Sudarsana Natchiappan also submitted its report, which also took due note of the Ordinance promulgated  by the Government on October 23, 2015, making certain improvements in the Bill. The avalanche of actions apparently, at least, testifies to the government’s intent to bring about a helpful business policy ballast to the corporate sector.

As the Law Commission Chairman Justice Ajit Prakash Shah said in his letter to the Union Law Minister enclosing the 59-page well-crafted report early this year, among others, the establishment of commercial courts and commercial divisions and Commercial Appellate Divisions in the High Courts  would ensure speedy disposal of high-value commercial suits. To this effect, it also drafted a new bill that covers substantive procedural changes in the forms of amendments to the Civil Procedure Code, 1908.  

Rightly did the Law Commission mention that the key difference between commercial litigation in India and such litigation conducted in England or Singapore is not just the mere establishment of commercial courts there, but also the procedure and manner in which commercial suits are conducted. Everything from the length of pleadings, the manner in which the documents are to be submitted and the consequences of non-compliance with the strictly enforced timelines is followed by parties and counsels meticulously. 

Thus, in the Indian context, much greater normative and practical changes are required in the conduct of litigation and control of dockets, over and above the legislative amendments to counter the problems plaguing commercial litigation. In effect, the Law Commission plumps for a seismic shift in litigation culture in India from “a litigant-managed to a court-managed litigation process”.

Justifiably the Law Commission maintains that the concept of commercial court—a dedicated forum aimed at resolving complex commercial rows between parties—is an idea that has merit in its own right. Stating that the importance of a stable, efficient and certain dispute resolution mechanism to the growth and development of trade and commerce is well established, the Commission contends that quick enforcement of contracts, easy recovery of monetary claims and award of just compensation for damages suffered remain “absolutely critical to encourage investment and economic activity which necessarily entails the taking of financial and enforcement risks”.  

There is also a felt need for improving the global image of the Indian justice delivery system as there is a growing impression among foreign investors and companies that India is a difficult spot to do business for reasons of the slowness and inefficiency of the judicial system. This is also reflected in the World Bank’s annual publication of “Doing business” report where India was ranked 186th among 189 nations surveyed in the 2014 report, unchanged from its 2013 position. 

Hence, the Law Commission in its report in the redrafted Bill proposed the setting up of commercial courts and commercial divisions within High Courts which will function as model courts establishing a new practice in commercial litigation that can over time be scaled up and extended to all civil litigation in the country. In fine, the suggested commercial courts, besides being ends in themselves, are also a pilot project to reform civil litigation across the nation and tackle the twin issues of delay and pendency that dog the judicature today.The House Panel report which studied the Bill for the establishment of commercial courts across the country argued that resolution of civil disputes is a service by the State to the litigants while justice delivery in the criminal case is a sovereign duty of the State. Having thus demarcated the role and the responsibility in dispensing justice to the citizenry, the House panel went on to state that the commercial entities in high-value disputes need a quicker remedy and in the absence of which they take recourse to arbitration  paying a hefty amount in the process of settling skirmishes. 

As parties to high-value commercial disputes are capable of bearing the cost of justice delivery in those cases, the Committee plumps for a “Cost Accountant Wing” in the apex court and high courts to analyse cost effect for determination of court fee for running the commercial courts. It rightly claimed that such a step would by degrees diminish dependency of courts on demand for grants from the Consolidated Fund of India which would also have the spur to offer financial independence to the judiciary. 

According to the House Panel, commercial courts with requisite human resource including judges and staff members, state-of-the-art infrastructure may be created on a pilot basis in some States where commercial disputes of Rs 2 crore and above are pending. The remaining States may replicate those courts in their States depending upon their requirements. The Bill proposes the creation of commercial division in High Courts of Madras, Calcutta, Mumbai, Delhi and Himachal Pradesh and commercial Appellate Division (which is a two each Court) in all 24 High Courts to be created to hear an appeal from Commercial Courts.

The Chairman of the House Panel Natchiappan is of the view that the country has the potentials to emerge as a hub of institutional arbitration to help foreign investors settle their host country disputes within the country in a faster and reliable manner instead of preferring third country like Singapore and Dubai that involves cost and time to the litigants. In this regard, he suggested that institutional arbitration with accredited arbitrators might be extended to the commercial entities so that they could avail themselves of the tack of either commercial court or arbitration for resolving rows. The Committee is of the considered view that the award of the arbitration should be binding on the parties without giving them the option to challenge the same in the court of law.   

Interestingly as the Law Commission report has suggested the Central government to appoint judges to the commercial court and the Bill vests the appointment of judges of commercial courts with the High Court concerned, the House Panel contends that encroaches upon the powers of the State government and contravenes the federal structure provided under the Constitution.  “We have suggested that the appointment powers of State government should be left as provided under Article 233 and 234 of the Constitution”.  But this plea of the House panel smacks of trying to influence judges in the commercial disputes by the States when in several instances the state themselves are litigants on issues of land and revenue and fiscal levies, impartial observers contend.

In any case, all these issues and nuances need to be studied thoroughly before enacting the legislation, even as the fact remains incontrovertible that establishing a commercial division in the higher judiciary is a vital piece of economic reform that has languished far too long to realize India’s growth potentials.

(The views expressed are strictly personal)
G Srinivasan

G Srinivasan

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