[Author’s Note :: Complete
credit for the answer to the above question and the first part thereof goes to
the PRS Legislative Research, Ministry of Law and Justice for the article
produced by them at the following link.
The rest of the portion is the result of
the research work of the author.]
Enforcing commercial contracts requires
the involvement of the judicial system. However,
it takes nearly four years (1,420 days) in India to resolve commercial
disputes. [See, “Ease of Doing
Business”, 122nd Report of the Department Related Standing
Committee on Commerce, December 21, 2015, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Commerce/122.pdf.] This may be due to reasons such as, high
existing pendency of cases, and complex litigation procedures. In 2013, there were 32,656 civil cases pending
in various high courts, of which 52% were commercial disputes. [See, “Commercial Division and
Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015”,
Law Commission, Report No. 253, January 2015, http://lawcommissionofindia.nic.in/reports/Report_No.253_Commercial_Division_and_Commercial_Appellate_Division_of_High_Courts_and__Commercial_Courts_Bill._2015.pdf.]
Over the years, various expert bodies
such as the Law Commission of India and the Standing Committee on Personnel,
Public Grievances, Law and Justice have observed the need to fast track
disposal of commercial disputes. [See,
“Proposals for Constitution of Hi-Tech Fast – Track Commercial Divisions In
High Courts”, Law Commission, Report No. 188, December 2003, http://lawcommissionofindia.nic.in/reports/188th%20report.pdf.]
[See also, Report No.78,
Standing Committee on Personnel, Public Grievances, Law and Justice: ‘The
Commercial Courts, Commercial Division and Commercial Appellate Division of
High Courts Bill, 2015, Rajya Sabha, December 2015, http://www.prsindia.org/uploads/media/Commercial%20courts/SCR-%20Commercial%20Courts%20bill.pdf.]
They note that most commercial disputes,
especially of high value have an impact on financial investments and larger
economic activity in the country. In its
253rd Report, the Law Commission (2015) further noted that an
independent mechanism for quick disposal of these commercial disputes is
required with specialised expertise in dealing with commercial cases.
In this context, the Commercial Courts,
Commercial Division and Commercial Appellate Division of High Courts Act, 2015
was enacted to fast track the disposal of high value commercial disputes (above
rupees one crore), by establishing commercial courts at the district level, and
commercial divisions and commercial appellate divisions in high courts. [The Commercial Courts, Commercial Division
and Commercial Appellate Division of High Courts Act, 2015,
https://indiacode.nic.in/bitstream/123456789/2156/1/201604.pdf.]
As of December 2017, state governments
had constituted a total of 247 commercial courts in various districts across the
country. [Rajya Sabha Starred Question
No.14, Ministry of Law and Justice, December 15, 2017.] To improve ease of doing business in India,
the Commercial Courts, Commercial Division and Commercial Appellate Division of
High Courts (Amendment) Ordinance, 2018 (Commercial Courts Ordinance, 2018) was
promulgated in May 2018, to reduce the pecuniary jurisdiction of commercial
courts and commercial divisions in high courts from one crore rupees to three
lakh rupees.
Key
Features
Table 1 compares provisions of the
Commercial Courts (Amendment) Ordinance, 2018 with the Commercial Courts,
Commercial Division and Commercial Appellate Division of High Courts Act, 2015
(2015 Act).
|
|
Existing
2015 Act |
The
Commercial Courts, Commercial Division and Commercial Appellate Division of
High Courts (Amendment) Ordinance, 2018 |
|
Minimum
value of commercial disputes |
At least one crore rupees (amount to
be notified by the central government). |
At least three lakh rupees (amount to be notified by the central government). |
|
Commercial
division in high courts |
Establishes commercial divisions in 5
high courts which have ordinary original civil jurisdiction, i.e.,
the High Courts of Delhi, Bombay, Calcutta, Madras and Himachal Pradesh. |
No change. |
|
Commercial
courts at district level |
State governments may set up commercial courts at
the district level, in areas where high courts do not have original
jurisdiction. |
Allows commercial courts at the
district level to be set up, in areas where all 24 high courts have
jurisdiction. In areas where high courts have original
jurisdiction, state governments may specify the pecuniary jurisdiction of
commercial courts which is not lower than three lakh rupees and more than the
pecuniary jurisdiction of district courts in those areas. State governments may constitute commercial
courts below the level of a district judge, in areas where high courts do not have original
jurisdiction. |
|
Commercial
appellate division in all high courts |
Establishes commercial appellate
divisions in all 24 high courts to hear appeals against orders from: (i)
commercial divisions of high courts, and (ii) commercial courts at the
district level. |
No change. |
|
Commercial
appellate courts at district level |
No provision. |
State governments may set up commercial appellate
courts at the district level in areas where high courts do not have original
jurisdiction. These courts will hear appeals against orders of
commercial courts below the level of a district judge. |
|
Appointment
of judges of commercial courts |
State governments, with the
concurrence of the Chief Justice of the High Court will appoint judges of
commercial courts from the higher judicial service of the state. |
State governments may with the
concurrence of the Chief Justice of the High
Court, appoint judges of commercial courts either at the level of a
district judge or below the level of a district judge. |
|
Pre
institution mediation |
No provision. |
Introduces mandatory mediation before the filing
of a suit, in cases where no urgent relief is sought by the parties. To be completed within three months (extendable
by two months). |
|
Counterclaims |
If a counterclaim was filed in a commercial
dispute of at least one crore rupees in a civil court, the civil court could
transfer the suit to a commercial court or commercial division of high court. |
Provision removed. |
Table 1: Comparison
of the 2015 Act with the Commercial Courts (Amendment) Ordinance, 2018
Note: Original ordinary civil jurisdiction refers to
when a court has the power to hear a fresh case. In India, five High Courts (i.e., High Courts
of Delhi, Bombay, Calcutta, Madras and Himachal Pradesh) have ordinary original
civil jurisdiction. The 19 remaining
High Courts only have appellate jurisdiction, i.e., they can hear appeals from
the others of subordinate courts.
Sources: The Commercial Courts, Commercial Division
and Commercial Appellate Division of High Courts Act, 2015, The Commercial
Courts, Commercial Division and Commercial Appellate Division of High Courts
(Amendment) Ordinance, 2018; PRS.
PART B:
KEY ISSUES AND ANALYSIS
Reduction
in the pecuniary jurisdiction of commercial courts
The 2015 Act establishes commercial
courts at the district level and commercial divisions in high courts to
adjudicate commercial disputes with a value of at least one crore rupees. The Ordinance reduces this limit to three
lakh rupees This raises a question
whether lowering the pecuniary jurisdiction of commercial courts is
appropriate. Over the years, the Law
Commission and Parliamentary Standing Committees have observed that due to high
pendency of cases the judicial system is unable to dispose of cases in a timely
manner. The Law Commission in 2003 and
2015 recommended that a law be enacted to establish commercial courts to
resolve commercial disputes of high value.
They argued that adjudication of high value commercial disputes requires
specialised expertise, and has a larger impact on foreign investments and
economic growth of the country. [See,
“Arrears and Backlog: Creating Additional Judicial (wo)man power”, Law
Commission of India, Report No. 245, July 7, 2014,
http://lawcommissionofindia.nic.in/reports/Report245.pdf.]
As seen in Table 2 below, it has been
recommended that the minimum value of cases being heard by commercial courts
should be above rupees one crore.
|
Table 2: Recommendations of expert bodies on minimum value of commercial
dispute
|
Reducing the minimum value to above
rupees three lakh will increase the number of cases admitted in commercial
courts and therefore slow down the priority given to relatively higher value
cases. Note that while examining the
2015 Act, the Standing Committee on Law and Justice (2015) recommended
increasing the minimum value of commercial disputes from one crore rupees to
two crore rupees. It argued
that setting a lower value may lead to the transfer of large number of cases
which may overburden the commercial courts.
Therefore, the purpose behind their establishment may be defeated.
Annexure
|
Figure 1: Hierarchy of
commercial courts proposed by the Ordinance
|
What
steps have been taken in West Bengal after the notification of Commercial
Courts Act, 2015 & The Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015?
OR
What
is the Territorial Jurisdiction of the Commercial Courts at Siliguri, Asansol,
Alipore and Rajarhat?
OR
Whether
a commercial dispute of substantial amount in the district of Darjeeling, Jalpaiguri, Alipurduar,
Coochbehar, North Dinajpur, South Dinajpur and Maldah will fall within the
Jurisdiction of the Commercial Courts at Siliguri?
On 28th June 2016, the Judicial
Department of the Govt. of West Bengal, by way of Notification No. 197-JL and in
exercise of the power conferred by sub-section (2) of section 3 of the Commercial
Courts, Commercial Division and Commercial Appellate Division of High Courts
Act, 2015 (4 of 2016) the Governor, after consultation with the High Court,
Calcutta, vide Memo No.2304-RG dated the 27th June, 2016, inaugurated Four
commercial courts (at Siliguri, Asansol, Alipore and
Rajarhat) with the following territorial jurisdiction -
(a) the local limits of the jurisdiction of the
Commercial Court at Alipore, the areas included within the districts of South
24 Parganas, Purba Medinipore and Paschim Medinipore;
(b) the local limits of the jurisdiction of the
Commercial Court at Rajarhat, the areas included within the districts of North
24 Parganas, Nadia, Hooghly and Howrah;
(c) the local limits of the jurisdiction of the
Commercial Court at Asansol, the areas included within the districts of
Murshidabad, Birbhum, Bankura, Burdwan and Purulia;
(d) the local limits of the jurisdiction of the
Commercial Court at Siliguri, the areas included within the districts of Darjeeling, Jalpaiguri, Alipurduar, Coochbehar, North
Dinajpur, South Dinajpur and Maldah.
Thus the Commercial Court at Siliguri includes
the districts of Darjeeling, Jalpaiguri, Alipurduar, Coochbehar, North
Dinajpur, South Dinajpur and Maldah.
The Judicial Department of the Govt. of West Bengal
by way of Notification No. 158 JL dated 20th March 2020 and in
exercise of the power conferred by sub-section (IA) of section 3 of the
Commercial Courts Act, 2015 (4 of 2016), and in supersession of the earlier
notification No. 254- JL, dated the 151h November 2018, was pleased to specify,
the Pecuniary Jurisdiction of the Commercial Courts with immediate effect, where
the value of the commercial disputes, as mentioned below:-
(a) in case of Commercial Courts at Siliguri,
Asansol, Alipore, and Rajarhat, of an amount not less than rupees thirty lakh;
(b) in case of Commercial Courts within the
territorial jurisdiction of the City Civil Court at Calcutta, of an amount-(i)
not less than rupees three lakh and not more than rupees ten lakh exclusively ;
and (ii) exceeding rupees ten lakh but not exceeding rupees one crore,
concurrently with the Commercial Division of the High Court, Calcutta;
(c) in case of the Commercial Division of the High
Court, Calcutta, of an amount exceeding rupees ten lakh.
Thus a commercial dispute EQUAL TO OR ABOVE 30
LAKH in the district of Darjeeling,
Jalpaiguri, Alipurduar, Coochbehar, North Dinajpur, South Dinajpur or Maldah
will it fall within the Pecuniary Jurisdiction of the Commercial Courts at
Siliguri.
What
disputes are “Commercial Disputes” within the scope of the Commercial Courts
Act, 2015 & The Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015?
OR
Ajay
Chakraborty, a resident of Jalpaiguri District falling in Siliguri, who was
owning ½ share of land located in Fulbari under Rajganj Block of Jalpaiguri, entered
into an Agreement to Sell for an earnest amount of 30 Lakh for his share to
Babu Ghosh, of Jalpaiguri Sadar. The Earnest Amount was to be forfeited in case
of non-payment of full consideration within stipulated time. Now, whether the
forfeit of the Earnest Money is a “Commercial Dispute” and thus will be filed
before the Siliguri Commercial Court?
OR
Whether
an Agreement to Sell for an immovable property (of 30 Lakhs as Earnest Money) to
be used in TRADE AND COMMERCE is a Commercial Act the violation whereof will be
a “Commercial Dispute” from the perspective of the Commercial Courts Act, 2015
& The Commercial Courts, Commercial Division and Commercial Appellate
Division of High Courts Act, 2015?
As per section 2(c) of The Commercial Courts Act,
2015, “commercial dispute” means a dispute arising out of––
(i) ordinary transactions of merchants, bankers, financiers and traders
such as those relating to mercantile documents, including enforcement and
interpretation of such documents;
(ii) export or import of merchandise or services;
(iii) issues relating to admiralty and maritime law;
(iv) transactions relating to aircraft, aircraft engines, aircraft
equipment and helicopters, including sales, leasing and financing of the same;
(v) carriage of goods;
(vi) construction and infrastructure contracts, including tenders;
(vii) agreements relating to immovable property used exclusively in
trade or commerce;
(viii) franchising agreements;
(ix) distribution and licensing agreements;
(x) management and consultancy agreements;
(xi) joint venture agreements;
(xii) shareholders agreements;
(xiii) subscription and investment agreements pertaining to the services
industry including outsourcing services and financial services;
(xiv) mercantile agency and mercantile usage;
(xv) partnership agreements;
(xvi) technology development agreements;
(xvii) intellectual property rights relating to registered and
unregistered trademarks, copyright, patent, design, domain names, geographical
indications and semiconductor integrated circuits;
(xviii) agreements for sale of goods or provision of services;
(xix) exploitation of oil and gas reserves or other natural resources
including electromagnetic spectrum;
(xx) insurance and re-insurance;
(xxi) contracts of agency relating to any of the above; and
(xxii) such other commercial disputes as may be notified by the Central
Government.
Explanation.––A commercial dispute shall not cease to be a commercial
dispute merely because—
(a) it also involves action for recovery of immovable property or for
realisation of monies out of immovable property given as security or involves
any other relief pertaining to immovable property;
(b) one of the contracting parties is the State or any of its agencies
or instrumentalities, or a private body carrying out public functions;
From a bare perusal, of Section 2(c) above including the explanations thereto
it is noticed that the disputes arising out of agreements relating to immovable
property used exclusively in trade or commerce will qualify to be a
commercial dispute to be tried by Commercial Courts.
Hence, in the absence of clear use of land in the Second Question above,
it is unclear that the land will be used for “Trade and Commerce” and hence
will not fall within the definition of “Commercial Dispute” and accordingly
will be tried by ordinary courts and not the Commercial Court at Siliguri.
The Land in Question in the Third Question above is a “Commercial
Dispute” within the meaning of The Commercial Courts Act, 2015 and will be filed
before the Commercial Courts at Siliguri.
