Amending the Commercial Courts Act: Quantity over Quality?

[Anhad S. Miglani is a Chandigarh based advocate and Sagun Poudyal a Mumbai based commercial lawyer. Both are graduates of the National Law School of India University, Bangalore]

In May 2018, an Ordinance was promulgated to amend the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (the “Act”). The Parliament, in its monsoon session, has passed a Bill to the same effect. The stated object is the need to improve India’s ranking in the World Bank’s Ease of Doing Business Index (it contains an ‘Enforcing Contracts’ component).[1] The same reason was given to justify the urgency behind promulgation of the Ordinance – a very limited power under Article 123 of the Constitution, which is to be exercised only in circumstances that render it necessary to take immediate action.

Be that as it may, while India’s rise in the Index might be beneficial economically, the causes or consequences of such a rise, insofar as they relate to the judicial machinery in India, are merely superficial. Most notable are the provisions of the Amendment Bill that reduce the pecuniary jurisdiction of commercial courts from one crore rupees to merely rupees three lakhs, despite the fact that the Parliamentary Standing Committee which had reviewed the original Act in 2015 had recommended increasingthe pecuniary limit to two crore rupees instead. Furthermore, it is worth pointing out that the Law Commission, in its 188th (2003) and 253rd (2015) reports had suggested rupees one crore as the minimum pecuniary limit for such specialised commercial courts.

Needless to say, such a low pecuniary threshold coupled with the widest possible definition of ‘commercial disputes’ is going to flood the commercial courts overnight. This is especially so since in implementing the Act it is only the existing courts that have been designated or rebranded as commercial courts, hence increasing their workload. While the Act does provide for the appointment and training of new judges and provisions for setting up additional infrastructure for commercial courts, the reality on the ground speaks otherwise. Resultantly, the existing judicial system across the board will be overburdened, thereby defeating the very purpose of the Act itself – expediency. It is also important to note here that because commercial disputes are required by the Act to be decided in a time bound manner, all other kinds of disputes pending before the courts will inevitably take a back seat as long as exclusive, specialised commercial courts are not set up. Yes, smaller businesses and traders have been given access to specialised commercial forums, but it is worthless, maybe even counter-productive, if the access does not translate into attainment (of justice).

Simply because the Commercial Courts Act provides for a time-bound decision on disputes through simplified procedures does not mean that increasing the number of cases under their jurisdiction will lead to the speedy resolution of all those cases. While the constitution of commercial courts below the district level [2] – possibly to adjudicate disputes of a lower pecuniary value (although not less than 3 lakhs) – seems like a good idea and might free up the dockets of the higher courts, it will continue to be unworkable till state governments provide the necessary infrastructure and appoint and train specialised judges to deal with commercial disputes. Even the provision for pre-institution mediation for commercial disputes, while quite laudable, is beset with possible inefficiencies insofar as the authorities under the Legal Services Authorities Act, 1987, have now been tasked with these (it may be helpful to recall that this statute was principally enacted to provide free legal services to the weaker sections of society). While we are yet to sight the exact manner and procedure intended for the conduct of such mediations, it will indeed be a tall order for the Legal Services Authorities to manage.

As a result, while the principal objective behind enacting the statue and introducing this amendment has been to make resolution of commercial disputes swift and expeditious, the framework of the legislation does very little to ensure that said intent is materialised. In fact, most of the timelines prescribed under the Act are effectively just directory in nature, with no particular penalties or deterrents prescribed for a failure to comply. Even the new Insolvency and Bankruptcy Code provides for timelines in the resolution process; yet, more often than not, these are not being followed. Besides, the track record of ‘fast track courts’ constituted for certain offences like corruption also serves to illustrate how merely prescribing timelines just looks good on paper.

Owing to the above, it seems that without a clear, step-wise plan of action and implementation, expediency in resolving commercial disputes will continue to remain a distant dream, irrespective of the World Bank’s Index. Much of it would also require increased co-operation between the executive and the judiciary to set up new commercial courts, appoint, train and assign judges, and establish the required infrastructure to give true effect to the Act. Additionally, small measures such as using costs and court fees punitively, to check frivolous delays and adjournments, may go a long way in providing timely justice, commercial or even otherwise.

Anhad S. Miglani & Sagun Poudyal


[1] ‘Enforcing Contracts’ is one of the indices used in calculating the Ease of Doing Business Index. It takes into consideration the time, cost and the quality of the judicial process in cases with claims worth 200% of per capita income or $ 5,000, whichever higher. Since INR 3,00,000 is approximately $ 4,300, the data for commercial courts (and not ordinary civil courts which were hearing these cases earlier) will now be used by the World Bank.

[2] In states where High Courts have no ordinary original jurisdiction.

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