The Commercial Courts Act, 2015 | Civil Law for Judiciary Exams PDF Download

Introduction

• The Commercial Courts Act of 2015 was implemented to expedite the resolution of commercial disputes. It established commercial courts at the district level and a specialized division in the High Court to handle commercial matters above a specified value of Rs. 3,00,000. These courts aim to streamline dispute resolution, incorporating alternative methods like arbitration and pre-institution mediation and settlement.
• The Act prioritizes efficiency, aiming to become comprehensive legislation with overriding effect over other statutes to reduce litigation duration. It limits appeals against court orders, emphasizing swift resolution.
• Understanding key terms is essential for grasping the Act's provisions. A "Commercial Dispute" under Section 2(1)(c) involves disputes valued at Rs. 3 Lakhs or more, requiring mandatory pre-institution mediation by Legal Services Institutions. Pre-Institution Mediation aims to resolve disputes before formal litigation.
• Additionally, the Act defines the "specified value" under Section 12, determining the Act's applicability. To initiate proceedings under the Act, one must demonstrate a commercial dispute exceeding the specified value.

Specified Value

Section 12 of the Act provides detailed criteria for determining the specified value in various scenarios:

• Recovery of Money: The total amount sought to be recovered in the suit or application, including any interest accrued up to the filing date.
• Movable Property: The market value of the movable property as of the date of filing the appeal or suit.
• Immovable Property: The market value of the immovable property.
• Intangible Property or Right: The market value estimated by the plaintiff for the intangible property or right.
• Arbitration: The aggregate value of the claim and counterclaim for arbitration proceedings.

These metrics are crucial for determining the specified value, which dictates the appropriate forum for hearing the matter and the applicability of pre-institution mediation or settlement under section 12A of the Act.

Constitution and Jurisdiction of Courts under the Act

The Act establishes commercial courts at the district and high court levels with original and appellate jurisdiction over commercial disputes, including those involving arbitration clauses.

Constitution

• Sections 3 to 5 of the Act outline provisions for the establishment of commercial courts at both the district judge level and the High Court level. These courts have original jurisdiction to adjudicate commercial disputes, as well as appellate jurisdiction to hear appeals from lower courts. The Act empowers state governments, in consultation with the High Court, to establish multiple commercial courts at the district judge level and appoint judges and staff as necessary. 
• Additionally, the High Court, under the direction of the Chief Justice, can create commercial divisions within the High Court and designate benches for adjudicating commercial matters. Furthermore, a Commercial Appellate Court may be established to hear appeals against orders issued under this Act.

Jurisdiction

• Commercial Court: The jurisdiction of the commercial court covers commercial disputes of specified value within its territorial jurisdiction.
• Commercial Division of High Court: The jurisdiction of the commercial division extends to disputes of specified value within its pecuniary or territorial jurisdiction, which would otherwise fall under a court not subordinate to a High Court. Matters falling within the pecuniary jurisdiction of the High Court, when filed in exercise of its ordinary civil jurisdiction, are exclusively heard by the High Court.
• Arbitration matters: This section applies when the subject of arbitration involves a commercial dispute of specified value. The Arbitration and Conciliation Act operates in conjunction with the Act. If an appeal related to arbitration is filed in the High Court, whether it pertains to international arbitration or not, the High Court's commercial division handles the case. Appeals filed with district courts (excluding High Courts) concerning local arbitration matters are heard by the commercial court with jurisdiction over the issue.
• Bar to Jurisdiction: The Act's jurisdiction does not apply in cases where another statute expressly or implicitly bars civil action.

Pre-Institution Mediation and Settlement

Section 12A of the Act mandates that parties to a dispute must attempt mediation before initiating legal proceedings if the dispute's specified value is Rs. 3,00,000 or more. This provision underscores the government's and judiciary's dedication to alternative dispute resolution (ADR) methods for swift and effective resolution, which is often preferable to traditional adjudication routes.

Section 12A of the Act outlines the provisions regarding Pre-Institution Mediation and Settlement as follows:

• A suit that does not involve any urgent interim relief under the Act cannot be initiated unless the plaintiff first exhausts the remedy of pre-institution mediation as prescribed by rules set by the Central Government.
• The Central Government may authorize the Authorities constituted under the Legal Services Authorities Act, 1987 for pre-institution mediation purposes.
• The authorized Authority must complete the mediation process within three months from the date of application by the plaintiff under sub-section (1). This period can be extended for up to two months with the parties' consent, and the time spent on pre-institution mediation does not count towards the limitation period under the Limitation Act, 1963.
• If the parties reach a settlement during mediation, it must be documented and signed by the parties and the mediator.
• The settlement reached under this section holds the same status and effect as an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996.

Sub-section (1) of Section 12A allows for mediation to be bypassed if an application for urgent interim relief is submitted along with the plaint. In such cases, the mandatory mediation referral can be skipped, and the suit can be directly instituted. This exception applies only when the sought-after interim relief is deemed urgent, requiring justification before the court when the plaint is initially considered.

Additionally, on July 3, 2018, the Central Government, under the powers conferred by the Commercial Courts Act, 2015, notified the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.

Key Highlights of the Rules are as follows:

A. Initiation of mediation process — Rule 3

Rule 3 of the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, outlines the procedure for initiating the mediation process as follows:

• A party to a commercial dispute must submit an application to the Authority in Form-1 of Schedule-I, either online, by post, or by hand, along with a fee of Rs 1000 payable to the Authority via demand draft or online payment.
• The Authority, considering the territorial and pecuniary jurisdiction and the nature of the commercial dispute, will issue a notice to the opposite party in Form-2 of Schedule-I via registered/speed post and electronic means (e.g., email) within ten days from the date of issue.
• If there is no response from the opposite party through post or email, a final notice will be issued by the Authority.
• If the notice remains unacknowledged or the opposite party refuses to participate in the mediation process, the Authority will consider the process as a non-starter and provide a report in Form 3 of Schedule-I to both parties.
• If the opposite party requests further time for appearance after receiving the notice, the Authority may fix an alternate date within ten days from the receipt of such request.
• If the opposite party fails to appear on the fixed date, the Authority will consider the mediation process as a non-starter and provide a report to both parties.
• If both parties appear and consent to participate in the mediation process, the Authority will assign the commercial dispute to a Mediator and schedule a date for appearance before the Mediator.
• The Authority will ensure that the mediation process is completed within three months from the receipt of the application for pre-institution mediation, unless an extension of up to two months is agreed upon by both parties.

B. Venue for conducting mediation — Rule 4
The mediation process will take place at the premises of the Authority.

C. Role of Mediator — Rule 5
Upon receiving the assignment, the Mediator's role is to facilitate the voluntary resolution of the commercial dispute and aid the parties in reaching a settlement.

D. Representation of parties — Rule 6
Parties involved in the commercial dispute must appear before the Authority or Mediator either in person or through a duly authorized representative or counsel.

E. Procedure of mediation — Rule 7
(1) The mediation process will follow these steps:
(i) The Mediator will start by explaining the mediation process to the parties.
(ii) The Mediator will schedule the date and time for each mediation session in consultation with the parties.
(iii) The Mediator may conduct meetings with the parties jointly or separately during the mediation.
(iv) Either party can share settlement proposals with the Mediator during separate sessions, specifying which parts can be shared with the other party.
(v) Parties may exchange settlement proposals orally or in writing during mediation sessions.
(vi) The Mediator must maintain the confidentiality of discussions held separately with each party during the mediation process, sharing only the facts permitted by each party with the other party.
(vii) Once both parties reach a mutually agreed settlement, the Mediator will document it in writing, and all parties, along with the Mediator, will sign the settlement agreement.
(viii) The Mediator will provide the original settlement agreement to all parties and submit a signed copy to the Authority.
(ix) If no settlement is reached within the specified time or if the Mediator believes that a settlement is not possible, the Mediator must submit a report to the Authority, explaining the reasons in writing.
(2) The Authority or Mediator must not retain hard or soft copies of documents exchanged between parties, or any notes prepared by the Mediator, for more than 6 months, except for the application for mediation, issued notice, settlement agreement, and failure report.

F. Mediation Fee — Rule 11
Before starting the mediation process, the parties involved in the commercial dispute must pay a one-time mediation fee to the Authority. This fee will be shared equally between the parties and will be determined based on the amount of the claim, as specified in Schedule-II.
Schedule-II
Mediation Fee
[Rule 11]

Appeals against Orders

• If any party is dissatisfied with the rulings of the commercial court or the commercial division of the High Court, they have the option to file an appeal against such rulings within 60 days of the issuance of the order or judgment. This appeal should be filed with the commercial Appellate Division of the High Court.
• Moreover, to ensure expeditious trials, Section 14 of the Act mandates that cases heard by the commercial appellate court and the commercial division of the High Court should be resolved within a period of six months from the date of filing the appeal.

Other Important Sections

• Section 17 mandates the collection and disclosure of data by Commercial Courts, Commercial Appellate Courts, Commercial Divisions, and Commercial Appellate Divisions. This data should include information about the number of cases disposed of and ongoing, along with relevant statistics. This information must be made available on the respective High Courts' websites to provide real-time tracking of the Act's effectiveness in adjudicating commercial disputes.
• Section 21 is a crucial provision in the Act as it asserts the overriding effect of the Act. This means that the provisions of this Act supersede any conflicting provisions in other laws. This non-obstante clause ensures that the Act's objectives are not thwarted by invoking contradictory statutes or codes, which could potentially prolong the adjudicatory process and delay justice for the aggrieved parties.

Conclusion

• In conclusion, the Commercial Courts Act represents a significant advancement in the realm of commercial dispute resolution by introducing specialized courts and incorporating alternative dispute resolution mechanisms like arbitration and mediation. Since its implementation, the Act has led to noticeable improvements in the efficiency of resolving commercial disputes, as evidenced by India's improved ease of doing business ranking. The Act has expedited case disposal and streamlined the adjudication process, offering a more straightforward pathway to dispute resolution.
• However, the true test of the Act lies ahead, particularly in the post-pandemic business landscape. With many businesses still struggling to recover, there is a potential for an increase in commercial disputes. It remains to be seen how effectively the Act can handle such a surge in cases and contribute to alleviating the strain on the judicial system. Nonetheless, the Act's introduction marks a significant step forward in enhancing commercial dispute resolution in India.