Fast Track Commercial Courts
By Surya Prakash B S (@SuryaPrakashBS)
Recent developments seeking to set up fast track
commercial courts are a good example of how our judicial reform process is hampered by lack
of relevant data and clear reasoning.
In the Budget
Speech in February 2015, Finance Minister Arun Jaitley had announced the Government’s
intention to prioritise the establishment of commercial courts. These courts
are meant to facilitate the speedy disposal of commercial disputes, which are typically
resolved only after several years spent in the judicial system. The Commercial Courts, Commercial Division
and Commercial Appellate Division of High Courts Bill, 2015 was introduced
in the Lok Sabha in April 2015 and is currently being examined by a Committee
under the Ministry of Law and Justice. An excellent summary of this Bill by PRS
Legislative Research can be found here.
Meanwhile,
according to press reports, the Prime Minister has on 20 October approved the
issuing of an ordinance to make this bill a law. After the ordinance receives
Presidential assent, state governments will need to make necessary changes to
their respective High Court regulations to operationalise the new scheme.
This is not the
first time that commercial courts have garnered attention. The Law Commission
had previously submitted a report
on this issue in 2003. A bill was introduced in the Rajya Sabha in 2009 after
the Lok Sabha approved it – but was then referred to a select committee of the
Rajya Sabha. A revised bill was introduced in the Rajya Sabha in 2010 which was
then referred to the Law Commission for analysis. The Commission submitted its
second
report on the topic in February 2015.
Some of the
relevant highlights of the recommendations of the Law Commission are:
- The need for setting up commercial courts in India is ‘obvious’.
- High Courts that have original jurisdiction for commercial disputes should set up Commercial Divisions – there are five such High Courts. Original jurisdiction means that the relevant High Court can directly admit commercial disputes above a certain value without the lower courts having to hear the matter first.
- Other jurisdictions should set up separate Commercial Courts, e.g., Bangalore, Madurai (together referred to as ‘Commercial Courts’ in this article).
- The new Courts can hear only disputes of Rupees One Crore or more.
- Judges appointed to the new Courts should have demonstrable expertise and experience in commercial litigation.
- A time bound procedure for filing statements, hearing and disposal mandated. Court fees to depend on the number of hearings. This will be court-led litigation (rather than led by litigants).
- Orders of the Commercial Courts to be heard by the Commercial Appellate Division of the High Court.
Some Aspects
Need for
reform
While making a
case for commercial courts, the Law Commission’s report gives data on pendency
and a sizing of the commercial disputes at five of the High Courts and
concludes that there is significant pendency and sizeable number of cases. The
question that we have to ask is whether commercial disputes are in any way
different from other types of disputes (e.g., criminal, social, constitutional).
There is nothing in the report that compares the pendency rate and size of the
various types of cases so as to justify that a reform of commercial disputes
mechanism should be taken up first over other types. The previous Law
Commission report on this topic too starts with the assumption that commercial
dispute resolution needs to be fixed without any background as to why this is so.
Tables 2.1 of
the Law Commission Report talks of total civil suits pending. Tables 2.2 and
2.3 pertain to suits with original jurisdiction only. Table 2.4 gives
what percentage of original civil suits are commercial suits.
Let us for a
moment see how much of total civil suits are comprise of such ‘commercial
disputes’ based on the above numbers:
High Court
|
Total Civil
Matters pending (as per Table 2.1)
|
Total
Commercial Disputes pending (as per Table 2.4)
|
%
|
Bombay
|
2,99,931
|
1,997
|
0.67%
|
Calcutta
|
2,30,317
|
5,352
|
2.32%
|
Delhi
|
49,000
|
3,582
|
7.31%
|
Himachal
Pradesh
|
54,015
|
88
|
0.16%
|
Madras
|
4,90,383
|
5,865
|
1.20%
|
Total
|
11,23,646
|
16,884
|
1.50%
|
As can be seen
above, commercial disputes form only 1.5% of the total number of civil suits
pending at the High Courts.
It would have
been ideal if the report had analysed the various types of civil suits pending
and then arrived at a logical conclusion that among these cases ‘commercial’
disputes are more worthy of being reformed first. Para 2.4.4 the report admits
of difficulty arising out of differences in classification practices across
High Courts. A measurement of pendency across High Courts would have
demonstrated a need for commercial courts to be set up throughout India. What
is apparent is the lack of data to measure the judicial system.
The capacity of
the State to dispense justice is a limited resource. Parties who have other
means of dispute resolution (arbitration, mediation, etc.) by choosing to use
courts, are taking away resources from other parties who do not have any such
alternatives (e.g., criminal, social, and constitutional matters). Utilising
this scarce resource should require a complete cost-benefit analysis for
society. Admittedly, estimating costs is a complex task, but surely the gravity
and the far reaching implication of the task before us requires it.
Fast Tracking
The Report
recommends the setting up e-courts with world class infrastructure and time-bound
disposals. It also recommends that the court fees charged should be
commensurate with this facility. Whether the justice dispensing function of the
State should be thus made easily available for those who can afford to pay high
fees is be a concern. The Report itself lists out certain concerns of the
members of the Rajya Sabha about this move being ‘elitist’ and ‘corporate
friendly’ (pages 7-8). There is nothing in the Report to assuage such concerns.
However, if the State does decide to dispense justice in a certain manner to a
certain category of citizens, then recovering costs incurred for the same from
those citizens is not irrational.
Monetary
Threshold
Only disputes of
value of Rupees One Crore or more are to be admitted in the new Commercial
Courts. The system of pecuniary limits, which varies between High Courts, has
already been in place for some time now. The basis for arriving at this
threshold has not been provided – neither has an impact analysis been done.
A break up of
outstanding matters via a break up of cases by monetary limit in five High
Courts have been provided (table 2.6 page 19), of course with caveats on the
accuracy of the data. As per information provided here cases above Rupees One
Crore constitute only 25% of the outstanding commercial disputes. What would
have really been convincing is a monetary threshold wise pendency data (table
2.7 on page 20 only gives total pendency).
By increasing the
threshold all that has been achieved is pushing cases to lower courts – and a
statistical improvement in the disposal rate of the High Courts. Is that really
solving the root cause of the problem? It may be prudent for the Government to
have a road map to make such commercial courts more inclusive and a time bound
lowering of the thresholds.
Judges
One also needs
to bear in mind that judges for such fast track commercial courts would be
drawn from the regular benches at the High Court. Because of the time bound
nature of these courts, judges will have to devote more time to such matters.
And indeed that is the objective. If the overall number of judges is not increased
commensurately the setting up of this court may lead to increase
in pendency of non-commercial disputes.
Conclusion
A bold change
from a litigant-led litigation to a court-led one is being tried out for the
first time. Given the increasing pendency rate at our courts while any change
is welcome from a status quo, the process of deciding what areas to begin the
reforms from needs to be more logical and thought through completely.
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