BackLaw commission suggests creation of specialized commercial courts
Plan aims to ensure speedy disposal of high-value cases, delays in which can discourage foreign investors
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New Delhi: The Law Commission of India has suggested creating specialized commercial courts across the country to reduce time spent in court for litigating companies.
In its 253rd report, entitled Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015, the commission has sought to revamp the commercial dispute resolution mechanism system by separating it from other civil disputes.
It is intended for speedy disposal of high-value commercial cases, delays in which can be a disincentive to foreign investors, it said in the report submitted to the law ministry on Thursday .
“Our legal system is not known for speedy justice in civil matters like rent and contracts. Some of them have lifecycles of 20 years," said Sunil Jain, tax, customs and trade partner at J. Sagar Associates, a law firm. “From an investor perspective, they want to see how the judiciary works because disputes are part of business. This lifecycle of litigation doesn’t work for them."
A commercial dispute has been defined in the draft legislation in the commission’s report, which includes disputes arising from agreements ranging from those of shareholders, franchising, joint venture agreements and subscription and investment agreements in the service industry to technology, intellectual property and insurance. The definition also clarifies that disputes from such agreements with the central and state governments and bodies performing public functions would still constitute a commercial dispute.
The panel has recommended establishing a new structure based on the London and Singapore commercial courts and accepted procedure from experience around the world, said A.P. Shah, chairman of the commission and a former chief justice of the Delhi high court. The government was “keen" on this project, Shah said.
The Law Commission criticized the Indian legal system for being “litigant-managed" where repeated adjournments, frivolous litigation and unreasonable claims have become a recurring feature. Relying on similar observations made by the apex court in a 6 May decision, the panel stated that there is a need to change the “litigation culture" where the pace and intensity of litigation is “court-managed".
The report seeks to give courts the discretion to make a company involved in litigation pay court fees and other expenses based on court hours used by it. Appeals from the commercial courts will go to the commercial appellate division of two judges. Appeals against interim orders should be barred, it has suggested.
Recommending a reform of the entire civil litigation system, the report has sought to change commercial dispute resolution procedures through these specially designated courts. The draft bill also includes a clause for training and continuous education of judges of these commercial courts. Jain welcomed the step for training. “It’s a very important step," he said. “They have to be proficient in commercial jargon to be able to segregate the grain from the chaff."
“The ratio of our population to judges is abysmal. The broader message is the need to increase the budget outlay for the judiciary, infrastructure, maintenance standards, information technology across courts," Jain said, adding that the government should take this recommendation from the law panel into account.
The “central government had earmarked large amounts" for court infrastructure and implementing the latest recommendation would be a mere fraction of that, Shah said.
The report noted that pending commercial cases in five high courts—Delhi, Bombay, Calcutta, Madras and Himachal Pradesh—stood at 16,884, which was 51.7% of all civil cases pending in these courts.
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