PERSPECTIVE OF COMMERCIAL SUITS AS PER COMMERCIAL COURTS ACT
2015
Ever since Commercial Courts Act 2015
is enacted, there are diverse pleas raised after filing of the suit, if the
suit so filed shall fall within the meaning of The Commercial Courts Act 2015
or not? For instance, if a suit is filed as an ordinary suit, the objection may
come if the filing of the suit as non commercial suit is in order or not?
Conversely, if the suit is filed as Commercial suit, it is also required to be
shown if the suit is in conformity with the provisions of The Commercial Courts
Act 2015 so as to conform to those provisions. The aforesaid vista with
detailed perspective shall be explained hereunder.
In the aforesaid context it may be apt
to pin point the very genesis of the enactment of The Commercial Courts Act
2015.
HISTORICAL PERSPECTIVE
The Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015 (Act No.4 of 2016) is published in
the Gazette of India on 01.01.2016. The Act is deemed to have come into force
w.e.f. 23.10.2015. The Act No.4 of 2016 was amended by Central Act 28 of 2018 –
The Commercial Courts Act. The Law Commission in its 253rd Report, inter alia
has made various recommendations. Para (4.2) of Chapter IV-“Conclusions and
Summary of Recommendations” of Law Commission’s 253rd Report.
The preamble of the Commercial Courts Act, 2015 reads as
under:-
“An Act to provide for the
constitution of Commercial Courts, Commercial Appellate Courts, Commercial
Division and Commercial Appellate Division in the High Courts for adjudicating
commercial disputes of specified value and matters connected therewith or
incidental thereto.”
The Statement of Objects and Reasons of the Commercial
Courts Act reads as under:-
“Statement of Objects and
Reasons:
The proposal to provide for speedy disposal of high
value commercial disputes has been under consideration of the Government for
quite some time. The high value commercial disputes involve complex facts and
question of law. Therefore, there is a need to provide for an independent
mechanism for their early resolution. Early resolution of commercial disputes
shall create a positive image to the investor world about the independent and
responsive Indian legal system.
……….
It is proposed to introduce the Commercial Courts,
Commercial Division and Commercial Appellate Division of High Courts Bill, 2015
to replace the Commercial Courts, Commercial Division and Commercial Appellate
Division of High Courts Ordinance, 2015 which inter alia, provides
for the following namely:-
(i) constitution of the Commercial Courts at District
level except for the territory over which any High Court is having ordinary
original civil jurisdiction;
(ii) constitution of the Commercial Divisions in those
High Courts which are already exercising ordinary civil jurisdiction and they
shall have territorial jurisdiction over such areas on which it has original
jurisdiction;
(iii) constitution of the Commercial Appellate Division
in all the High Courts to hear the appeals against the Orders of the Commercial
Courts and the Orders of the Commercial Division of the High Court;
(iv) the minimum pecuniary jurisdiction of such
Commercial Courts and Commercial Division is proposed as one crore rupees; and
(v) to amend the Code of Civil Procedure, 1908 as
applicable to the Commercial Courts and Commercial Divisions which shall
prevail over the existing High Courts Rules and other provisions of the Code of
Civil Procedure, 1908 so as to improve the efficiency and reduce delays in
disposal of commercial cases.
……...”
The object and purpose of
Commercial Courts Act is to ensure that the Commercial Courts, Commercial
Appellate Courts, Commercial Division and Commercial Appellate Division of the
High Courts and also to ensure that the commercial cases are disposed of
expeditiously, fairly and at reasonable cost to the litigant.
After the Law Commission’s 253rd
Report, the Act No.4 of 2016 was amended by Central Act 28 of 2018. The section
3 of the Act deals with Constitution of Commercial Courts. As per Section 3 of
the Act, the State Government shall, after consultation with the High Court, by
notification, constitute Commercial Courts at District level if deemed
necessary for the purpose of exercising jurisdiction under the Act. As per
Section 3(1A) of the Act, Commercial Courts shall have jurisdiction to try the commercial
disputes of a “Specified Value” which shall not be less than Three Lakh Rupees
or such higher value, for whole or part of the State, as it may consider
necessary. After amendment in 2018, proviso to Section 3 provides that
Commercial Courts may be constituted with respect to area over which the High
Courts have ordinary original civil jurisdiction. Section 5(1) of the Act
provides for the constitution of Commercial Appellate Division having one or more
Division Benches for the purpose of exercising jurisdiction and powers
conferred on it by the Act.
Section 5 of the Act deals with the
Constitution of Commercial Appellate Division. Section 5(1) of the Act reads as
under:-
“5.
Constitution of Commercial Appellate Division. – (1) After issuing notification under sub-section (1)
of section 3 or order under sub-section (1) of section 4, the Chief Justice of
the concerned High Court shall, by order, constitute Commercial Appellate
Division having one or more Division Benches for the purpose of exercising the
jurisdiction and powers conferred on it by the Act”.
In terms of Section 5(2) of the Act, the Chief Justice
of the High Court shall nominate such Judges of the High Court who have
experience in dealing with commercial disputes to be Judges of the Commercial
Appellate Division.
Section 6 of the Act reads as under:-
“6. Jurisdiction
of Commercial Court –
The Commercial Court shall have jurisdiction to try all
suits and applications relating to a commercial dispute of a Specified Value arising
out of the entire territory of the State over which it has been vested
territorial jurisdiction.
Explanation. – For the purposes of this section, a commercial dispute shall
be considered to arise out of the entire territory of the State over which a
Commercial Court has been vested jurisdiction, if the suit or application
relating to such commercial dispute has been instituted as per the provisions of
sections 16 to 20 of the Code of Civil Procedure, 1908 (5 of 1908)”.
Section 7 deals with the
jurisdiction of Commercial Divisions of High Courts. Section 7 of the Act reads
as under:-
“7.
Jurisdiction of Commercial Divisions of High Courts –
All suits and applications relating to commercial
disputes of a Specified Value filed in a High Court having ordinary original
civil jurisdiction shall be heard and disposed of by the Commercial Division of
that High Court:
Provided that all suits and applications relating to
commercial disputes, stipulated by an Act to lie in a court not inferior to a District
Court, and filed or pending on the original side of the High Court, shall be
heard and disposed of by the Commercial Division of the High Court:
Provided further that all suits and applications
transferred to the High Court by virtue of sub-section (4) of section 22 of the
Designs Act, 2000 (16 of 2000) or section 104 of the Patents Act, 1970 (39 of
1970) shall be heard and disposed of by the Commercial Division of the High
Court in all the areas over which the High Court exercises ordinary original
civil jurisdiction”.
The Commercial Divisions are to be
set up in High Courts that are already having ordinary original civil
jurisdiction having one or more Benches consisting of a Single Judge having
experience in dealing with commercial disputes for exercising powers under the
Act. As per Section 7(1) and the proviso thereto, Commercial Division will hear
and dispose of all suits and applications relating to commercial disputes of a
specified value, that lie in a court not inferior to district court and filed
in a High Court having ordinary original civil jurisdiction and also those
cases transferred to High Court under Section 22(4) of the Designs Act, 2000 or
under Section 104 of the Patents Act, 1970.
Section 9 of Code of Civil
Procedure shall be applicable to Commercials Courts Act 2015.
It is clearly stipulated in Section
11 of the Act, notwithstanding anything contained in the Act, a Commercial Court
or a Commercial Division shall not entertain or decide any suit relating to any
commercial dispute in respect of which the jurisdiction of the civil court is
either expressly or impliedly barred under any other law for the time being in
force.
TRANSFER OF PENDING CASES
Section 15 of the Act deals with
transfer of pending cases. It reads as under : -
“15.
Transfer of pending cases. – (1)
All suits and applications, including applications under the Arbitration and
Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute of
Specified Value pending in a High Court where a Commercial Division has been
constituted, shall be transferred to the Commercial Division.
(2) All suits and applications, including applications
under the Arbitration and Conciliation Act, 1996 (26 of 1996), relating to a commercial
dispute of a Specified Value pending in any civil court in any district or area
in respect of which a Commercial Court has been constituted, shall be
transferred to such Commercial Court:
Provided that no suit or application where the final
judgment has been reserved by the Court prior to the constitution of the Commercial
Division or the Commercial Court shall be transferred either under sub-section
(1) or sub-section.
Insofar as transferred cases, as
per Section 15(4) of the Act, the Commercial Division or Commercial Court shall
prescribe new timelines or issue further directions for speedy and efficacious disposal
of such suit or application in accordance with Order XVA of the Code of Civil
Procedure. New time period for filing written statement shall be prescribed and
the proviso to sub-rule (1) of rule 1 of Order V of the Code of Civil Procedure
shall not apply to the transferred cases and the Court may, in its discretion,
prescribe a new time period within which the written statement shall be filed.
Section 2(1)(c) defines “commercial dispute” as under:-
“2.
Definitions. - (1) In this Act, useless the
context otherwise requires,-
……….
(c) “Commercial dispute” means a dispute arising out of-
(i) ordinary transaction 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 agreement;
(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 resource including electromagnetic spectrum;
(xx) insurance and re-insurance;
(xxi) contract 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 commercial dispute
merely because-
(a) it also involves action for
recovery of immovable property or for realising 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;
(d) “Commercial Division” means the Commercial Division
in a High Court constituted under sub-section (1) of section 4;
(e) “District Judge” shall have the same meaning as
assigned to it in clause (a) of Article 236 of the Constitution of India:
(f) “Document” means any mater expressed or described
upon any substance by means of letters, figures or marks, or electronic means,
or by more than one of those means, intended to be used, or which may be used,
for the purpose of recording that matters;
(g) “Notification” means a notification published in the
Official Gazette and the expression “notify” with its cognate meanings and
grammatical variations shall be construed accordingly;
(h) “schedule” means the Schedule appended to the Act; and
(i) “Specified Value”, in relation to a commercial
dispute, shall mean the value of the subject matter in respect of a suit as
determined in accordance with section 12 [which shall not be less than three lakh rupees] or such higher value, as may be notified by the
Central Government.”
[Subs. by Act 28 of 2018, sec. 4(II), for “which shall not be
less than one crore rupees” (w.r.e.f. 3-5-2018)].
It may be noted that clause (i) of
Section 2 of the Act defines “Specified Value”, in relation to a commercial
dispute, shall mean the value of the subject matter in respect of a suit as
determined in accordance with section 12 [which shall not be less than Three Lakh Rupees] or such higher value, as may be
notified by the Central Government”. Section 12 provides for criteria for
valuation of the suit, application or appeal for the purpose of the Act. What
will attract jurisdiction of the Commercial Court or the Commercial Division of
the High Court shall depend on the following factors:-
(i) it shall be a commercial
dispute within the meaning of Section 2(1)(c) of the Act; and
(ii) such commercial disputes are
of a specified value as per Section 2(i) of the Act.
Section 13 deals with appeals from
decrees of Commercial Courts and Commercial Divisions. As per Section 14 of the
Act, the Commercial Appellate Court and the Commercial Appellate Division shall
endeavour to dispose of appeals filed before it within a period of six months
from the date of filing of such appeal.
THE SUPREME COURT OF
INDIA In CIVIL APPEAL NO. 7843 OF 2019
(Arising out of SLP (Civil) No.9391 of 2019) in a matter captioned as Ambalal Sarabhai
Enterprises Ltd. Versus K.S. Infra space LLP & Anr has dealt with the ambit
of Commercial Courts act 2015.
Fast Track Procedure for
deciding the Commercial Disputes
Section 16 of the Act, stipulates
that the provisions of the Code of Civil Procedure as amended under the Act,
shall apply in the trial of suit in respect of a commercial dispute of a
specified value. For ready reference section 16 of the Act reads as under:
“16. Amendments to the Code of Civil Procedure, 1908 in its
application to commercial disputes. –
(1) The provisions of the Code of Civil Procedure, 1908
(5 of 1908) shall, in their application to any suit in respect of a commercial
dispute of a Specified Value, stand amended in the manner as specified in the
Schedule.
(2) The Commercial Division and Commercial Court shall
follow the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as
amended by this Act, in the trial of a suit in respect of a commercial dispute
of a Specified Value.
(3) Where any provision of any rule of the
jurisdictional High Court or any amendment to the Code of Civil Procedure, 1908
(5 of 1908), by the State Government is in conflict with the provisions of the
Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, the
provisions of the Code of Civil Procedure as amended by this Act shall
prevail”.
AMENDMENT IN CODE OF CIVIL PROCEDURE NECESSITATED DUE TO
COMMERCIAL COURTS ACT 2015
Order
XIIIA - “Summary Judgment” has been inserted. Order
XIII contains the scope and classes of suits to which Order XIIIA applies,
grounds for summary judgment, procedure to be followed, evidence for hearing of
summary judgment, orders that may be made by Court in such proceedings for
summary judgment, etc.
Order XV A– “ Case Management Hearing” has been inserted. Order XVA
provides for first Case Management Hearing-
(Rule 1); recording of oral evidence on a day-to-day
basis
(Rule 4); powers of the Court in a Case Management
Hearing
(Rule 6); adjournment of Case Management Hearing
(Rule 7); consequences of non-compliance with orders
(Rule 8). By way of amendment, several rules have been incorporated
to make the matters of commercial disputes on fast track.
In Order XX of the Code – “Judgment”, Rule 1 has been substituted
that within ninety days of the conclusion of arguments, the Commercial
Court/Commercial Division/Commercial Appellate Division to pronounce the
judgment and copies thereof shall be issued to all the parties to the dispute
through electronic mail or otherwise.
Various provisions of the Act
namely Case Management Hearing and other provisions makes the court to adopt a
pro-active approach in resolving the commercial dispute. A new approach for
carrying out case management and strict guidelines for completion of the
process has been introduced so that the adjudicatory process is not delayed.
The underlying object of the act is
therefore to bring out amendment in Code of Civil Procedure to deal with the commercial
disputes, only to highlight that the trial of the commercial dispute suits is
put on fast track for disposal of the suits expeditiously. Various provisions
of the Act referred to above and the amendments inserted to Civil Procedure
Code by the Schedule is to ensure speedy resolution of the commercial disputes
in a time bound manner. The intent of the legislature seems to be to have a
procedure which expedites the disposal of commercial disputes and thus creates
a positive environment for investment and development and make India an
attractive place to do business.
It has been enacted for the purpose
of the Act is to provide an early disposal of high value commercial disputes. A
bare perusal of the provisions of the act shall reveal that the Objects and
Reasons and various amendments to Civil Procedure Code is to ensure expeditious
disposal of cases and the provisions are required to be strictly
construed.
CASES RELATED TO
IMMOVEABLE PROPERTIES
All the dispute relating to
immovable property may not be treated as a commercial dispute, unless the trap
of Commercial Courts Act 2015 as amended are attracted in such cases. It
becomes a commercial dispute, if it falls under sub-clause (vii) of Section
2(1)(c) of the Act viz. “the agreements relating to immovable property used exclusively
in trade or commerce”. The words “used exclusively in trade or commerce” are to be
interpreted purposefully. The word “used” denotes “actually used” and it cannot
be either “ready for use” or “likely to be used” or “to be used”. It should be
“actually used”.
The object and purpose of the
establishment of Commercial Courts, Commercial Divisions and Commercial
Appellate Divisions of the High Court is to ensure that the cases involved in
commercial disputes are disposed of expeditiously, fairly and at reasonable
cost to the litigants. Keeping in view
the object and purpose of the establishment of the Commercial Courts and fast
tracking procedure provided under the Act, the statutory provisions of the Act
and the words incorporated thereon are to be meaningfully interpreted for quick
disposal of commercial litigations so as to benefit the litigants especially
those who are engaged in trade and commerce which in turn will further economic
growth of the country.
It follows that with a view
to ascertain if the disputes relates to “Commercial Disputes” the
quintessential part is that the nature of the dispute and the jurisdiction to
try the same is to be reflected in the suit itself. In a civil suit, the pleadings,
namely averments in the plaint would at the outset be relevant to confer
jurisdiction. Hence before adverting to the other aspects it would be necessary
to carefully examine the plaint. In the case of Jagmohan Behl
vs. State Bank of Indore, 2017 SCC OnLine Del 10706 it is held that the
dispute involved therein would constitute a commercial dispute and the expression
“arising out of” and “in relation to immovable property” should not be given
the narrow and restricted meaning and the expression would include all matters relating
agreements in connection with the immovable properties. The said conclusion
reached was in a circumstance where the immovable property in question was
undoubtedly being used for a trade or commerce and it was held so when the
claim in the suit is for recovery of rent or mesne profit, security deposit
etc. for the use of such immovable property.
In Vasu Healthcare Private Limited vs.
Gujarat Akruti TCG Biotech Limited, AIR 2017 Gujarat 153 wherein a detailed
consideration has been made and the conclusion reached therein by taking note
of an earlier decision is that on a plain reading of Clause 2(1)(c) of CC Act,
2015 the expression “used” must mean “actually used” or “being used”. It is
further explained that if the intention of the legislature was to expand the
scope, in that case the phraseology “likely to be used” or “to be used” would
have been employed.
REMARK
It is thus crystal clear
that all such suits may be treated as Commercial Suit if the same falls within
the definition clause of Section 2 as illustrated above. It is necessary to
carefully examine and entertain only disputes which actually answers the
definition “commercial disputes” as provided under the definition clause 2 (1) (c)
of the Act, with a view to arrive at a conclusion if the suit falls within the
definition of commercial suit or not. If neither the agreement between the
parties refers to the nature of the immoveable property being exclusively used
for trade or commerce as on the date of the agreement nor is there any pleading
to that effect in the plaint and still further, if the very relief sought in
the suit is for execution of the Mortgage Deed which is in the nature of
specific performance or of the terms of a Memorandum of Understanding without
reference to nature of the use of the immovable property in trade or commerce
as on the date of the suit ipso facto
cannot be treated as commercial suit.
---------
Anil K Khaware
Founder & Senior
Associate
Societylawandjustice.com
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