Commercial Courts Act, 2015—A Mechanism of Commercial Dispute Resolution

The Commercial Court Act of 2015 establishes a procedural framework dealing with commercial disputes and forms commercial courts at the district level. The objective behind enacting the Commercial Court Act 2015 is the speedy redressal of the commercial dispute.

As the name suggests, Commercial Courts were formed to resolve the disputes related to fraud, breach of contract, unfair trade practices etc. It was amended in the year 2018, and the amendment’s objective was to adjudicate disputes that fall under the Act.

Commercial Court Act, 2015

The Commercial Court Act 2015 got enacted to provide a constitution for the commercial courts. The Act also constitutes the Commercial Appellate Courts, Commercial Division and Commercial Appellate Division, which are set up in the High Court. The Act came into force on 23rd October 2015 and extends to the whole of India.

Definition under the Commercial Court Act

Commercial appellate court: According to Section 2(1)(a), the Commercial Appellate Court get designed under section 3A.

Commercial appellate division: According to Section 2(1)(aa), the Commercial Appellate Division means the Commercial Appellate Division in the High Court constituted under sub-section (1) of Section 5.

Commercial Court: According to Section 2(1)(b), Commercial Court means the court constituted under sub-section 1 of Section 3.

Commercial Dispute: According to Section 2(1)(c), Commercial Dispute means a dispute arising out of:

• Enforcement and interpretation of documents related to transactions between merchants, bankers, financiers & traders
• Merchandise or service’s export & import.
• Transactions of aircraft, aircraft engines, equipment of aircraft and helicopters, which include their sales, leasing and financing
• Admiralty and maritime law
• Carriage of goods
• Contracts of construction and infrastructure contracts, including tenders
• Immovable property agreements used in trade and commerce
• Franchising agreement
• Licensing and distribution agreement
• Consultancy and management agreement
• Joint venture agreement
• Agreement between shareholders
• Subscription and investment agreements relating to outsourcing and financial services
• Mercantile agency and usage
• Partnership agreement
• Technology development agreement
• Registered and unregistered intellectual property rights
• Sale of goods agreement
• Electromagnetic spectrum exploitation of oil and gas reserves and other natural resources
• Insurance and re-insurance
• Agency contracts
• Any other commercial dispute notified by the central government

Commercial Division: According to Section 2(1)(d), a Commercial division means a division in the High Court constituted under sub-section (1) of Section 4.

District judge: According to Section 2(1)(e), District Judge has the same meaning as assigned in clause (a) of Article 236 of the Constitution of India. Accordingly, District Judge includes a civil court judge, additional district judge, chief judge of the small cause court, additional chief presidency magistrate, chief presidency magistrate, session judge, additional session judge and assistant session judge.

Document: According to Section 2(1)(f), a document means any matter that is expressed or described in the form of any substance in the form of a letter, figure, marks, or electronic means to record the matter.

Specified value: According to Section 2(1)(i), it is the value of the subject matter in respect of the suit as per Section 12. According to the provision, the value of the suit should not be less than three lakh rupees or a higher value as specified by the government.

Constitution of the commercial courts

Constitution of commercial courts

Section 3 of the Commercial Courts Act establishes the Commercial Courts. After consultation with Hight Court, the State Government constitutes Commercial Courts at the district level. The State Government has the power to specify the pecuniary value. But the Act provides that the pecuniary value should not be less than three lakhs rupees and should not be more than the pecuniary jurisdiction that is exercisable by the District Court.

The State government is empowered to specify the local limits of the area to which the jurisdiction of the Commercial Court extends. However, the State Government can decide after the consultation with the High Court.

The State Government also appoints one or more people with experience in dealing with commercial disputes to the judge, either at the level of a district judge or in the court below the district judge. The judge is also appointed after consultation with High Court Chief Justice.

Designation of the commercial appellate court

According to Section 3A of the Act, the State Government, after consultation with the High Court, can designate Commercial Appellate Court. The Commercial Appellate Court can be designated at the district judge level to exercise the jurisdiction and powers conferred on the court.

Constitution of the commercial division of the high court

According to Section 4 of the Commercial Court Act, 2015, the High Court has the original civil jurisdiction constituting Commercial Division. The High court’s commercial division is constituted by the Chief Justice of the High Court.

• There can be one or more commercial divisions consisting of a single judge to exercise the jurisdiction and powers conferred on it.
• The Chief Justice of the High Court nominates judges of the High Court as the judge of the Commercial Division.
• The judge appointed as the judge of the Commercial Division must have experience in dealing with commercial disputes.

Constitution of the commercial appellate division

According to Section 5 of the Commercial Court Act, the Chief Justice of the High Court should constitute Commercial Appellate Division with one or more Division Benches to exercise the jurisdiction and powers conferred on it.

High Court’s Chief Justice also nominates the High Court’s judge with experience dealing in commercial disputes to be the Judge of the Commercial Appellate Division.

Jurisdiction of the commercial courts

Jurisdiction of the commercial court

According to Section 6 of the Act, the Commercial Courts have jurisdiction to try all the suits and applications related to the commercial dispute of specified value of the territory over which the court has jurisdiction.

Jurisdiction of the commercial division of the high courts

According to Section 7 of the Commercial Court Act, the Commercial Division of the High Court has jurisdiction over all suits and applications related to commercial disputes. The commercial disputes tried by the Commercial Court are of the specified value for the territory over which the High Court have original civil jurisdiction. The Commercial Division of the High Court hears and disposes of the dispute. This section provides that all the suits and applications related to the commercial disputes should lie in a court that is not inferior to District Court.

Bar on jurisdiction

Bar against revision application or petition against an interlocutory order

Section 8 of the Commercial Court Act of 2015 provides a provision for Bar against revision application or petition against an interlocutory order. According to this section, no civil revision application or petition should be entertained against an interlocutory order of the commercial court. It includes an order on the issue of jurisdiction or any other challenge. However, an appeal can only be raised against the decree of the Commercial Court.

Bar of jurisdiction of Commercial Courts and Commercial Division

Section 11 of the Act provides that the Commercial Court or Commercial Division should not entertain any suit, application or proceeding related to any commercial dispute for which the jurisdiction of the civil court is expressly or impliedly barred under any law.

Specified value

Determination of the specified value

Section 12 of the Commercial Court Act deals with the specified value.

The Specified Value of the commercial dispute is determined in the following manner:

• When the suit or application is related to the recovery of money, the money to be recovered for which the suit is filed may include interest as on the date of suit filing to determine specified value.
• When the suit, appeal or application is related to the movable property, the property’s market value at the time of filing is considered to determine the specified value.
• When the suit, appeal or application is related to the immovable property, the property’s market value at the filing date is taken into account to determine the specified value.
• Where the suit, appeal or application is related to intangible rights, the market value of the rights estimated by the plaintiff should be considered to determine the specified value.

The aggregate value of the claim and counterclaim is set-out in the statement of claim and counterclaim. The arbitration of a commercial dispute shall depend upon whether the arbitration is related to the jurisdiction of the Commercial Division, Commercial Appellate Division or Commercial Court.

Pre-Institution mediation and settlement

Section 12A of the Commercial Court Act states that if the suit does not contemplate any interim relief, it should not be instituted. Such a suit can only get instituted on the exhaustion of the remedy of pre-institution mediation.

The Central Government is empowered to authorise the authorities constituted under the Legal Service Authorities Act for Pre-institution mediation. The authorities must complete the mediation process within three months from the date of application. However, the mediation period can get extended for two months with the parties’ consent. Also, the period occupied by pre-institution mediation is not considered in the limitation period. Once the commercial dispute is settled by mediation, the mediator should note the same.

Transfer of pending suits

Section 15 of the Commercial Court Act deals with transferring pending cases. According to this section, the suits and applications related to the commercial dispute of specified value filed under the Arbitration and Conciliation Act, 1996; such disputes pending in the High Court where a commercial division is constituted should get transferred to the Commercial Division.

All suits and applications pending in the Civil Court, including the application under Arbitration and Conciliation Act, 2015 and Commercial disputes of Specified Value, should get transferred to the Commercial Court. The transfer takes place if the Commercial Court is constituted in the district. However, the transfer cannot occur if the court’s final judgment is reserved before the constitution of the Commercial Court or Commercial division.

The section further provides that the provision of the Commercial Court Act applies to the case only if the procedure followed to resolve a dispute is not completed at the time of transfer.

The Commercial Division or Commercial Court under this section is empowered to hold a case management hearing related to the transferred case. In the hearing, the court prescribes a new timeline or issues further direction that the court deems necessary for speedy and efficacious disposal of the suit.

When the suit or application is not transferred as provided by Section 15 of the Commercial Court Act, the Commercial Appellate Division of the High Court, on the application of any party to the suit, can withdraw the suit from the court before which the case is pending. The Commercial Appellate Division then transfers the case suit to the Commercial Division or Commercial Court that has territorial jurisdiction over the suit. The order of the transfer of the suit passed by the Commercial Appellate Tribunal is final and binding.

Conclusion

The government of India considered the Commercial Court Act an essential step for the speedy delivery of justice in matters related to Commercial Disputes. The Act provides separate Commercial Courts to be constituted by the State Government at every district level. These Commercial Court are to try suits and claims related to the commercial dispute of specified value.

As per the provision of the Commercial Court Act, 2015, in the states where the original Civil Jurisdiction lies with the High Court, the High Court gets required to constitute Commercial Division within each High Court. The Act states that the case must get resolved within six months of the case filing. The Act also amends the provision of the Code of Civil Procedure, 1908, to improve the efficiency and speedy disposal of the case.