The Lok Sabha has passed the Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill, 2018, replacing a current ordinance. This legislation aims to resolve commercial disputes valued at Rs 3 lakh or more. The law will have prospective effect so as not to affect the authority of the judicial forum currently handling commercial disputes.
The Need for This Legislation
The number of commercial disputes both domestically and internationally has been on a significant rise. This is partly due to an increase in Foreign Direct Investment (FDI) and overseas commercial transactions. By reducing the specified value of these disputes, the resolution process should take less time, improving India’s ranking in ease of doing business.
Over the years, bodies such as the Law Commission and Parliamentary Standing Committees have noticed that the high pendency of cases is preventing the judicial system from disposing of cases promptly. The Law Commission recommended in 2003 and again in 2015 that a law be enacted to establish commercial courts to handle high-value commercial disputes. It was argued that disposing of such disputes requires special expertise and has a larger bearing on foreign investments and the country’s economic growth.
Highlights of the Bill
The Commercial Courts Act of 2015 previously allowed commercial courts and commercial divisions of high courts to adjudicate commercial disputes with a minimum value of one crore rupees. This bill lowers this amount to three lakh rupees, making it more accessible.
The Bill also allows state governments to form commercial courts at the district level in areas where high courts have ordinary original civil jurisdiction. In areas where the high courts do not have original jurisdiction, state governments can establish commercial appellate courts at the district level to consider appeals from commercial courts below the level of a district judge.
Introduction of Mandatory Mediation
This bill introduces a provision for mandatory mediation in cases where parties to the dispute are not seeking urgent relief. This mediation can be conducted by authorities constituted under the Legal Services Authorities Act, 1987 (for instance, the National and District Legal Services Authority).
The mediation process is to be completed within a three-month period, which could be extended by an additional two months if necessary. A signed agreement between disputing parties will have the same effect as an arbitral award under the Arbitration and Conciliation Act, 1996.
Changes to Transfer of Suits
Previously, according to the Act, if a counterclaim was filed in a commercial dispute of at least one crore rupees in a civil court, the case could be transferred to a commercial court. This new bill removes this provision relating to the transfer of suits.
