Commercial Courts Act, 2015 "An Overview"

To generate confidence of the parties entering into commercial agreement/transactions in the rule of law, so as, to bring about ease of doing business in India and a step of legislature towards improving the ranking of India in the "Ease of Doing Business Index". Not only does this benefits the litigant, other potential litigants (especially those engaged in trade and commerce) but also advantaged the courts, by the reduction in backlog caused by the quick resolution of commercial disputes. In turn, this will further economic growth, increase foreign investment, and make India an attractive place to do business. Further, it also benefits the economy as a whole given that a robust dispute resolution mechanism is a sine qua non for the all-round development of an economy.

Commercial Courts are constituted under section 3 of this Act, under section 3A Commercial Appellate Courts are designated, Commercial Division of High Court is Constituted under Section 4, Commercial Appellate Division is constituted under Section 5 of the Act.

This Act provides for adjudicating commercial disputes of specified value and matters connected therewith or incidental thereto.

The term "Commercial Dispute" is defined under Section 2(1) (c) and the "Specified Value" is defined under section 2(1)(i) of the Act and now the value of the subject-matter in respect of a suit shall not be less than Rs. 3,00,000/- (Rupees Three Lakh Only) [though earlier in 2015 Act it was "not less than Rs. 1,00,00,000/- (Rupees One Crore only)"]. The mode of determination of specified value has been provided under section 12.

In order to make this legislation more effective a bar has been provided under section 8 of the Act, against revision application or petition against an interlocutory order of a Commercial Court, including an order on the issue of jurisdiction, and any such challenge, shall be raised only in an appeal against the decree of the Commercial Court, only with an exception provided under section 13 of the Act, that an appeal shall lie from such orders passed by a Commercial Division or a Commercial Court that are specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908 (5 of 1908) as amended by this Act and section 37 of the Arbitration and Conciliation Act, 1996.

Section 12A has been added in the amended Act, providing for Pre-institution Mediation in a suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation. The pre-institution mediation process is required to be completed within three months of the making of an application by the plaintiff under subsection 1 of section 12A. The period of mediation may be extended for a further period of two months with the consent of the parties. The period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963.

Section 10 also confers jurisdiction in Arbitration matters where the subject-matter of an arbitration is a commercial dispute of a Specified Value.

In case of an International Commercial Arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed in a High Court, shall be heard and disposed of by the Commercial Division where such Commercial Division has been constituted in such High Court.

In case arbitration is other than an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed on the original side of the High Court, shall be heard and disposed of by the Commercial Division where such Commercial Division has been constituted in such High Court.

In case arbitration is other than an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that would ordinarily lie before any principal civil court of original jurisdiction in a district (not being a High Court) shall be filed in, and heard and disposed of by the Commercial Court exercising territorial jurisdiction over such arbitration where such Commercial Court has been constituted.

Appellate Authority:

Any person aggrieved by the judgment or order of a Commercial Court below the level of a District Judge may appeal to the Commercial Appellate Court within a period of sixty days from the date of judgment or order under section 13 (1).

Any person aggrieved by the judgment or order of a Commercial Court at the level of District Judge exercising original civil jurisdiction or, as the case may be, Commercial Division of a High Court may appeal to the Commercial Appellate Division of that High Court within a period of sixty days from the date of the judgment or order under section 13(1A).

Section 14 contemplates that 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.

Case Law:

1. CIVIL APPEAL NO. 7843 OF 2019 (Arising out of SLP (Civil) No.9391 of 2019)

Ambalal Sarabhai Enterprises Ltd. Versus K.S. Infraspace LLP & Anr.

The Hon'ble Supreme Court held "it is also necessary to carefully examine and entertain only disputes which actually answer the definition "commercial disputes" as provided under the Act. In the instant case, as already taken note neither the agreement between the parties refers to the nature of the immovable 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."

"A dispute relating to immovable property per se may not be a commercial dispute. But 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". Such a wide interpretation would defeat the objects of the Act and the fast tracking procedure discussed above."

2. CIVIL APPEAL NO. 9307 OF 2019(ARISING OUT OF SLP (CIVIL) NO.25618 OF 2018)

In BGS SGS SOMA JV Versus NHPC LTD., Hon'ble Supreme Court held:

The interplay between Section 37 of the Arbitration Act, 1996 and Section 13 of the Commercial Courts Act, 2015, has been laid down in some detail in the judgment in Kandla Export Corporation (supra). The precise question that arose in Kandla Export Corporation (supra) was as to whether an appeal, which was not maintainable under Section 50 of the Arbitration Act,1996, is nonetheless maintainable under Section 13(1) of the Commercial Courts Act, 2015. In this context, after setting out various provisions of the Commercial Courts Act, 2015 and the Arbitration Act, 1996, this Court held:

"13. Section 13(1) of the Commercial Courts, Act, with which we are immediately concerned in these appeals, is in two parts. The main provision is, as has been correctly submitted by Shri Giri, a provision which provides for appeals from judgments, orders and decrees of the Commercial Division of the High Court. To this main provision, an exception is carved out by the proviso…"

The proviso goes on to state that an appeal shall lie from such orders passed by the Commercial Division of the High Court that are specifically enumerated under Order 43 of the Code of Civil Procedure Code, 1908, and Section 37 of the Arbitration Act. It will at once be noticed that orders that are not specifically enumerated under Order 43 CPC would, there- fore, not be appealable, and appeals that are mentioned in Section 37 of the Arbitration Act alone are appeals that can be made to the Commercial Appel- late Division of a High Court.

Thus, an order which refers parties to arbitration under Section 8, not being appealable under Section 37(1)(a), would not be appealable under Section 13(1) of the Commercial Courts Act. Similarly, an appeal rejecting a plea referred to in sub-sections (2) and (3) of Section 16 of the Arbitration Act would equally not be appealable under Section 37(2)(a) and, therefore, under Section 13(1) of the Commercial Courts Act.

3. Leitz Tooling Systems India Pvt. ... vs Bharat Bhogilal Patel

REVIEW PETITION (L) NO. 15 OF 2019 IN COMMERCIAL SUIT NO. 316 OF 2018

Hon'ble Bombay High Court answered the following question:

"Whether in view of the amendment to the Code of Civil Procedure, 1908 by a Commercial Court, Commercial Division and Commercial Appellate Division of High Court's Act, 2015 (4 of 2016), the Defendant can be allowed to file the Written Statement after 120 days from the date of service of Summons in a Commercial Suit".

"30. I therefore hold that the amendments introduced to the CPC by the Commercial Courts Act are only applicable to Commercial Disputes of a Specified Value and not Commercial Disputes not of a Specified Value such as the present suit. Consequently, amongst other amendments introduced to the CPC by the Commercial Courts Act, the amendment to the CPC mandating that a Written Statement in a Commercial Suit has to be filed within 120 days, will not apply to Commercial Disputes not of a Specified Value."