Law Commission for dedicated courts for commercial disputes

Just a day after the Centre decided against appealing in Vodafone tax dispute, the Law Commission has recommended dedicated legal infrastructure for resolving commercial disputes.

The Commission submitted its report to the Law Minister DS Gowda on Thursday.

“A stable, certain, and efficient dispute resolution mechanism is essential for the development of the nation,” the Commission headed by Justice Ajit Prakash Shah said in its report.

The report also includes draft Bill for setting dedicated legal structure for resolving commercial disputes. Later Justice Shah said that the Centre was very keen to introduce the Bill.

The Commission has recommended setting up five commercial divisions – Delhi, Mumbai, Kolkata, Chennai and Himachal Pradesh – besides three-four district level Commercial Courts preferably in major industrial and commercial hubs is all the States.

Simultaneously, a Commercial Appellate Division will also need to be constituted in all the States, which will hear the appeals against the orders and decree passed by the Commercial Division or Commercial Courts.

An appeal can be made against the Appellate Division in the Supreme Court only as ‘leave by the court’ and not as ‘right to appeal.’

The Chief Justices of the concerned High Courts will nominate sitting judges, having expertise and experience in commercial disputes, to the Commercial Division and Appellate Division preferably for a period of two years. Commercial Courts will be manned by specially trained judges appointed by the High Courts.

Commenting on frequent adjournments, the commission has suggested a time frame for disposal of suits. Defendants will be given maximum 120 days to file written statements while judgments need to be delivered within 90 days from conclusion of arguments.

There is a new concept of ‘costs to follow event’ – claim payment will be based on original cost – proposed in the report.

The Commission said that commercial disputes should be defined broadly to mean disputes arising out of ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, joint ventures & partnership agreements, IPR and insurance besides others.

At present, commercial suits are filed as civil suits in various courts. A dispute involving higher value is taken to five High Courts (Delhi, Bombay, Madras, Calcutta and Himachal Pradesh) with original civil jurisdictions. Combined with frequent adjournment and lack of experience in handling such matters, the disputes take a long time to be resolved.

The Commission feels that there is an impression among foreign investors and companies that India is a difficult place to do business, due to the slowness and inefficiency of the judicial system.

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