Friday, April 9, 2010

The Commercial Division of High Courts Bill, 2009

The Commercial Division of High Courts Bill, 2009.

What this Bill aims to do is to create a special division within existing High Courts to fast track commercial disputes that are assessed beyond a 'specified value'.

After this Bill becomes the law (after it is passed by the Rajya Sabha), the Supreme Court will be compulsorily burdened with appeals from Orders passed by High Courts under the new law. The Supreme Court cannot summarily reject appeals because a right of appeal has been furnished to the litigant.

Section 13 of this Bill says:

13. (1) In respect of suits of the category referred to in sub- section (1) of section 4,
section 5, section 11 and clause (i) of section 12, an appeal shall lie to the Supreme Court
against any decree passed by the Commercial Division.
(2) An appeal shall lie to the Supreme Court against the orders of the Commercial
Division referred to in clauses (a) to (w) of Rule 1 of Order XLIII of the Code of Civil
Procedure, 1908.
Explanation.— In this section, the word “decree” shall include all decrees which are
to be treated as decrees for purposes of Rule 4 of Order XXI, Rule 58 and Rule 103 of Order
XXI of the Code of Civil Procedure, 1908.

Full text of the Legislation here... in PDF fomat,

From -

The Commercial Division of High Courts Bill, 2009 was introduced in the Lok Sabha on December 16, 2009 by the Minister of Law and Justice, Shri Veerappa Moily. The Bill was passed by the Lok Sabha on December 18, 2009 and is pending in the Rajya Sabha.
  • The Bill seeks to allow a High Court to constitute a commercial division of that High Court for adjudicating commercial disputes. The Judges of the division shall be High Court judges nominated by the Chief Justice of the High Court.
  • The Bill specifies the types of cases that can be allocated to the commercial division of a High Court. It includes all commercial disputes of specified value pending in the High Court and appeals against orders of subordinate courts, interlocutory applications, revision application all of which are of specified value. Commercial disputes pending in subordinate courts shall be transferred to the commercial division of the High Court having jurisdiction over such courts.
  • A “commercial dispute” is defined as any dispute between merchants, bankers and traders over a transaction such as interpretation of documents, export or import of merchandise, carriage of goods, distribution and licensing agreements, intellectual property, and any dispute notified by the central government.
  • The commercial division shall have jurisdiction over certain commercial disputes of specified value under the Arbitration and Conciliation Act, 1996.
  • The Bill defines “specified value” as the value of the subject matter of the commercial dispute which is Rs 5 crore or above as notified by the central government.
  • The Bill outlines the manner in which specified value of the subject matter of a commercial dispute shall be determined.
  • If there is a dispute over whether a case is a commercial dispute case or not or there is dispute over the specified value, such cases shall be decided by the commercial division of the High Court in which the case is pending.
  • The commercial division of a High Court shall follow the procedure specified in the Code of Civil Procedure, 1908 except in cases provided under the Act. But certain prescribed procedures have to be followed in every case such as filing documents, affidavits, requisite fee, and counter claims of defendants.
  • The commercial division may appoint an advocate with 20 years or more experience at the Bar or a judicial officer in the rank of Senior Civil judge as Commissioner to record statements in cross-examination and re-examination of parties and witnesses.
  • The commercial division shall pronounce judgment within 30 days of the conclusion of argument.
  • A single judge sitting in the commercial division may hold case management conferences, fix a time schedule for finalization of issues, cross-examination of witnesses, filing of submissions, record of evidence of cross-examination. However, any objection as to the admissibility of any evidence shall be decided by the Bench of two judges sitting in the commercial division.
  • All decrees of the commercial division can be appealed in the Supreme Court.
The government plans to establish a new mechanism for speedy resolution of large commercial disputes between corporates. The law ministry has moved a Cabinet note that proposes to set up a separate division in every high court for a speedy resolution of such disputes. Once the mechanism is in place, vexatious corporate disputes, like the Birla-Lodha case or the more recent RIL-RNRL case, which generally drag on for years, would be decided in a shorter time span.
Now, the Company Law Board is the arbiter of shareholder disputes and mismanagement issues related to corporates. The CLB, however, has no mandate to cover commercial disputes like the RIL-RNRL stand-off over K-G basin gas. The proposed National Company Law Tribunal would take over the CLB’s functions, but would still not hear commercial disputes, which will remain with civil courts.
The law ministry has proposed that all commercial disputes with a threshold value of Rs 1 crore and above would be handled by the proposed commercial division in high courts. This implies that high courts would be relieved of the burden of dealing with corporate cases. The high courts now deal with all cases ranging from criminal to civil to corporate matters.
Any commercial disputes pending before the district and other subordinate courts would also be transferred to the commercial divisions in high courts. “It would speed up the disposal of corporate cases as district courts would have no jurisdiction in such cases,” the Cabinet note said.
Sources said ministries like commerce & industry, corporate affairs and finance have given their consent to the law ministry’s proposal, which has now been sent to the Prime Minister’s Office for comments.

Once the Cabinet approves the plan, the government would have to move a Bill in Parliament to bring about the statutory change.
A high-level committee on law, headed by the department of legal affairs in the law ministry, has noted that without an effective mechanism for speedy resolution of corporate commercial disputes, progress in corporate India would be retarded.
The committee has also observed that foreign investors in India must be assured that the Indian courts are as fast as the courts in the most developed countries.
The law ministry has taken cue from England in making the proposal. In England, commercial court is a division of the high court, which tackles corporate disputes. In the US, in states like New York, Delaware, Philadelphia and Maryland, commercial courts have been established. Even Nepal has recently set up commercial benches in courts.
According to the proposed Bill, “the Commercial Division of High Courts Bill, 2009”, a dispute that is not a commercial dispute will be deemed to be a commercial dispute if the immovable property involved in the dispute is used in trade or put to commercial use.
Every commercial division will have judges of high court nominated by the chief justice of the high court. And all suits relating to commercial disputes pending in the courts subordinate to the high court would be transferred to the new commercial divisions. All commercial disputes pending in the high court would be transferred to the commercial division. An appeal against the order and decree passed by the commercial division will go before the Supreme Court.

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