Assessing the impact of amendments to the Commercial Courts Act, 2015 on Indian economy

After presidential assent on May 3, 2018 the amended Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 came into force with a view to increase efficiency in the resolution of commercial disputes and subsequently improving India’s ranking on the Ease of Doing Business index in the form of Commercial Courts (Amendment) Act, 2018.

Background

India has been consistently showing improved “enormous growth potential” compared to other emerging economies, the World Bank said referring to the country’s 7.3 percent growth rate in 2018. “India is a very large economy. It has a huge potential. At the same time, it has its own challenges,” according to the World Bank. The increase in commercial activities with rapid economic development has consequently given rise to a number of commercial disputes at domestic and international level. There is a need for faster resolution of disputes regarding commercial activities to present a positive image of India as emerging global economy with a fast-acting, stable and responsible judiciary among foreign investors. This need led to the genesis and creation of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015.

The impact of this piece of legislation can be seen in the 2017 World Bank report which categorically stated, “on 31^st October, 2017, in the released latest annual Ease of Doing Business report for the year 2018 India has emerged out as one among top ten improvers and for the first time ever, India has jumped 30 positions and reached 100^th ranked country in terms of Ease of Doing Business amongst 190 countries.” Ease of Doing Business is an index of World Bank which inter alia refers to the dispute resolution environment in a country which facilitates the investors in deciding for setting up of an operation of a business; the index created by World Bank in 2002 since has been used to evaluate almost all the countries of the world.

Effective amendments

1. The amended section 1(1) of the Act states, “this Act may be called the Commercial Courts Act, 2015.” This was done with a view to clear existing confusion that the different courts mentioned in the name of the said Act are actually separate courts with different procedures constituted for resolving commercial disputes and not merely separate divisions of the High Courts.
2. The “specified value” as defined under Section 2(2)(i) of the Act was originally set at Rs. 1 crore (Rs. 10,000,000) which is now being reduced to Rs. 300,000, thus, bringing a large number of disputes within the ambit of the commercial courts which were previously taken care of by city civil courts; the previous process led to increasing the burden on city civil courts and decreasing their efficiency in quicker resolution of disputes.
3. The amendment introduce changes in the hierarchical structure of the Commercial Courts and Appellate Court by setting up Commercial Courts in regions (Delhi, Bombay, Madras, Calcutta and Himachal Pradesh) where High courts have Ordinary Original Civil (OOC) Jurisdiction, by setting up Appellate court and splitting up Commercial courts into two types of courts – one at District Judge level and one below that level, ensuring efficient, smooth and fast disposal of cases.
4. One critical piece of the amendment brought into the legislation through the Ordinance is that it gives the state government ample power to appoint judges even without prior consultation with the chief justice of the high courts, a provision which could be expected to be controversial with all kinds of general dissatisfaction prevalent regarding appointments in the judiciary.
5. The insertion of Section 12A urges the plaintiff to undergo mandatory pre-institution mediation (PIM) where urgent interim relief is not required as per the provisions of Legal Services Authorities Act, 1987 and the process of mediation need to be completed within three months from the date of application. The settlement agreement so reached will have same status and effect as an arbitration award as per the provisions of section 30(4) of the Arbitration and Conciliation Act, 1996.
6. The transfer of suit as was prevalent under the guidance of Section 9 read with section 12(e) has been prevented with the deletion of both those sections. This change was brought into effect considering the fact that the Commercial Courts now have the pecuniary jurisdiction to attend to cases of the specified value of Rs. 3,00,000 and not Rs. 1 crore (Rs. 10,000,000).

Effects of the amendment

Although it is too early to comment positively or negatively regarding the various effects of the amendment to the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, nevertheless it is a laudable effort of our legislators in addressing this key piece of legislation especially with the increase in trade volume and India’s need to create a business-friendly environment to boost its financial status and rightfully present itself as a leading hub of global market economy. Recent years have seen India showing its true potential by aggressively promoting itself in foreign countries under the auspices of the current BJP-led Narendra Modi government.

It is crucial that India deliver its promise by providing an equitable opportunistic market economy with speedy dispute redressal mechanisms if it is going to portray itself as Shining India and as an alternative market to the aggressive and burgeoning market economy of China and give the neighbouring country any serious competition. The amended legislation is a bold step towards achieving Make in India goals more effectively and is supposed to be one of the many futuristic and smart revamping of our legislation in order to increase foreign direct investment (FDI) and sustained India’s current growth rate in an ever-increasingly competitive world business market.