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Commercial Courts: Speedy Justice?

Published on Sat, Jun 27,2015 | 13:51, Updated at Mon, Jun 29 at 21:16Source : CNBC-TV18 |   Watch Video :

THERE ARE 3432493 CASES PENDING IN INDIA’S 24 HIGH COURTS. IN THE 5 MAIN HIGH COURTS 16884 COMMERCIAL DISPUTES ARE PENDING. 50% OF THESE CASES HAVE BEEN PENDING FOR MORE THAN 5 YEARS. IN THE MADRAS HIGH COURT, THE JUDGE TO COMMERCIAL DISPUTES RATIO IS 1:1467. CONTRACT ENFORCEMENT TAKES NEARLY 4 YEARS (1420 DAYS) IN INDIA.

That makes a strong statistical argument for the speedier disposal of commercial cases in India. But, are special commercial divisions and commercial courts the solution to this problem? Especially, as designed by the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015? Joining CNBC TV18’s Menaka Doshi to discuss this are M P Bharucha, Senior Partner at Bharucha & Partners and Bombay High Court Senior Counsel, Aspi Chinoy.

Doshi: The numbers make a very strong case for the speedier and more expert disposal of commercial disputes in India. However, at the very heart of this debate is the first question that I am going to put to you which is, are commercial courts and commercial divisions the answer to this problem?

Bharucha: Yes and no. The primary issue is that we need speedy justice. The whole justice delivery system needs to improve. Now within that is a subset of commercial disputes, the high valuation litigation because commerce is the life blood of the economy. But given the way in which the proposal is structured I personally don’t believe that this is the solution to the real problem that we face. We need to improve the infrastructure. We need to improve the lawyers, the judiciary, the works…

Doshi: The Bill doesn’t do that?

Bharucha: It just addresses a part of the problem.

Doshi: Would you say that flaws lie in the bill or in the approach, the conceptual solving of this problem?

Chinoy: We can’t gainsay the requirement of expeditious disposal of commercial matters because there is a cost to be paid in not having an effective disposal of commercial matters. I think this (the Bill) doesn’t go anywhere near helping that. It is as I would put it metaphorically, a band-aid on a cancer patient. What does it really do? It re-designates existing judges to commercial divisions. Everyone knows what we need, to have an effective judiciary. We need more courts, we need more judges, we need better judges and we need better paid judges; that is what we need. We don’t need Commercial Court bills

The 2015 Bill provides for establishing Commercial Divisions in those High Courts that have ordinary original civil jurisdiction and it provides for establishing Commercial Courts at the district level. It says a Commercial Appellate Division shall be set up by all High Courts to hear appeals against the orders of commercial divisions and courts. The Commercial Appellate Division will also have jurisdiction over arbitration appeals.

Commercial Divisions and Commercial Courts will only hear cases involving Rs 1 crore and more. As for the definition of a ‘commercial dispute’ …it is a lengthy one and lists disputes arising out of

-           ordinary transactions of merchants, bankers, financiers and traders…

-           export/import of merchandise or services

-           issues relating to admiralty and maritime law

-           transactions relating to aircraft…

-           carriage of goods

-           construction & infrastructure contracts

-           agreements relating to immovable property…

-           franchising agreements

-           distribution & licensing agreements

-           management & consultancy agreements

-           joint venture agreements

-           shareholders agreements

-           subscription & investment agreements pertaining to the services industry  including outsourcing services and financial services

-           mercantile agency and mercantile usage

-           partnership agreements

-           technology development agreements

-           intellectual property rights…

-           agreements for sale of goods or provision of services

-           exploitation of oil and gas reserves or other natural resources

-           insurance and re-insurance

-           contracts of agency

-           such other commercial disputes as may be prescribed

Bharucha: I am a little skeptical as to whether we need the definition of ‘commercial dispute’ because that term has been on the statute book for a number of years. Starting with the Foreign Awards Act, in fact prior to that, the 1937 Arbitration Protocol and Convention Act and even in the Civil Procedure Code (CPC) Section 34 refers to a commercial transaction. I think the only rationale for a specific definition like this appears to be that this is not a court which is open for every dispute, it is open to a particular category of commercial disputes and then of course it has to meet the other threshold of value.

Doshi: Which is Rs 1 crore and above?

Bharucha: Even then I think the definition is problematic because the first clause talks of normal transactions of banks - what happens to the Debt Recovery Act? Which is a special statute created for recovery of bank dues. One of the definitions talks of contracts in relation to aircraft, what happens to ship building? What happens to ship charter? Are they commercial contracts?

Another very serious objection that I have in relation to the definition is - investment agreements. They have carved out a sector, now what happens to private equity or venture capital investments. Unless and until they fall within a particular category those investments are out from the definition.

Chinoy: 21 sub clauses and the 22nd plenary clause… ‘other commercial disputes as may be prescribed’. It virtually covers the entire gamut of commercial litigation and it leaves out very little… say public law, writ petitions or personal law, adoption, matrimony… otherwise very little is left out.

Doshi: Isn’t that the intention…to bring all these disputes to these courts and these divisions.

Chinoy: We have about 30 judges and now all this is going to go to say 5 judges. The pressure will be unbearable.

Bharucha: And from all over the state.

Doshi: I also want to try and understand which High Courts will have Commercial Divisions and which States will have Commercial Courts. So far as I understand this - the 5 High Courts in India that have an original side namely Bombay, Delhi, Kolkata, Chennai and Himachal Pradesh will have a Commercial Division in that High Court and all the other High Courts in India will have a Commercial Court attached to them?

Chinoy: In the later case the Commercial Court would be of the status of the Principal District Judge… so like in Bombay you have the City Civil Court, if we didn’t have original civil jurisdiction we would have another City Civil Court.

Doshi: So you are taking cases out of a City Civil Court and then moving them on to a Commercial Court?

Chinoy: A special District Court.

Doshi: This Bill provides for an Appellate Division to be created within High Courts where you could appeal the orders of the Commercial Division or the Commercial Courts? Can you talk us through the benefits of this appellate structure and I also want to ask you a question on whether eventually all these cases will land up at the door of the Supreme Court or not?

Chinoy: Possibly, you see an intra-court appeal is almost like an essential aspect of a right because otherwise a litigant is subject to a single judge’s decision and the ability to afford a trip to the Supreme Court. So an intra-court appeal would help a lot. By and large governments have been trying to negate or restrict intra-court appeals. We used to call them letter patents appeals (LPA) within the High Court. They have been trying to whittle it down. The consequence of that is that people don’t get access to corrective justice.

Doshi: Even then. No matter how many levels of appeal cases go through in this country somehow almost all of the cases and if not all, most of them end up at the Supreme Court?

Chinoy: Ask the Supreme Court why it takes on all these cases under 136. If you want to be a regular court of appeal nothing can ever stop the numbers.

Doshi: One more question about the Appellate Division - it also says that these Commercial Appellate Divisions will hear writs against the Securities Appellate Tribunal, the Company Law Board (CLB), the National Company Law Tribunal – whenever it is set up, the Competition Appellate Tribunal, The Intellectual Property Appellate Board (IPAB) and the Debt Recovery Tribunal Appellate tribunal

Chinoy: In any case you can file writ petition against them. It goes to the regular writ petition court.

Doshi: Then instead of going to the High Court it will go to the Commercial Appellate Division…right?

Chinoy: Yes, and since the Commercial Appellate Division is part of the High Court, it’s just a change of nomenclature. The High Court judge is now called a Commercial Appellate Judge, that is all. It is the same old creature…it was there yesterday in that phenomena and now this.

The success of Commercial Divisions and Courts depends on the speed and expertise applied to the disposal of commercial dispute cases. The 2015 Bill provides for strict timelines and the amendment of the Code for Civil Procedure. There are new provisions for summary judgment, case management hearings, limited period arguments, day-to-day recording of evidence and more detailed parameters to determine costs. The Commercial Appellate Division must endeavour to dispose of an appeal within six months. All this suggests the conclusion of a case in just over a year…at least on paper.

Bharucha: They are achievable; let me put it that way. They are achievable provided the client, the judiciary and the lawyers are acutely conscious that they are before a commercial court, they have stiff penalties by way of cost, they want justice in a timely way, and they must work towards that.

Chinoy: I don’t think it is going to work, it is the usual, they always stipulate timelines; the timelines have little meaning if you can’t achieve them. If you are swamped by numbers – basically it must be achievable, if the same judge is hearing matters today and can’t deal with the same timelines then how does it make it difference tomorrow? You need more judges and less cases per judge. How will he manage the timelines?

Doshi: However, they have been laid out in black and white. The bill defines the amount of time permitted for written submissions, it proposes a case management hearing right at the beginning for the Court or the Judge to lay out how long this will go on for, won’t all of that help?

Chinoy: When you go to a trial there are two areas, there is the evidence, the cross examination, the witnesses and then there is the arguments. There is nothing here suggesting how any of those could be constrained in any way. How will it change? All they have put the timelines in is in the preparatory factors; the time to file a written statement, the time to finish discovery…but the trial can’t be constrained, it hasn’t been.

Doshi: Haven’t they also suggested that the court must attempt to complete the trial within six months, attempt to dispose-off the appeal in six months?

Chinoy: Appeal yes, an appeal is a different factor because that doesn’t require evidence. However, when you come to trial court how will you decide quicker? You will need so many judge hours per case. It is alright to legislate a time limit, how do you effectuate it and how does the judge work it?

Bharucha: I think there is an answer to that. Let me say this, Mr. Chinoy is absolutely right when he says that it is achievable if there are judges who are capable of hearing this. However, to answer on the other aspect, subject to the big question of whether there are a number of judges who will be able to cope with the work load, case management is a fact of life when you are in international disputes and very stringent timelines are laid down. It is not just laying down the timelines, the courts do prescribe, you will file opening arguments not exceeding ‘x’ number of pages, your witness statements shall not exceed ‘x’ number of pages unless you get leave of the court. These are all concepts which are well known in other jurisdictions. If you can adhere to those then you can have a speedier disposal.

Doshi: If I may argue… the 2015 Bill says the Court will hold the first ‘Case Management Hearing’ no later than 4 weeks after the filing of the affidavit. That the Court shall ensure arguments are closed no later than 6 months from the date of the first case management hearing. That the Court shall as far as possible ensure recording of evidence on a day-to-day basis. That a party shall, within 4 weeks of commencing oral arguments, submit concise written arguments. That the Court may permit parties to file revised written arguments within no more than one week after conclusion of arguments…Would this not prompt courts and judges to move faster on cases?

Chinoy: Let me explain how it doesn’t make too much sense. If you go to a court in England, a judge on his list has two or maybe three and most times one case per day. When you go to a court in Mumbai, that commercial judge has between 60-100 cases on the list. Now where are the remaining 59 going to go? Basically it is a matter of being killed by numbers.

I agree with you, one of the facts that we should somewhere think about is constraining the amount of time for oral arguments by lawyers because sometimes I have seen cases go and on just because the judge doesn’t think it appropriate to stop a lawyer who just likes hearing a long argument.

Bharucha: Linked to that is also the issue, this again goes back to time constraints and everything, if the court has read the papers, arguments necessarily need to be brief and the judge would be right in curtailing them. However, the judges don’t have the time and there are some judges who say I will not read papers on my own because that may give rise to an inclination to pre-judge matters. Now that is a perspective… I am not going to quarrel with that. However, the fact of the matter is if the judge is prepared, the lawyers have to be prepared and if you are prepared then your timelines are much shortened.

Doshi: However, in this case wouldn’t the judge and the lawyers have to be prepared because the law requires you to submit all of these written submissions.

Bharucha: You are right and that goes back to Mr. Chinoy’s major comment and I share with that. Do we have the bandwidth?

Chinoy: Precept and practice, at the end of the day if the judge has 60 commercial cases on his list which does he read?

Doshi: I want to add two other things that they have proposed in an attempt to expedite cases. For instance the Law Commission report, which was the starting point of at least this version of the Bill, says that these special courts and special divisions should be modeled on the ‘Model Courts’ policy of the Government. Essentially these should be hi-tech courts. The Bill doesn’t provide for anything like that… but says infrastructure will have to be provided by the State.

Chinoy: If we could have infrastructure why haven’t we had it all this time? Does it require a law to tell us this? Essentially we need more courts. If at a stroke you could double the number of courts in India you would probably halve the arrears.

Let me tell you the judges in the High Court, especially the younger appointments, are working way above their reasonable capacity and we still aren’t making a dent. They work late, they work Sunday’s, Saturday’s, mornings before court, holidays most times – it is just that we are swamped by numbers. All you are doing is re-designating an existing judge; you are not appointing more judges. So where does the workload go? Whether you call him a judge of the High Court or a judge of the Commercial Court, he has got five hours a day and more cases than he can handle. Now, with this, all the District Court matters will end up in the Commercial Division/Court. How is it ever going to work? Unless a judge suddenly becomes superman and can work at four to five times his capacity with the same number of hours? I would be happy to hear that.

Doshi: I am trying to play devil’s advocate here but I am failing because even I know that the vacancy at the High Court level is some 30 percent!

The Law Commission report suggested Commercial Courts be manned by specially trained judges. The 2015 Bill says a Commercial Court Judge must be qualified to be appointed as a District Judge with experience and matters relating to commercial disputes, or has held a judicial, tribunal or suitable government office for at least 7 years. Commercial Division judges will be nominated from the High Court - for a period of 2 years.

Chinoy: The only advantage, if you look at it that way, is that Commercial Court judges get designated for two years at a time. So instead of shifting with very assignment of three months there will be some degree of continuity. Plus there is now a mandatory intra-court appeal in all commercial matters. So the appealability will be higher…but these are very small steps in a very big problem which is capable of solution if you wanted to.  

Doshi: It says here the Chief Justice in the concerned High Court shall ‘nominate such number of judges of the High Court as required to be judges of the Commercial Division or the Commercial Appellate Division’. So in a sense the Chief Justice can allocate more judges to this.

Bharucha: Provided he has the judges.

Chinoy: What about the other matters like writ petitions and regular appeals? I mean it is in the cake, the cake isn’t growing bigger you are just cutting it in different portions.

Bharucha: The way in which I have read the Bill, I believe the court has power to appoint even advocates as judges of the Commercial Court and that does widen the pool. You could pick up talent assuming the advocates are agreeable to go to the Commercial Court.

Doshi: So wouldn’t that be good enough, wouldn’t that in some sense also help resolve the numbers issue?

Bharucha: The number issue is an extremely large issue. It doesn’t just deal with the number of people available, it goes with the remuneration, it goes with the service conditions; it is a very vast issue. We are very fortunate that we have a number of lawyers who are still willing to join the judiciary… that is my belief…and there are very committed people who take that hit and they do it. However, the whole concept over here is there is difference between affordable justice and cheap. You want quality; you got to pay for it.

Now why is it that a judge has to be pegged down to a particular level of government servant or government public sector employee? You need independence and you got to pay for what you want.

Chinoy: An issue which is peculiar for High Courts with existing original civil jurisdictions, they are only providing for nominating judges of the High Court as Commercial Division judges. So, we don’t increase the cake. For other courts which don’t have original civil jurisdictions, the Commercial Court will function as a Principle District Court. So, it won’t even be a High Court level judge. Now, if you are going to have this great focus on commercial litigation should you not bring it up to the High Court level straight off?

Doshi: Why do you think they would have designed it this way then?

Chinoy: Because then they have to confer original civil jurisdiction on the High Courts.

Doshi: What would their objection be to doing that?

Chinoy: There shouldn’t be, in fact they have been pairing away original civil jurisdiction in intra-court appeals and that is led to a large extent to the decline of the situation.

Doshi: Why would they have a problem with fixing it exactly the way you spelled it out?

Chinoy: They should have legislated that this will be an additional facet, creation of an original civil jurisdiction of a High Court level for commercial matters instead of keeping it with the District Court level.

Doshi: If we were to add all of this it would still not make a dent? The fact that faster procedures have been prescribed in the Bill, that there is the hope that States will provide the necessary infrastructure to these courts for them to function in a high-tech and more efficient manner, that there will be judges that are conversant with commercial disputes assigned to Commercial Divisions and hopefully they will pick from a wider pool including advocates for Commercial Courts in other states. All of this together is still not going to make a substantial dent?

Bharucha: No, in fact I believe that may be small changes in the existing legislation might be more beneficial. First of all empower the court and the court should in practice award real cost, genuine cost. Empower the courts to allow interest at the real rate of interest. Introduce case management with consequent penalties. These are incremental changes.

Doshi: But isn’t all of this here in the Bill?

Bharucha: This is by way of a special legislation.

Doshi: Isn’t it unique that this set of courts and divisions is going to insist on awarding costs, calculated in a realistic manner?

Bharucha: We don’t need a special statute to do all this. Just amend the Code of Civil Procedure and then within that you can; then you make a systemic change. What I am talking about is in a sense systemic but it is within this system. You are not creating anything new, you are not creating a new beast which people need to get used to but you are still making the justice delivery system a little more efficient.

Doshi: There were two additional features that I was going to use to play devil’s advocate. A) the awarding of costs which has been explicitly laid down in this Bill and B) the Law Commission’s promise at the end of its report where it says that we will review court fees and this is in connection to the fact that some countries like Singapore have escalating court fees linked to the duration of the case. We already have awarding of costs in this Bill, if over time the Law Commission suggests escalating court fees as well wouldn’t you be able to say that all of this combined will make for the faster disposal of commercial cases?

Chinoy: I wish I could, that is all I can say. It is not going to make a difference. If you were in the system you would appreciate that most of these are just palliatives. They don’t change anything in substance. You still have the same poor judge sitting there five hours a day trying desperately to cope with a rush of litigation that comes at him and with the best of efforts it is very difficult to deal with the situation. What stops the Government, if it wants to, in deploying adequate resources to increase the number of judges in courts? If you can’t get around to doing that then this is just fiddling with the problem.

Doshi: I have always asked why we don’t enhance the allocation to our judiciary in a substantial fashion? Because how else are you going to create all these e-courts and model courts and all of that?

Chinoy: I suspect that when you really get down to the core of things, I am not sure government really wants an effective judiciary. I am not sure. I hope I am wrong. But my belief is that hardly anything is being done to make the judiciary responsive or effective to cope with the situation you have. They can allocate resources for all sorts of things. If you took the coal mines nationalisation or auction and just deployed that money here you could probably double the number of courts in India.

Doshi: I am going to end this debate by giving the last word to Arun Jaitley, who in 2009, when he was in opposition had severely critiqued an earlier version of this very bill. Mr. Jaitley had said this in the 2011 Rajya Sabha debate, ‘the average life of a case when it goes to the City Civil Court could be two years, three years or four years at an outer limit. If you go to the original sides of the High Courts, which are the functioning Commercial Divisions, the average life of a case in the first instance, is 10-15-18 years. By creating Commercial Divisions and Commercial Courts we are placing these cases into the laziest and the slowest layer of the judicial system.’

 
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