REGULATORY UPDATE: THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND COMMERCIAL APPELLATE DIVISION OF HIGH COURTS (AMENDMENT) BILL, 2018

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 also known as The Commercial Courts Act was passed in 2015 with the intent to fasten the process of resolving Commercial disputes in India. The Act defined Commercial courts and Commercial disputes as follows:

Commercial courts:  These courts will be established as per the provisions of the Act by the State government after consultation with the State government to resolve commercial disputes.

Commercial Disputes: It means any disputes which is commercial in nature. The Act gives a non-exhaustive list of 22 disputes termed as commercial disputes. Eg: Dispute arising out of any ordinary merchant transaction, insurance disputes, Banking disputes, SHA, JV, Export Import, IP rights, sale of good and service agreements etc.

The following Changes have been brought about by the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill, 2018 ordinance

REDUCING THE SPECIFIC VALUE

  • The specific value as determined in Section 2(I)(i) determined that the Commercial courts under the Act can hear disputes only in cases where the minimum pecuniary value is 1 crore Rupees. It has been brought down to Three Lacs.

*This will allow the courts to have wider pecuniary jurisdiction and institute more disputes under the Act so as to fasten the process of commercial disputes.

INSTITUTION OF DISTRICT JUDGE LEVEL COURTS

  • The ordinance has further allowed for institution of DISTRICT JUDGE LEVEL COURTS for the states which were the High courts have Original Ordinary Jurisdiction after consultation with the High Courts of the Respective States.

PRE-INSTITUTED MEDIATION

  • Chapter 3 A has been inserted along with 12A which makes it mandatory for parties to a commercial dispute under this Act to be referred to Pre-Instituted Mediation under the Legal Service Authorities Act, 1987 unless the dispute is of urgent matter and requires interim relief.
  • The process of mediation has to be completed within a period of three months and can be extended up to a period of another two months on the consent of the parties.
  • It is important to note that the ordinance specifies that if the parties are undergoing mediation under this Act, then the mediation period has to be excluded from the calculation of the limitation period under the Limitation Act,1963
  • If the parties reach an agreement, it shall be binding and have the same effect as ARBITRAL AWARD under the Arbitration and Conciliation Act, 1996, therefore cannot be disputed.

What is important to be noted here is that the Act has not defined Urgent matter and therefore shall be decided on a case to case basis as of now. However, mandatory mediation gives an indication of a positive impact on the process.

CENTRAL GOVERNMENT’S POWER TO MAKE RULES

  • The Central government is yet to make rules, and inserted Section 21A to makes rules for pre-instituted mediation. However the ordinance mention the application of Pre-instituted Mediation as per Legal services Authorities Act, 1987 and therefore the general provisions of rules therein shall apply until expressly prohibited.

Source: http://www.prsindia.org/uploads/media/Ordinances/Commercial%20Division%20of%20High%20Courts%20Amendment%20Ordinance%202018.pdf

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