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.