DIPP has asked the ministry of law and justice to help expedite the process of setting up commercial courts at the district level for swift dispute resolutions.
With India staring at yet another year of poor performance in “enforcing contracts” in the World Bank’s ease of doing business index, the department of industrial policy and promotion (DIPP) has asked the ministry of law and justice to help expedite the process of setting up commercial courts at the district level for swift dispute resolutions.
India is currently ranked 130th of 190 nations in the ease of doing business index, partly because in “enforcing contracts”, its position is far worse —172nd of 190 countries. Fixing this irritant is an absolute pre-requisite for the country to achieve the Modi government’s target of breaking into the list of top 50 nations.
Sources told FE that setting up commercial courts at the district level in most parts of the country requires an amendment to the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. However, despite it being a low-hanging fruit that can be brought in without much hassles, the law & justice ministry hasn’t yet made much of a progress in this regard.
The DIPP now wants the department of justice to urge high courts in Delhi and Mumbai to exercise their administrative powers to exclusively allocate cases of commercial nature to identified lower courts, more so in cases where the amount involved is less than Rs 1 crore.
In a letter to law secretary Snehlata Shrivastava last week, DIPP secretary Ramesh Abhishek said: “Out of the several pending reforms identified, the establishment of commercial courts at the district level in Delhi and Mumbai is of significant importance, to expedite enforcement of contracts and fast-track dispute resolution.”
According to the proviso to Section 3(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, the commercial courts can be set up at the district level only if the High Courts don’t have original jurisdiction. In Delhi and Mumbai, the respective High Courts hold ‘Ordinary Original Civil Jurisdiction’ and hence, it’s not possible to set up commercial courts in these cities, Abhishek said in the letter.
Establishing commercial courts in Delhi and Mumbai is important, as the World Bank takes into account stakeholders’ perceptions of reforms in only these two cities while ranking India in ease of doing business.
The DIPP usually monitors the progress of various reforms in ease of doing business, while administrative departments are mandated to work towards and implement such reforms.
“Until the necessary amendments are made in the Act, in order to establish the commercial courts in the cities of Delhi and Mumbai, the honourable chief justices of Delhi and Bombay High Courts may be requested to exercise their administrative powers to exclusively allocate cases of commercial nature to identified lower courts,” said the letter. The High Courts may also be requested to exercise their power to confer jurisdiction on courts at district level in relation to cases with specified value of less than Rs one crore, it added.
Setting up commercial courts at district levels will enable focussed measures to improve the efficiency of these courts, such as the introduction of electronic case management system with functionalities such as e-filing, e-payment, e-cause list, e-summons and digitally-signed court orders along with capacity building of judges on complex commercial matters.
Senior advocate Abhishek Manu Singhvi said: “I do believe commercial courts should exist at the district level also. I know that a provision in the Commercial Courts Act prevents this so long as the High Court has original civil jurisdiction, which is true in Delhi. However, all it requires is an amendment to the Act…. Why should such an amendment not be brought expeditiously?”
Tarun Gulati, partner with law firm PDS Legal, said the proviso to Section 3(1) is intended only to ensure that the High Court’s original civil jurisdiction is not impacted by the creation of commercial courts. “It does not appear to be a bar for the creation of commercial courts at the district level for cases where the High Court does not have pecuniary jurisdiction but a civil court has jurisdiction. The High Court itself can create commercial division benches under Section 4. Therefore, it is clear that the purpose is to carve out the civil jurisdiction into separate categories for commercial and other cases at all levels.”
The country’s ranking in “getting electricity”, the major driver in the ease of doing business index in the past two years, already reached a saturation point. Even benefits of the goods and services tax (GST) regime and the new insolvency law are likely to reflect meaningfully from next year (The GST was introduced in July and the application of the Insolvency and Bankruptcy Code (IBC) picked up pace from June after the RBI recommended 12 large non-performing asset accounts to be resolved under the IBC—much after the World Bank’s window for considering reforms closed for this year. So the government had earlier thought of expeditiously fixing the “enforcement of contracts” parametre to improve its score, which hasn’t yet taken place.