Commercial Court

What is a Commercial Court?

A Commercial Court is a specialized judicial body established to handle disputes arising from commercial and business transactions, typically involving high-value cases. In India, for instance, under the Commercial Courts Act, 2015 the specified value for cases to be heard by a Commercial Court was initially set at ₹1 crore but has since been reduced to ₹3 lakhs following amendments in 2018. These courts focus on matters such as contracts, corporate disputes, intellectual property rights, banking and finance, insurance, and other trade-related issues. The primary aim of a Commercial Court is to resolve such disputes efficiently, providing a faster and more expert resolution than regular civil courts. They typically apply streamlined procedures and strict timelines to ensure that litigation does not unduly hinder business operations.

Commercial Courts are characterized by their procedural efficiency and the expertise of the judges who preside over them. Judges in these courts often have specialized knowledge in commercial law, allowing them to better understand the complexities of business-related disputes. The procedural rules of Commercial Courts are designed to expedite the resolution of cases, with features such as case management hearings, summary judgments, and tight deadlines for filing pleadings and conducting trials. These courts play a critical role in fostering a business-friendly environment by reducing the time and cost of litigation, thus enhancing the ease of doing business and ensuring that commercial disputes are resolved in a fair and timely manner.

Official Definition of Commercial Court

Term as defined in Legislation

Section 2(1)(b) of the Commercial Courts Act, 2015 (“Act”) defines “Commercial Court” as the Commercial Court constituted under sub-section (1) of section 3 of the Act.

As per this section, the government can establish district-level commercial courts vide notification, post consultation with the High Court. District-level commercial courts have jurisdiction over commercial disputes with a distinct value ranging from not less than 3 lakhs to not more than 1 crore.

Commercial disputes are defined in section 2(c), and include the following:

1. ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;
2. export or import of merchandise or services;
3. issues relating to admiralty and maritime law;
4. transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same;
5. carriage of goods;
6. construction and infrastructure contracts, including tenders;
7. agreements relating to immovable property used exclusively in trade or commerce;
8. franchising agreements;
9. distribution and licensing agreements;
10. management and consultancy agreements;
11. joint venture agreements;
12. shareholders agreements;
13. subscription and investment agreements pertaining to the services industry including outsourcing services and financial services;
14. mercantile agency and mercantile usage;
15. partnership agreements;
16. technology development agreements;
17. intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits;
18. agreements for sale of goods or provision of services;
19. exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum;
20. insurance and re-insurance;
21. contracts of agency relating to any of the above; and (xxii) such other commercial disputes as may be notified by the Central Government.The Act also facilitates Case Management Hearing (“CMH”), wherein the judge will frame the issues, determine the order in which the issues will be taken up, set timelines for the completion of various stages of litigation, encourage parties to consider alternative dispute resolution mechanisms, allocate time for oral arguments, and decide dates for hearings and trial. It aims to streamline the litigation process and must be conducted within four weeks from the date of filing the affidavit of admission or denial of documents by all parties.

Term as defined in Official Government Reports

In 2003, the Law Commission of India's 188th Report suo motu took up the subject of setting up commercial courts and proposed the establishment of expedited courts in High Courts. Due to concerns, particularly on the scope and definition of a 'commercial dispute', the Bill was referred back for a re-evaluation.

In 2015, the 253rd Law Commission Report recommended the creation of a system of commercial courts, the establishment of Commercial Courts, Commercial Divisions, and Commercial Appellate Divisions within the High Courts. Consequently, the Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Act, 2015 came into force. The 2018 amendment to the Act decreased the monetary limits for jurisdiction over commercial disputes.

Legal Provisions relating to Commercial Courts

Specified Value

The Commercial Courts Act, 2015 introduces the concept of specified value in Section 2(i), which defines it as the value of the subject matter in a commercial dispute, determined based on the claims made in the suit, including interest, costs, and other monetary aspects. Initially, the Act set the specified value at ₹1 crore, meaning only disputes with a monetary value of ₹1 crore or more could be heard by Commercial Courts. However, following the Commercial Courts (Amendment) Act, 2018, the specified value was reduced to ₹3 lakhs, as mentioned in Section 12 of the amended Act. This change significantly widened the range of cases that could be brought before Commercial Courts, allowing for the inclusion of small and medium-sized businesses in commercial litigation. The provisions regarding specified value help filter cases to ensure that only disputes of a substantial financial threshold are adjudicated in these specialized courts, thereby promoting efficient judicial processes and expediting the resolution of high-value commercial disputes.

Amendments to CPC

Along with the establishment of Commercial Courts in India, the Code of Civil Procedure, 1908 (CPC) was amended severally under the Commercial Courts Act, 2015. The amendments were especially aimed at making the procedure for adjudication of commercial disputes even more simplistic and, thus, made the process efficient and time bound. The amendments pertain only to the Commercial Courts, Commercial Divisions, and Commercial Appellate Divisions where suits and applications are filed and refine the ancient civil procedure rules considering the specialized nature of commercial litigation. Here the intention is to reduce the procedural delays and expedite the disposal of high-value commercial disputes.

Important Amendments in CPC under the Commercial Courts Act:

1. Case Management Hearings: Case Management Hearings in accordance with Order XV-A of the CPC equips the court with the ability to conduct hearings to manage and streamline the progress of the suit by fixing a timeline for filing written submissions, framing of issues and scheduling of the trial. The court can even pass orders for the early disposal of applications or documents during the Case Management Hearing. If the parties do not comply with the deadlines determined in these hearings, then the consequences may indeed be severe such as the dismissal of the suit or striking off the defense by the defendant. This provision ensures parties follow a structured timetable, thereby leaving little opportunity for unnecessary delay.

2. Summary Judgment: The amendment in the Order XIII-A CPC opened doors for Summary Judgment in commercial disputes, which stands in sharp contrast to the traditional rules of civil litigations. It empowers the courts to dispense with a full trial of the case if no material issue of fact remains to be largely examined. Either party is entitled at any time after the service of summons and before the framing of issues, to present a motion for summary judgment. Here, the purpose is to give an early end to winding-up trials in cases wherein the result clearly manifests on undisputed facts, thus saving the court's time as well as other resources for proper allotment elsewhere. Summary judgment is a very powerful tool to determine cut and dried cases rapidly, especially where it is clear that there is lack of viability in the case or defense of one party.

3. Stricter Time Lines for Submitting Written Statements: Another key change there is the imposition of very strict timelines for submitting written statements under Order VIII, Rule 1. While the general provision has given a period of 30 days with an extension up to 90 days at the utmost, the Commercial Courts Act brings it up to a strict limit of 120 days from the date of service of summons for filing the written statement, and no further extensions are permitted. If the respondent fails to file the written statement during such period, he shall lose all right to offer the same at any later point of time. This consequently nullifies the typical ploy of adjourning the litigation successively.

4. Discovery and Disclosure: The amendments also bring in better provisions of discovery and disclosure under Order XI of the CPC. The courts have made parties disclose all documents pertinent to the dispute, supporting or adverse to their respective cases, at the earliest stage. As a matter of law, the ambit and manner of discovery have been made to be more comprehensive with the requirements of affidavits of admission or denial of documents. It means an adverse inference could be drawn by the court regarding the relevance of the undisclosed document, making commercial litigation vibrant and crystal clear with emphasis on full disclosure.

5. Pre-Institution Mediation: With the introduction of Section 12A in the Act, pre-institution mediation in disputes which do not involve no urgent interim relief becomes statutorily mandatory. However, this is done through Legal Services Authority, where settlement at the pre-filing stage will lift some burden from the judiciary and would be an aid to it in such scenarios. The suit can then be filed. On failure of the mediation process, the suit may be filed; the CPC amendments about Commercial Courts would accordingly apply. This trend was meant to foster alternative dispute resolution and pave the way for the disputes, which per se demand adjudication by the judiciary.

Changes brought about in the CPC under the Commercial Courts Act have transformed the litigation process of commercial disputes into the same with entailing procedural stringency and efficiency. It brings about early case management and insists on strict observance of timelines besides promoting early resolution by summary judgments and pre-institution mediation. With a focus on transparency, swift disclosure and accountability in all processes, predictability is coupled with business-friendliness.

Types of Commercial Court

District-level Commercial Courts

Their jurisdiction is laid down in Section 6 of the Act. Commercial courts have jurisdiction over all instances and petitions related to commercial disputes over and above the specified value that arise across the entire geographical expanse of the state where their territorial jurisdiction has been established. These disputes are resolved in accordance with the requirements of Sections 16 to 20 of the Code of Civil Procedure 1908, which are applicable to business-related conflicts.

Commercial Division of High Courts

Their jurisdiction is defined under section 7 of The Commercial Courts Act, 2015.

As per Section 3(3) of the Act, the State governments with the concurrence of the Chief Justice of the High Court, may appoint one or more persons having experience in commercial disputes to be the judges of Commercial court.

Appearance in official databases

Available at https://doj.gov.in/the-national-judicial-data-grid-njdg/

The National Judicial Data Grid publishes data relating to the pendency of suits depending on the type of cases, and includes commercial suits.

The Department of Justice, the nodal department for the Enforcing Contracts Indicator, regularly publishes reports and statistics pertaining to commercial courts and their functioning across the country. Further, it publishes data relating to Dedicated Commercial Courts with pecuniary jurisdiction up to Rs 3 lakh, which has improved the business climate in India thereby reducing the time taken for trial and judgment in these courts.

The Department of Legal Affairs also publishes data pertaining to commercial courts, which includes a number of cases instituted, disposed of and pending at each commercial court. However, the last update was in 2023.

Available at:  https://legalaffairs.gov.in/commercial-court-data-page?page=1

The Commercial Courts (Statistical Data) Rules, 2018 along with the Commercial Courts (Statistical Data) Amendment Rules, 2020 provides the formats for collection and disclosure of data by Commercial Courts, Commercial Appellate Courts, Commercial Divisions and Commercial Appellate Divisions of High Court.

Accordingly, High Courts shall maintain the following data:

1. list of cases e-filed during the month;
2. list of cases in which e-Payment of Court fees was made during the month;
3. list of cases in which Electronic Service of Process has taken place during the month;
4. list of total number of cases randomly allocated during the month;
5. list of cases in which case management hearing was held during the month;
6. contested commercial cases disposed during the month; and
7. summary of commercial cases during the month.

The Commercial Courts (Statistical Data) Amendment Rules, 2020, prescribes Form 7 for the High Courts to maintain the summary of commercial cases each month. This requires the courts of all districts to provide a summary of the total number of cases pending on the 1st day of the month, the total number of cases instituted during the month, the total number of cases disposed of during the month, and the total number of cases pending at the end of the month. Most high courts provide this data on their websites. However, not all courts follow the requirements under this Rule. This lack of concrete data is especially evident in commercial courts below the district judge level.

Available at: https://delhihighcourt.nic.in/reports/commercial_court_statistic

Statistical information regarding commercial cases pending in the commercial courts for June 2023 in NCT of Delhi [available at: https://delhihighcourt.nic.in/uploads/CommercialCourt/145031183864b67cb368304.pdf]

Statistical information regarding commercial cases pending in the commercial courts for June 2023 in Karnataka [available at: https://karnatakajudiciary.kar.nic.in/commercialCourts/ccourts/stat_pdfs/June-2023.pdf]

Statistical information regarding commercial cases pending in the commercial courts for June 2023 in NCT of Delhi wherein data is provided for all categories of cases [available at: https://delhihighcourt.nic.in/uploads/CommercialCourt/161922613564ac0c3c36859.pdf]

Research that engages with Commercial Court

Commercial Courts Act, 2015: An Empirical Impact Evaluation, by Vidhi Centre for Legal Policy

An empirical impact evaluation of the Commercial Courts Act, 2015, undertaken by Vidhi Centre for Legal Policy, found that the Act failed to solve systemic issues that exist in the Indian litigation scenario such as overburden on courts, lack of courts in regions of high case density and procedural delays in disposal of cases.

How Effective Are Commercial Courts?

Anindita Pattanayak of Daksh India has published an article regarding the effectiveness of commercial courts. Commercial Courts, envisaged as an avenue for complex commercial disputes nevertheless have regular civil judges making them no different from ordinary courts. The Act does not lay any specific criteria for judges in Commercial Courts except requiring judges to be “persons having experience in dealing with commercial disputes”. This, with frequent transfer, and training programs failing short of a proactive approach, delineate the current functioning of commercial courts. Pattanayak ends with the need of the hour.

Commercial Courts in India: Three Puzzles for Legal System Reform,

The article reviews the effectiveness of commercial courts in India and seeks to find out whether they have lived up to the purposes for which they have been constituted by evaluating their performance. The paper reviews performance of commercial courts via quantitative and qualitative methodology. It re-evaluates the court's utility against the standard they were expected to meet. The observation being that the objective to speedy justice was not only not met, but resolution of commercial matters has slowed down.

The Emergence of International Commercial Courts in India: A Narrative for Ease of Doing Business

The article critically evaluates the effectiveness of commercial courts vis-à-vis their impact on India’s ease of doing business and resolution of cross border disputes. It notes the focus on international commerce disputes and the following concerns relating to insufficiencies of the legal systems. The traction in commercial court is analysed and critiqued on functioning of commercial dispute resolution in cross-border cases, and the attempt to address the system via specialised courts.