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Report No. 188

Proposals for Constitution of Hi-Tech Fast - Track Commercial Divisions in High Courts

Chapter I


Need for fast-track, high-tech Commercial Courts in India

The last decade has brought about phenomenal changes in India leading to enormous growth in our commercial and industrial sectors. The policies of the Government have changed radically from 1991, the year in which our economy was opened up to foreign investment in a big way. Privatisation, liberalization and globalisation have resulted in giving a big boost to our economy. At the same time, world has become very much competitive.

With such rapid increase in commerce and trade, commercial disputes involving high stakes are likely to increase. Unless, there is a new and effective mechanism for resolving them speedily and efficiently, progress will be retarded. Foreign investors in India must be assured that the Indian Courts are as fast as the courts in the most developed countries of the world and that there are no longer any long delays in the judicial process.

With that in mind, the Law Commission thought it necessary to examine the feasibility of 'Commercial Divisions' in the High Courts in India on the model of the Commercial Division in the High Court in the United Kingdom and in US and other countries. In Chapter III of this Report, the manner in which the 'Commercial Divisions' have been set up in various countries and their functioning will be discussed. We may state 5that in the United Kingdom, the Commercial Division was started more than a hundred years ago in 1895 and gave confidence to the business community and contributed enormously to the growth of commerce in London. In the United States, Commercial Divisions have been started only recently in or around the year 1993. Other countries too have or are following suit.

The purpose of this Report is to recommend the creation of "Commercial Division' with high-tech facilities like video-conferencing, on-line filing etc. in each of our High Courts so that they may handle 'commercial cases' of a high threshold value of (say) Rs.1 crore and above, or such higher limit as may be fixed by the High Court (but not in excess of Rs.5 crores) and fast-track basis. A fast-track procedure was indeed recommended in our Report on Amendments to the Indian Arbitration and Conciliation Act, 1996 for 'fast-track' arbitration. The objective is that a commercial case of such high value should be disposed of within a period of one year or at the most two years in all the States in India.

A maximum period of two years is perfectly justified and is comparable to the period of pendency in most courts abroad and in particular in US and UK. The proposed Divisions should be manned by Judges of the High Court who are well-versed in civil law and in particular, in commercial laws. It is also proposed that High Court Judges should be given extensive exposure to the fast growing changes in commercial laws occurring globally and that their knowledge levels in respect of new branches should be updated constantly by a programme of continuing lectures.

The commercial cases above the pecuniary limit of (say) Rs.1 crore or more as stated above must, in our view, be taken up on the original side of the High Court by a Division 6Bench. Simultaneously, pending appeals before Division Benches in relation to commercial cases of the high pecuniary value abovementioned must also go to the Commercial Division straightway rather than stand in queue along with other civil appeals pending in the High Courts. Likewise, the execution of decrees passed by the Commercial Division in original suits as well as transferred matters must also be undertaken by the same Division.

Chapter II of this Report discusses another problem which has surfaced recently. There is a recent trend in the judgments of UK and US courts of selectively applying the principle of 'forum non-conveniens' and staying actions filed by aliens and refusing to apply the same norm when actions are filed in these countries against aliens. To explain, where a foreign entity is doing business in India with an Indian entity, the said foreign entity is today being permitted by Courts in New York and London to file claims in courts in New York or London, on the assumption that there are extraordinary delays in Indian Courts.

This is being done even if no part of the cause of action has arisen in those countries. Where an Indian entity has a branch in US or UK, it is now held by the Courts in those countries that such entities are amenable to the jurisdiction of foreign courts though no part of the cause of action might have arisen in those countries. The Courts abroad have held that UK or American courts could, in cases filed against Indian entities in those countries, refuse stay of the cases on the broad generalization that, if the cases were filed in India, they would take at least "twenty-five years" for disposal.

This unfortunate attitude of US and UK Courts in several cases is explained in Chapter II. We are referring to this aspect as an additional reason as to why we are proposing separate Commercial Divisions in the High Courts. While we totally disagree with the generalized assumption of UK and US Courts that all cases in India take nearly two decades for disposal we, however, feel that the above-said recent trend in UK and US Courts will stop if our proposals are given legislative shape.

Therefore, a separate Division in each High Court is proposed to be constituted for dealing with high value commercial cases (say) above Rs. 1 crore, on the original side, as stated above. These Courts will have the benefit of on-line filing, computerization, video conferencing etc. and the cases are proposed to be disposed of within one year or at any rate within a period of two years. With the expertise we have in our judiciary and in our High Court Bar, it should not be difficult to establish these 'Commercial Divisions' at an early date.

It is proposed that commercial cases of such high value, which are referred to the Commercial Division, decided by one or more Division Benches of two Judges of the High Court on the original side should be subject to a statutory appeal to Supreme Court. Our proposal is also that in addition to sitting Judges, retired High Court Judges who have had a proven record of efficiency and who have adequate experience in civil and commercial laws must be appointed under Article 224A of the Constitution of India to man these Courts. Under Article 224A, such appointments can be made even if the High Court Judges had retired from other High Courts. The further discussion on the subject in the other Chapters will lay down the foundation for the constitution and functioning of Commercial Division in each High Court.

In Chapter II, we shall be referring in detail to the recent problems of 'forum non conveniens' which have emanated in other countries like US and UK; in Chapter III, we shall deal with the establishment and functioning of prevailing Commercial Courts in UK, US and other countries. In Chapter IV, we shall deal with the meaning of the words 'commercial cases'.

In Chapter V we shall discuss whether Article 225 and Entry 11A of List III of the 7th Schedule confer adequate power on Parliament to bring about a 'Commercial Division' within each High Court. Chapter VI will deal with the fast-track procedures. Chapter VII will deal with high-tech systems in other countries and Chapter VIII with our proposals for high-tech systems in our commercial Courts. Chapter IX will deal with the final proposals for constitution of Commercial Division in the High Court. Chapter X contains a summary of our recommendations.

Proposals for Constitution of Hitech Fast Track Commercial Divisions in High Courts Back

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