Legal Information / Articles

JURISDICTION OF COMMERCIAL COURTS

INTRODUCTION 

The term ‘Commercial’ means to be concerned with or engaged in commerce which include business matters such as contracts, matters related to export or import, agreements, trade, etc. 

Commercial Courts are made to resolve such business matters including fraud, breach of contract, unfair trade practices, etc. In simple terms, Commercial Courts have jurisdiction to solve the issues arising in businesses.

Commercial disputes are also known as business disputes. It means a dispute between two businesses or dispute between a business and a customer or clients. A dispute is a conflict or disagreement, for instance, infringement of contracts, delivery of bad quality of products, parties not upholding their end of the bargain in some way or the other, etc. 

Thus, the Government has introduced The Commercial Court Act, 2015 to resolve the issues or problems of a business in a smooth and quick manner. 


WHAT CONSTITUTES AS A COMMERCIAL DISPUTE? 

Section 2 (c) of the Commercial Courts Act 2015 states that a Commercial dispute arises out of the following reasons or under the following circumstances : 

1) Ordinary transactions of merchants, bankers, financiers and traders and those relating to mercantile documents, including enforcement and interpretation of such relevant 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, distribution and licensing, management and consultancy, joint venture, shareholders, partnership as well as technology development agreements. 
9) Mercantile agency and mercantile usage. 
10) Subscription and investment agreements pertaining to the services industry including outsourcing services and financial services. 
11) Intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits. 
12) Agreements for sale of goods or provision of services. 
13) Exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum. 
14) Insurance and re-insurance. 
15) Contracts of agency relating to any of the above and such other commercial disputes as may be notified by the Central Government. 


TYPES OF COMMERCIAL DISPUTES 

Commercial disputes can be classified into two broad categories :

DISPUTE ARISING BETWEEN TWO BUSINESSES 

In these type of Commercial disputes, there is a dispute between two businesses. Both engage in some type of contractual relationship with each other and if there is a breach of contract by one party, related to something which is in the contract or if the clauses mentioned in the contract are in any way ignored intentionally. 

DISPUTE ARISING BETWEEN A BUSINESS AND CLIENTS OR CUSTOMERS

In these type of Commercial disputes, there is a dispute between a business and clients or customers. If customers are dissatisfied with the product or services of a business, or customers suffer from unfair trade practices because of a business. 


CONSTITUTION OF COMMERCIAL COURTS 


The State Government after consultation with the concerned High Court constitutes a number of Commercial Courts at the District level, as is known to be necessary for the purpose of exercising the jurisdiction and powers conferred on those Courts under this Act. 

The State Government after consultation with the concerned High Court specifies the local limits of the particular area to which the jurisdiction of a Commercial Court is extended from time to time, increase or reduce or alter such limits. 

The State Government with the agreement of the Chief Justice of the High Court appoints one or more persons having experience in dealing with commercial disputes to be the Judge or Judges, of a Commercial Court either at the level of District Judge or a court below the level of a District Judge. 




Designation of Commercial Appellate Courts : 

Excluding the territories over which the High Courts have original civil jurisdiction, the State Government after consultation with the concerned High Court designates a number of Commercial Appellate Courts at District Judge level for the purposes of exercising the jurisdiction and powers conferred on those Courts under the Commercial Courts Act, 2015. 

Constitution of Commercial Division of High Court : 

In all High Courts, having original civil jurisdiction, the Chief Justice of the High Court constitutes a Commercial Division having one or more benches consisting of a single Judge for the purpose of exercising its jurisdiction and powers. 

The Chief Justice of the High Court nominates such judges of the High Court who have experience in dealing with commercial disputes. 

Constitution of Commercial Appellate Division :

The Chief Justice of the concerned High Court constitutes Commercial Appellate Division having either one or more division benches for the purpose of exercising its jurisdiction and powers. 

The Chief Justice of the High Court nominates such judges of the High Court who have experience in dealing with commercial disputes. 


JURISDICTION OF COMMERCIAL COURTS 

Section 6 of the Commercial Courts Act, 2015 deals with Commercial Courts having jurisdiction to take up all suits and applications relating to a commercial dispute of a specified value which means the value of the subject-matter in respect of a suit as determined according to the Commercial Courts Act, 2015 which shall not be less than three lakh rupees or a higher value set by the Central Government, over which it has territorial jurisdiction. 

1) COMMERCIAL DIVISIONS OF HIGH COURTS 

Section 7 of the Commercial Courts Act, 2015 deals with the Jurisdiction of Commercial Divisions of High Courts. 

It states that all suits and applications relating to commercial disputes of specified values under this act filed in the High Court having original civil jurisdiction, to hear and resolved by commercial division of High courts.
Commercial Division of the High Court has jurisdiction to hear all suits and applications relating to commercial disputes, specified by an act to lie in a court and pending on original side of the High court.

For instance, all suits and applications are transferred to the High Court under Section 22 (4) of the Design Act, 2000 or Section 104 of the Patents Act, 1970 and heard and resolved by the Commercial Division of the High Court.


The object and purpose of the establishment of Commercial Courts, Commercial Divisions and Commercial Appellate Divisions of the High Court is to ensure that the cases involved in commercial disputes are disposed of expeditiously, fairly and at reasonable cost to the litigants. 


3) APPEALS FROM ORDERS OF COMMERCIAL COURTS AND COMMERCIAL DIVISIONS 

Appeal from an order of Commercial Court below District level Judge will lie before the Commercial Appellate Division and must be filed within 60 days.

Appeal from an order of Commercial court at District Judge level exercising original civil jurisdiction or the Commercial Division of the High Court will lie before Commercial Appellate Division of that High Court is to be filed within 60 day. 

The Commercial Appellate Court and the Commercial Appellate Division is to dispose of appeals filed within a period of six months from the date of filing of such appeals. 


PENDING SUITS : 

Section 15 deals with the transfer of pending cases under the Commercial Courts Act, 2015. It clearly provides and states that no suit or application where the final judgements have been reserved by the Court which means there will be no further hearings, prior to the Commercial Division or Commercial Court are to be transferred under such circumstances. 

HOW TO FILE A CASE IN COMMERCIAL COURTS? 

The Aggrieved Person has to file a list of all documents and photocopies in its power, possession, control or custody pertaining to the suit, specifying whether such documents are original, office copies or photocopies and must state in brief, details of the parties to each document, mode of execution, issuance or receipt and line of custody of each document.

The Aggrieved Person has to submit a Statement of Truth that all documents in the power, possession, control or custody pertaining to the facts and circumstances of the proceedings have been disclosed and copies stating that the plaintiff does not have any other documents in his/her possession.

In the case of urgent filings, the Aggrieved Person may seek to leave to rely on additional documents and the same are to be filed within 30 days of filing the suits, along with a declaration on oath. 

The Aggrieved Person will not be allowed to rely on documents which were not disclosed, save, except if it is allowed by the Court which will granted only upon the Aggrieved Person if he/she establishes a reasonable cause for such non-disclosure.

The Aggrieved Person has to set out details of documents which the Aggrieved Person believes to be in the power, possession, control or custody of the other party and which the Aggrieved Person wishes to rely upon and seek approval for production. 

The same rule applies to the other party in relation to the written statement / counterclaim. Parties must complete inspection of documents within 30 days of filing written statement. This time limit may be extended by the court.

A party may seek direction at any stage, for the inspection/production of documents by the other party of which inspection has been refused or documents have not been produced despite notice to produce the same. Such an application must be disposed within 30 days of its filing.

If such an application is allowed, inspection and copies of documents must be provided within 5 days of such order.

Every party, within 15 days of completion of inspection must file a statement of admission and denial pertaining to the correctness of contents, existence issuance/ receipt and custody of the document, along with an affidavit in support of the same. Reasons for denial of any such documents must be provided by a party.

In the case of disclosures and inspection of Electronic Records as per the Information Technology Act, 2000, furnishing of printouts shall be sufficient compliance. At the discretion of parties, copies of electronic records may even be furnished in electronic form instead of or additional to printouts.


THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND COMMERCIAL APPELLATE DIVISION OF HIGH COURTS AMENDMENT ACT, 2018

The amendment of 2018 was introduced to achieve the following objectives :

1) To enable parties to approach the lowest level of subordinate courts for a speedy resolution of commercial disputes.

2) To enable the State Governments, with respect to High Courts having original civil jurisdiction, to constitute commercial courts at the district level and to specify such pecuniary value of commercial disputes which shall not be less than Rs. three lakhs but not more than the pecuniary jurisdiction of the district courts.

3) To enable the State Governments, except the territories over which High Courts have original civil jurisdiction, to designate such number of Commercial Appellate Courts at District level to exercise appellate jurisdiction over the commercial courts below the district judge level.

4) To promote compulsory mediation before institution of a suit, where no urgent relief is contemplated and for this purpose, to introduce Pre-Institution Mediation and Settlement Mechanism and to enable State Governments to authorise authorities constituted under the Legal Services Authorities Act, 1987 for this purpose. 



BY: 
Shaleen Sehgal
Associate
M/s Aura & Co. 
03.03.2021