By Dr. S Ananth
Recently, the Supreme Court of India took up the issue of implementation of the Commercial Courts Act, 2015 and called for data from the High Courts about the pendency of commercial disputes and infrastructure available. This was in response to a petition calling for time-bound implementation of the Act. This comes at a time when the Commercial Courts Act, 2015 will complete a decade of its existence on 31 December 2025.
The official gazette notification was issued on 1st January 2016. The law seems to have originated in the recommendations of the 188th Law Commission of India Report titled "Proposals for Constitution of hi-tech fast-track commercial division in the High Courts", the 253rd Report titled "Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015" and the "Scheme of the Provisions of the Commercial Division of High Courts Bill, 2009". The 2009 bill was passed by the Lok Sabha but due to objections raised in the Rajya Sabha it was referred to the Standing Committee, which raised a number of concerns. It was finally passed in 2015.
Objectives
The Act was expected to give a fillip to 'ease of doing business'. In fact the long and detailed elucidation of the objectives underscore the intention to bring about change in "ease of doing business" – one of which is dependent on a quick resolution of disputes. Ease of doing business itself was marketed as a solution to plaguing India's economic resurgence. The general belief underscoring the Commercial Courts Act (hereinafter referred to as "The Act of 2015" for convenience and brevity) was that India's judicial system was slow in dispensing justice and resolving disputes and this itself was restraining further investments, especially from foreigners.
However, despite nearly a decade of its existence, despite its good intentions, The Act of 2015 has been anything but a success. Data from the National Judicial Data Grid indicates the total number of suits pending under The Act of 2015 is a paltry 30,447 in the district courts of the country as on 14-03-2025. This miniscule number needs to be seen in the context of the total pendency of more than 1,09,33,369 civil cases. This has led the Supreme Court of India to recently order that details of pending cases in the Commercial Courts be submitted to it.
However, it would be a mistake to blame the justice delivery mechanism as being responsible for the delays – though it is the easiest and most common allegation. The fact of the matter is that though the intention of the Act of 2015 is good, the drafting itself is largely responsible for the lack of enthusiasm for parties to a dispute to use it rather than approaching the civil court under other Statutes/acts. The interesting aspect is that Section 2(c) has a long definition as to what constitutes a commercial dispute and explains what shall not cease to be a commercial dispute. The upper time limit for disposal of appeals along with the reduced possibility of litigation by way of revision petitions against interlocutory applications was thought would be an attraction.
Issues
Despite good intentions and as with many other laws in our country, Commercial Courts have not gained traction. Initially, the "specified value" of the dispute was fixed at Rs. one crore and it was thought to be the reason why commercial courts did not gain traction. This led to an amendment in the Act, in 2018 and the specified value was reduced to Rs three lakhs. However, despite reduction, which has been notified in different states has now led to other complications because due to increase in prices and values of assets almost all the suits now have are above Rs three lakhs. This has led to a situation where in some states, most cases are to be settled in commercial courts – if the law is adhered to strictly.
Unfortunately, the deficiencies of the Act are more fundamental and along with the fact that while Parliament is quick to pass new laws, precious new infrastructure to implement the new laws are actually created thereby increasing the pressure and strain on existing infrastructure.
Hence, in view of the lessons of the past decade, there is an urgent need for the government to consider amendments – while concurrently increasing the physical and human resources for commercial courts. The provisions in the Act themselves have unwittingly made it less attractive, while a few provisions have created needless difference of interpretation, thereby leading to avoidable litigation.
It is may be useful to consider changes in Section 11 so that it gives the choice to either approach either the commercial court or the civil court – like some laws including the Consumer Protection Act and Real Estate (Regulation and Development) Act, 2016.
Another area that may need a relook is Section 12-A mandatorily requires mediation efforts before the institution of the suit when there is no urgent relief sought for. This has unnecessarily created a needless layer of litigation. Practical reality of business world is such that no person who has a dispute involving large amounts of money will risk undermining their business relationship and further delays by not trying to request for the dues and very often the nature of business is such that they will use the good offices of people within their social or economic network so that the disputes are resolved. Hence, to say that formal mediation is required before filing a suit is not necessary. Invariably, this leads to a scenario when parties are likely to unnecessarily conjure up non-existing risks.
One important and even needless complexity that exists in some of the laws, including the Commercial Courts Act, is the needless use of the word "original" in provisions that lay down jurisdiction of the Hon’ble High Courts. The NDA government has often said that they want to remove the Colonial influence over the judicial system. They need to start with this because this claim of a particular high court having "original" jurisdiction is essentially a colonial hangover and goes back to the Indian High Courts Act of 1861 whereas after India became a Republic in 1950 the source of all authority and power be it legislative, executive or judicial flows from the Constitution of India.
Before 1950, there were only five High Courts, which had original jurisdiction, which were in essence "Chartered High Courts". It is important to note that in the present day, High Courts draw their powers from the Constitution of India and there is a whole chapter (Chapter V) that deals with the High Courts in the States. In fact, in some respects the powers of the High Court under Article 226 and 227 are more sweeping than the powers of the Hon’ble Supreme Court. Various Constitution bench and division bench judgments of the Hon’ble Supreme Court have clearly laid down that High Courts is not a court that is "subordinate" to Supreme Court except for purposes related to Appeals and provisions laid down under Articles 132 to 136, 139-A, 141 and 144. Moreover, any such discrimination against any one High Court is not permissible under Article 14 of the Constitution.
Road Ahead
Every state government has gone overboard to claim that they are trying to attract investments and are keen on "ease of doing business". Most often, this is more of lip service when it comes to important but less high-profile systemic requirements and changes.
Investments will only come forth if there is a rule of law and quick, low cost and objective dispute resolution. It is imperative to remember that for millions of business persons, especially micro, small and medium enterprises (MSMEs) in most instances do not have the time or financial resources for luxuries such as prolonged litigation and disputes do not reach the higher constitutional courts.
Further, it is important to note that a large part of the economy comprises of micro, small and medium enterprises, which have limited means – unlike large companies – and many may not even survive a few years of costly prolonged litigation – especially against the government.
The practical reality of government attitude is that they even for the flimsiest reason, the government will keep appealing to the higher court and it is done only because public money is spent on the litigation while a private individual will have to spend money from their own pockets. It will be useful for the concept of ease of doing business if it is realised that the point of contact for a business is not the higher constitutional courts but it is usually the lower judiciary.
Hence, not investing in the human and physical resources for justice delivery will invariably have an impact on any attempt to improve ease of doing business. If commercial courts are to be considered as a serious forum for adjudication of commercial, high value disputes, it may necessary to have more commercial courts – but after allotting sufficient investments in human and infrastructure resources have one in each district: AP has two (Vijayawada and Visakhapatnam) while Telangana has two (Hyderabad and Ranga Reddy).
Any business would find it more convenient if such courts were accessible in areas close to their base and operations. Invariably, there is a problem while investing in infrastructure: while parliament may pass laws and create new laws, providing infrastructure is left to the states – and most of the states are in precarious financial health. Therefore, unless the Union of India starts making substantial amounts of budgetary allocations the ground realities may vastly vary from hopes, aspirations and expectations.
(Disclaimer: The opinions expressed in this article are those of the writer. The facts and opinions expressed here do not reflect the views of ETV Bharat)
