India Legislative Updates — Reorganization of the Judiciary

Francisco A. Laguna

Today, we continue our India Update, focusing on the recent reorganization of the judiciary.  The reforms included in The Commercial Courts Commercial Division & Commercial Appellate Division of High Courts Act, 2015 (Act) form part of India’s efforts to ease doing business in the country, build confidence and attract foreign direct investment.

Jurisdiction in Arbitration Proceedings

All matters currently pending under Part I of the Arbitration & Conciliation Act, 1996 (Arbitration Act) will be transferred to the Commercial Courts or Divisions.

Golden Temple, Amritsar, by Rakshakdua – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=21132680

International commercial arbitrations, defined as controversies involving at least one non-Indian party with proceedings in India, will be under the jurisdiction of the Commercial Divisions of the High Courts.  The one exception is applications for the designation of arbitrators, which are currently the responsibility of the Supreme Court.

This has created a conflict between the Act, which prescribes that arbitration proceedings would be heard by the Commercial Appellate Divisions, and the Arbitration Act, including the fact that the Commercial Divisions of the Mumbai High Court do not include arbitration proceedings within their jurisdiction.  This is expected to be modified in the near future.

Appellate Jurisdiction

Decisions issued by the Commercial Courts and Divisions are no longer subject to appellate review by the High Courts.  These appeals will be heard, exclusively, by the Commercial Appellate Division of the High Court that heard the case in first instance.  Appeals must be filed within 60 days of the date of the order, and more importantly from the foreign investor perspective, must be decided within a period of 6 months.  The time it takes for appeals to be heard and resolved has been a major criticism of foreign companies doing business in India.

Procedure & Timelines

To address concerns of the time required to litigate in the Indian courts, the Code of Civil Procedure has been revised to include the following provisions, some taken directly from procedures followed by US courts:

  • Parties may move for summary judgment solely on the written pleadings.
  • Every pleading must be attested by an affidavit; otherwise, it cannot be relied upon.

In addition, the following deadlines have been incorporated into the Code:

  • Written statements must be filed within 120 days of the date of service of process.
  • Document Inspection must be completed within 30 days of filing of the written statement.
  • Initial case management hearing will be within 4 weeks from admission or denial of documents by all parties.
  • Written arguments must be submitted within 4 weeks of commencement of oral arguments. The court has the discretion to permit revised written arguments to be filed within 1 week of oral arguments.
  • Oral arguments must be concluded within 6 months from the first case management hearing.
  • The Commercial Court or Division must issue its ruling within 90 days of the conclusion of oral arguments.

These deadlines, if indeed followed and enforced, will greatly streamline court proceedings.

Pending Disputes

The Act clearly stipulates that pending commercial disputes with the required Specified Value, including those pending under the Arbitration Act, will be transferred to the Commercial Courts or Divisions.  Not surprisingly, however, the Delhi High Court has adopted another position, ruling that the civil courts will continue to retain jurisdiction of cases where hearings have concluded and judgment is reserved.

From the practical perspective, Commercial Courts have yet to be established. Only the Delhi and Bombay High Courts have Commercial Divisions and Commercial Appellate Divisions. Moreover, the establishment of new divisions or courts does not resolve the fact that the judiciary is over-burdened.

Contact TransLegal with your questions concerning court and arbitration proceedings in India.

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India Legislative Updates — Reorganization of the Judiciary

Francisco A. Laguna

 Today, we continue our India update, focusing on the recent reorganization of the judiciary.

On 31 December 2015, President Pranab Mukherjee approved The Commercial Courts Commercial Division & Commercial Appellate Division of High Courts Act, 2015 (Act), which is effective as of 23 October 2015.  The Act is yet another step in India’s efforts to ease doing business in the country, build confidence and attract foreign direct investment.  It will certainly impact both ongoing and future litigation.

Classes of Courts under the Act

The Act establishes three classes of courts.

 

"High Court of Karnataka, Bangalore MMK" by Muhammad Mahdi Karim (www.micro2macro.net)Facebook Youtube/ Augustus Binu - Own work. Licensed under GFDL 1.2 via Wikimedia Commons

“High Court of Karnataka, Bangalore MMK” by Muhammad Mahdi Karim (www.micro2macro.net)Facebook Youtube/ Augustus Binu – Own work. Licensed under GFDL 1.2 via Wikimedia Commons

  • First, the existing High Courts of original jurisdiction (Mumbai, Kolkata, Chennai, Delhi and Karnataka) must set up a Commercial Division.
  • Second, every High Court will have to establish a Commercial Appellate Division.
  • Third, state governments in the remaining states must establish Commercial Courts at the district level.

Threshold Monetary Jurisdiction

The Commercial Courts and Divisions will have jurisdiction over all commercial disputes in excess of INR 1,00,00,000 (~ US$ 150,900) or such higher amount dictated by the Central Government (“Specified Value”).

Chennai:  Madras High Court Photo Credit: Milei.vencel via Wikimedia Commons

Chennai: Madras High Court
Photo Credit: Milei.vencel via Wikimedia Commons

Section 12 of the Act provides how to calculate the value of the claim.  Plaintiffs and counsel should pay careful attention to the valuation provisions in Section 12 to avoid possible allegations of lack of jurisdictions.

Subject Matter Jurisdiction

The Commercial Courts and Divisions will have subject matter jurisdiction over commercial disputes, defined as those arising out of, or related to:

  • ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;
  • export or import of merchandise or services;
  • issues relating to admiralty and maritime law;
  • transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing thereof;
  • carriage of goods;
  • construction and infrastructure contracts, including tenders;
  • agreements relating to immovable property used exclusively in trade or commerce;
  • franchising agreements;
  • distribution and licensing agreements;
  • management and consultancy agreements;

 

"High Court - Oval Maidan" in Mumbai, by Anunandusg - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

“High Court – Oval Maidan” in Mumbai, by Anunandusg – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

  • joint venture agreements;
  • shareholders agreements;
  • subscription and investment agreements pertaining to the services industry including outsourcing services and financial services;
  • mercantile agency and mercantile usage;
  • partnership agreements;
  • technology development agreements;
  • intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits;
  • agreements for sale of goods or provision of services;
  • exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum;
  • insurance and re-insurance;
  • contracts of agency relating to any of the above; and
  • such other commercial disputes as may be notified by the Central Government. Further, a commercial dispute includes a counter-claim filed in a suit if it is a commercial dispute of Specified Value.

Clearly, many of topics now under the purview of the commercial courts are of specific interest to investors.

Next week, we will continue the discussion of jurisdiction over arbitration proceedings and other procedural matter.

TransLegal assists its clients understand and maneuver the often difficult rules and regulations that characterize the Indian legal and regulatory system.  Call us with any questions you may have about doing business in India.