Commercial Disputes and a Limited Right to Appeal

By Priyanshu Agarwal and Soumit Ganguli, Students at Faculty of Law, Jamia Millia Islamia, New Delhi

The Commercial Courts Act, 2015 (Act) is undoubtedly one of the most crucial pieces of legislations enacted in the last few years. It was rolled out with the intention of providing more efficient and expeditious remedies in deciding cases of commercial disputes in order to promote trade and commerce in the country. While India continues to fare well in the World Bank’s Doing Business Report, the ever-growing pendency of commercial disputes continues to be a concern for the nation’s business environment. In order to ‘ease’ this situation, commercial courts were established to reduce delays and dispose of commercial disputes in a more streamlined manner. The essence of the Act lies in deciding specifically commercial disputes by the “[C]onstitution of Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of specified value and matters connected therewith or incidental thereto”. Hence, the object of the Act, as a part of India’s Ease of Doing Business initiative, is to develop India’s image as a viable business destination which shall lead to incentivise Foreign Direct Investments (FDI) in the country and, thus, providing a much-needed impetus to the Indian economy.

What are Commercial Disputes?

As Section 2(1)(c) of the Act, “commercial disputes” are the disputes, which arise out of – ordinary transactions of merchants, bankers, financiers and traders, export or import of merchandise or services; 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; joint venture agreements; shareholders agreements, partnership agreements; intellectual property rights, insurance etc.

Now, as per the 2018 amendment to Section 2(1)(i) of the Act, “commercial suits” are the suits whose valuation is not less than a specified value i.e., Rs. 3 Lakhs (Rupees Three Lakhs Only). Furthermore, commercial disputes can arise between a customer and a businessperson or between two businesspersons. Section 6 of the Act provides that commercial courts have jurisdiction to try commercial disputes of the entire state. The 2018 amendment added Section 12A to the Act, which provides for a pre-institution mediation in a suit that contemplates for an urgent relief. In other words, the plaintiff for an institution of a suit under the commercial courts act, the plaintiff has to exhaust the alternative remedy of mediation.

Can Commercial Courts Act be interpreted in the light that procedure is handmaid of justice?

The Act has amended various provisions of the Code of Civil Procedure, 1908 (CPC) to make the procedure for commercial suits more speedy and effective. This is based on one of the cardinal principles of law i.e., justice delayed is justice denied. The CPC, at various places, is liberally construed so that there be no injustice to the parties as it is a well-accepted principle that procedural laws are the handmaid of justice. However, in the case of special laws like the said Act, the procedure is intended to be strictly followed and, more importantly, the time limit to file for written statement, summon is strictly followed. A similar interpretation was made by the Apex court in the case of SCG Contracts India Ltd. v. K.S. Chamankar Infrastructure Pvt. Ltd. and Ors., where the court held that extension of time for filing of written statement cannot be granted beyond 120 days, as is done in cases of civil disputes by liberally interpreting Order VIII Rule 1 and passing ‘any such order’ to extend the time limit under Order VIII Rule 10 of the CPC.

Appeal from an order of a Commercial Court

An appeal is a statutory right and not an inherent or natural right. This means that a person can file an appeal against the order of a subordinate court only when such a right to appeal is provided in the statute. Further, as aforementioned, the object of the Act is to serve as a mechanism for speedy relief and any unnecessary appeal or revision may stagnate the process of seeking remedies, thereby making the object of the Act rather infructuous. Section 13 of the Act provides that an appeal from an order of a commercial court below a District level judge can be made to a commercial appellate court within 60 days of such order.

In the recent case of Government of Maharashtra v. Borse Brothers Engineers and Contractors Pvt. Ltd., the Supreme Court bench comprising of R. F. Nariman, B. R. Gavai and Hrishikesh Roy, JJ., held that Section 5 of the Limitation Act, 1963, is not excluded by the scheme of the Act. This signifies that a commercial appellate tribunal is empowered to condone the delay in filing of appeals and the commercial, as well as appellate courts, are empowered to condone the delay in filing of applications as per the said provision of the Limitation Act. However, while allowing condonation of delay, the court has to exercise double discretion. Firstly, at the stage of examining the sufficiency of the cause and secondly, even if sufficient cause is proved the interest of the opposite party also has to be examined. Also, if the court finds that such interest would be adversely and irreparably affected, the court can decline to condone the delay, despite the existence of sufficient cause.

However, the authors defer from the opinion of the Apex Court in the said case and contend that a special statute should be strictly construed in consonance with its object. Further, a court is obligated to entertain an appeal in such cases where the appellant successfully proves an error apparent or gross failure of the justice. It can be rightly said that frivolous appeals as a tool to delay the execution of the decree create more pendency and delay in the administration of justice, which is detrimental to the current state of the Indian Justice System, considering that it finds itself overburdened with millions of cases yet to be decided.

Can a Non-Appealable Order of an Arbitral Tribunal be appealed under the provisions of the Commercial Courts Act?

Section 10 of the Act pertains to the place of jurisdiction in case of commercial matters involving arbitration disputes. As per the said provision, in the case of international commercial arbitration, appeals shall lie before a commercial division of the High Court of the state or Union Territory.

In the case of BGS SGS Soma JV v. NHPC Ltd., the Apex court discussed the interplay between Section 37 of the Arbitration and Conciliation Act, 1996, which enumerates the orders from which an appeal shall lie to the Court authorised by law to hear appeals from original decrees of the Court passing the orders, and Section 13 of the Act, and held that when an order under Section 8 of Arbitration Act is not appealable under Section 37(1)(a) of Arbitration Act, the same would be not appealable under Section 13(1) of the Commercial Courts Act. This decision appears to be in consonance with the spirit and object of the Act.

Conclusion

The authors are compelled to disagree with the recent trend by the judiciary in diluting the provisions of the Act making the overall procedure of the commercial courts dawdling. It is suggested that in cases of appeal, the appellate court should discharge the strict burden of proof, also the appellate court should look into the fact that a gross failure of justice has been done by the lower court and restrain itself from casually allowing and hearing appeals from inferior courts. Such measures will go in the long run to serve the interests of bona fide litigants.