Commercial Courts: A Failure In Implementation
In 2015, to enable the speedy disposal of high-value commercial disputes in India, the NDA government introduced the Commercial Courts Act, 2015. The Act allows state governments and high courts to designate courts at the high court and district court levels as commercial courts to hear commercial matters above a certain pecuniary value (initially determined to be a minimum of Rs 1 crore and later reduced to a minimum of Rs 3 lakh). Once designated as commercial courts, these courts were required to follow special procedural rules and management techniques, as well as maintain judicial statistics on institution and disposal in a format that would make the implementation of the legislation more transparent.
The results of the study show that, overall, the Act’s well-intentioned measures have been poorly implemented by state governments and the judiciary.
Judicial Statistics Still Face Considerable Challenges
As mentioned earlier, Section 17 was a unique provision introduced under the Act, to remedy the inadequacy of judicial statistics and provide the means for measuring judicial performance. The provision mandates high courts to publish monthly statistical data, on their respective websites, of the number of commercial cases instituted, pending and disposed under the Act.
The chart below marks the data uploaded on the website, vis-à-vis data that was obtained into response to RTIs, in red and blue, respectively. In the first three years, only three High Courts complied with Section 17. In 2018, after the government notified the Commercial Courts (Statistical Data) Rules, 2018 this compliance increased slightly to eight High Courts.
Even then, important commercial courts like the Bombay High Court made disclosures for only one month out of the 36 months that we studied.
The Delhi High Court appeared to be the only court regularly maintaining and publishing data.
The overall failure of almost half of all High Courts, to comply with this provision in any form or manner, is disappointing while also making it extremely difficult for independent researchers like us to measure the disposal rates of the commercial courts.
Poorly Estimated Designation Of Commercial Courts
Another issue that we studied was the seemingly ad-hoc manner in which High Courts have designated existing courts as commercial courts under this Act. We found that the number of such courts being designated was not always commensurate to the actual volume of commercial litigation that takes place in these jurisdictions. The map below notes the difference in the number of commercial courts designated under the Act vis-à-vis the average number of pending cases in that state.
The lack for correlation, for example, can be seen in Tripura where eight commercial courts have been designated, while only one case has been instituted across the whole state, since 2016. The concentration of courts to some commercial centres, on the other hand, brings up its own set of problems. In Karnataka, for example, only three commercial courts have been designated for the entire state. If a case was to arise from a district that did not have a designated commercial court, the litigant would have to travel a significant distance to file a case in a district where such a court was indeed designated. Therefore, a selective designation of courts, especially in territorially expansive states, such as Madhya Pradesh or Karnataka, can severely hinder the capacity of litigants to access these commercial courts, due to long distances and excessive costs.
If this Act was to be successfully implemented, the number of courts that were to be designated would need to correspond both to the number of pending cases in the state while still keeping in mind the commercial centres and the geography of the state.
Capacity Issues Go Unaddressed
Another facet of the implementation of the Act was the drastic variation in the average number of cases instituted per month under the Act. For example, when the pecuniary requirement was above Rs 1 crore, the Commercial Divisions at Delhi and Bombay averaged at 252 and 206 cases respectively in a month. This is a surprising and drastic variation from the erstwhile centres of commercial litigation such as the Madras and Calcutta High Courts, which averaged at three and 21 cases respectively per month, according to RTI replies from these courts.
Our study also determined that while the institution rate of cases varies across different commercial courts (and divisions), the disposal rates remained more static, hovering within the same range. All of the courts have disposed less than 10 percent of the cases pending before them, in any given month. For example, the Commercial Division at Delhi for the month of September 2018 disposed only 267 of the 3,804 cases.
These single-digit disposal rates suggest that there is either a shortage of judges or that judicial performance is below par.
The low disposal rates also meant that the average pendency of cases also progressively increased from month to month. For example, in Punjab and Haryana, the number of pending cases increased by 7.93 percent every month. On the bright side, however, courts like Karnataka, for example, saw a decrease in pendency rates (at -0.79 percent), therefore suggesting that there might be some successful case disposal practices that the courts might be following.
One of the factors that contribute to the lack of capacity of these courts is the additional workload that judges, designated under the Act, have to undertake. An analysis of the high courts rosters shows that the judges hearing these commercial cases are adjudicating on them, in addition to their previously held rosters. In Delhi, for example, a judge designated to the Commercial Division also heard company appeals and criminal original (company) petitioners, in addition to matters under the Act. Prudent implementation of the Act would therefore not merely designate the existing courts as commercial, but constitute new courts, with fresh infrastructure and personnel, to specifically hear commercial cases.
Rethink The Implementation Of Commercial Courts Act
From the analysis, our report draws three main conclusions. First, Section 17, makes it evident that indifference on part of the High Courts can impair well-intentioned provisions that seek to increase judicial transparency and promote empirical assessments of these courts. Second, findings on the variance in institutional rates, and the disproportionate manner in which commercial courts have been designated serve as an unfortunate yet stark reminder that implementation of any statute needs to be better planned by the judiciary. Third, the Act has been implemented without simultaneously increasing the requisite infrastructural and human resources, thereby inherently making its implementation unsustainable.
Vaidehi Misra is a Research Fellow and Ameen Jauhar is a Senior Resident Fellow at the Vidhi Centre for Legal Policy.
The views expressed here are those of the authors and do not necessarily represent the views of BloombergQuint or its editorial team.