A critical look at the Commercial Courts Act: Govt must avoid misadventures

In 2015, the enactment of the Commercial Courts Act marked the culmination of a decade-long debate on commercial courts. A recent independent study explores its legislative history, and evaluates its impact on commercial litigation in India.
 
The 188th report of the Law Commission (2003) was the seminal document on this issue, triggered by growing international criticism of the Indian justice system. According to judges in the US and the UK, inordinate delays faced by litigants in Indian courts were egregious enough to leave such claimants without an adequate remedy. Consequently, in several cases, these judges appropriated jurisdiction over civil cases where Indian courts rightly had jurisdiction, while meting out harsh criticism against the Indian judiciary. To counter this negative perception, the Law Commission, in a knee-jerk manner, proposed the creation of exclusive commercial divisions in high courts to fast-track high-value commercial litigation in India.

 
However, a Bill introduced in Parliament in 2009 by the UPA government was met with a combined, staunch opposition of Left and BJP parliamentarians. The Bill was decried for setting up “5-star or 7-star courts” favouring rich litigants over poorer ones. Furthermore, Arun Jaitley, then the Opposition lea­der in the Rajya Sabha, led a scathing criticism against this Bill for unreasonably encumbering high courts with more work, admonishing them as the “slowest rung in the Indian judiciary”. The Bill never made it through the Rajya Sabha and lapsed. 
 

In 2014, the BJP-led NDA government swept to power touting several economic reforms as its policy priority. It argued for revitalising India’s image as an investment destination, by bettering its rank on the Ease of Doing Business index. A key measure for this cumulative ranking is the time and cost expended to adjudicate commercial disputes and enforcing contracts. When the NDA government tabled the Commercial Courts Act in 2015, its sole aim was that of improving India’s standing in the Doing Business index -- a claim that was unequivocally stated in these many words by the then law minister. Our study questions the sensibility in making a foreign index the sole raison d’être for pan-Indian legislation. Such an approach has proven to be short-sighted, aiming to satisfy political optics, rather than targeting graver systemic problems of a poor litigation culture, plaguing the Indian justice system. The Law Commission had termed any isolated procedural modifications (as have been introduced under the Act) as “cosmetic and shallow changes”, predicting their eventual failure (as confirmed by our study).

 
In addition to the flawed agenda-setting, there is another key failure attributable to the government. The concerned lawmakers were culpable of making poorly informed decisions, which necessitated an amendment in 2018 -- just two years after the Act came into effect. For instance, despite harping on the importance of the Doing Business index, the lawmakers failed to even familiarise themselves with the World Bank’s study methodology. Minutes of a special task force of the Law Ministry disclose a belated realisation in this regard in 2017. The bureaucrats in this task force realised that the World Bank was not studying Commercial Divisions in the Delhi and Bombay High Courts. Instead, the Bank examined district courts in Delhi and Mumbai, neither of which had commercial courts under the original Section 3 of the 2015 Act.  Somehow, inexplicably, this had been missed and thus, Section 3 had to be amended to, yet again, cater to the Doing Business index.

 
The government also attempted to give a positive spin to another significant change -- the reduction of minimum valuation from Rs 1 crore to Rs 3 lakh. Claiming this amendment would allow more commercial cases to benefit from expeditious processes under the Act, the government effectively did a volte-face on its previous stand of limiting the jurisdiction of commercial courts exclusively to high-value commercial litigation.
 
Thus, the whole legislative process has seen some avoidable back and forths, and shifting of goalposts, consequently providing a reason to impugn its credibility. With an even stronger mandate in 2019, the NDA government is likely to plough further its focus on the Doing Business index, which it believes is necessary for India to attract investment. However, prudence in policy decisions is the need of the hour. Misadventures like the establishment of redundant commercial courts are unlikely to either salvage the economy, or alleviate the systemic challenges in the justice system. Instead, a more measured and better-informed outlook towards policymaking will prove effective for NDA 2.0. 

 The writers work with the Judicial Reform Initiative at Vidhi Centre for Legal Policy