The Act enables creation of commercial divisions in High Courts and commercial courts at district level to adjudicate commercial disputes such as disputes related to contracts for provision of goods and services and construction contracts. The amendment is aimed at improving ease of doing business in India.
Key Features of Bill
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Reduction in pecuniary limits: Under the parent Act, commercial courts and commercial divisions in High courts can decide commercial disputes with value of at least Rs. 1 crore. The Bill reduces this limit to Rs. 3 lakh.
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Establishment of certain commercial courts: The parent Act, empowers state governments to constitute commercial courts at district judge level, after consulting concerned High Court. It had barred such commercial courts to be constituted in cases where High Court has original jurisdiction to hear commercial cases. The Bill removes this bar and allows states to constitute commercial courts where High Courts have original jurisdiction.
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Commercial Appellate Courts: The Bills allows state governments to notify commercial appellate courts at the district judge level in areas where High Courts do not have ordinary original civil jurisdiction. These Appellate Courts will hear appeals against order of commercial court below level of district judge.
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Mediation: It introduces pre-institution mediation process in cases where no urgent, interim relief is contemplated. This aims to provide for opportunity to parties to resolve commercial disputes outside ambit of courts through authorities. This will also help in reinforcing investor’s confidence in the resolution of commercial disputes.
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Counterclaims not to be transferred: The Bill removes provision of counterclaim in relation to transfer of suits in a commercial dispute of at least Rs. 1 crore in civil court.
What is the issue related to mediation?
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Mandatory pre-litigation mediation in commercial disputes has been introduced by the recent Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018, which amends the Commercial Courts Act of 2015.
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This amendment is expected to alter parties’ sense of responsibility in resolving disputes. Mandatory pre-litigation mediation puts the ball in the court of the parties involved, rather than looking at external agencies like courts, and urges them to engage with and resolve disputes.
The meaning of mediation
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Mediation is a process of resolution of disputes by the parties to them. It involves discussion of the conflicts, moving out of the loop of allegations and counter-allegations, and assessing where interests lie in resolving the disputes.
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Options for settlement are explored and a settlement is worked out through joint evaluation. The process is managed by a neutral person called the mediator, who may evaluate the disputes and weigh in on options for settlement (a variant called conciliation) but has no authority to impose a settlement.
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The participation of the disputants is voluntary. The terms of settlement, if the parties do settle, are decided by the parties. The discussions are confidential.
Background
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Mediation, and mandatory mediation specifically, is not new in India.
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The Arbitration and Conciliation Act, 1996, makes a settlement arrived at through conciliation enforceable like a court decree.
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Under the Code of Civil Procedure, judges can refer cases to mediation.
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The Micro, Small and Medium Enterprises (MSME) Development Act, 2006, mandates conciliation when disputes arise on payments to MSMEs.
The Italian case
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Italy, which faces a high rate of pendency of cases, has adopted what is referred to as ‘opt out’ mandatory mediation.
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In 2010 and 2013, it introduced a law for pre-litigation mediation. Attempts to mediate were made mandatory for certain disputes (like partition and joint ownership of property) before a case was filed in court.
What lies ahead?
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Pre-litigation mediation is an important step to improve the ease of doing business
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The ordinance is an important step in mainstreaming mediation, but it is not enough.
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Most disputes seek urgent orders for preservation of status quo or restraint orders on filing. With such an application, pre-litigation mediation could effectively be given a go-by.
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There is a need for a comprehensive policy on mediation, rather than the abbreviated and disconnected steps so far.
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This policy would encapsulate the process, the role and professional responsibilities of mediators, the rights and obligations of parties in the process, and the outcome of the mediation agreement.
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When seen in the context of a deliberate and well-considered law, mediation as a process would be more credible to disputants, as has happened in the case of arbitration.