How The Government Used A Flawed Ordinance To Expedite Cases Dealing With Rs 1 Crore Or More While Other Cases Remain Pending

There is an old saying that politics is all about perception. A good policy, is therefore, not necessarily one that is perfect in the technocratic sense but one which complements the larger political agenda. For a government defending allegations of being a suit-boot ki sarkar—a government serving the interests of the rich—a good policy would be one which appears inclusive of all sections of society and not just the “suits and boots.” Paying little heed to this prescription, on 21 October 2015, the Modi sarkar advised President Pranab Mukherjee to promulgate an ordinance that put into effect the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015.

This ordinance, which was promulgated by the President of India on 23 October, aims to fast-track the resolution of disputes valued at upwards of Rs 1 crore. It aims to do so by creating special commercial bench divisions at the level of the high courts, special commercial courts at the district level and a special appellate commercial division in high courts. These courts will be required to follow a special, abridged procedure, and appeals against the orders of these courts will be curtailed to only final judgments and not all interim orders. In other words, the ordinance would hasten the speed of crorepati litigation—litigation with a net worth higher than one crore.

In a statement to Outlook magazine, the commerce minister Nirmala Sitharaman said, “We see no hurdle in getting approval for the draft legislation, as like fast-track courts, these dedicated courts will take care of all commercial issues. This is to make doing business easy for big and small companies.” However, Sitharaman might be highly mistaken in thinking that there will be “no hurdle” in getting the approval of Parliament for this law. The last time this law was in Parliament, members of parliament (MP) cutting across party lines objected to the very purpose of the bill: to prioritise high-value commercial litigation over other forms of litigation. To understand the opposition and objection to this law, it is necessary to first start with the manner in which this law evolved through the legal system.

The first version of this law was proposed in the 188th report of the Law Commission as far back as December 2003. At the time, the Law Commission had suo moto—begun a legal process on its own—taken up this issue without a request from either the Supreme Court or the Central Government. In his letter to the then Law Minister Arun Jaitley, retired Supreme Court Justice M Jagannadha Rao, then the chairperson of the Law Commission, justified the bill on the grounds that it would send “a clear message that such high value commercial disputes will be disposed of quite fast in India.” He argued that it was necessary to send such a message due to “a recent spate of judgments of the US and UK Commercial Courts declaring that the Indian Court system has ‘collapsed’ because there are delays upto twenty years or more.” As a result of this perceived “collapse” of the Indian litigation system, Rao wrote, American and English judges, in a deviation from the conventional principles of jurisdiction in civil litigation, had been assuming jurisdiction over Indian defendants as long as these defendants had a branch or local representative or were trading in that foreign country.

This version of the bill drafted by the 188th Report of the Law Commission was introduced in Parliament by the Congress-led United Progressive Alliance (UPA) government in its second term, as the Commercial Division of High Courts Bill, 2009. The only major legal reform in the UPA’s first term was the Gram Nyayalayas Act, 2008, a legislation aimed at changing litigation in rural India. This version of the Commercial Division of High Courts Bill was passed by the Lok Sabha in 2009. It was one of the 4 bills that were cleared within 5 minutes without debate in December that year, when parliamentary proceedings were log-jammed due to protests over the demand for Telangana. However when the bill went to the Rajya Sabha, it was referred to a select committee, whose report on the bill was tabled on 29 July 2010. While a majority of the committee approved of the bill, two MPs filed strong dissent notes.

One of those MPs was P Rajeev, a widely-respected MP of the Communist Party of India (Marxist) who recently completed a term in the Rajya Sabha after receiving high praise from many political parties. His dissenting note was so strongly worded that the chairman of the select committee had ordered at least 14 words to be expunged from it before publishing it as a part of the Committee’s report. In the note, Rajeev wrote that “ghastly discrimination and inequality in every dimension of justice is alas writ large in the new Bill,” and that the bill “perpetuates inequality in the dispensation of Justice since the law steals away the equality principle which constitutes the edifice of the Indian Constitution, since the principle of equality is the true test for validity of any law made.” He concluded that “this law attempts to make a [word expunged] distinction between the poor man and the rich corporate who come equally before the courts pleading for justice.” Politicians from the communist parties have always had a way with words when it comes to criticising the justice system—former Kerala chief minister EMS Namboodiripad’s criticism of the higher judiciary comes to mind. On 9 November 1967, at a press conference, Namboodiripad had quoted the revolutionary socialists Karl Marx and Friedrich Engels on how the judiciary was an “instrument of oppression,” and how “judges are guided and dominated by class hatred, class interests and class prejudices.” For these remarks, he was found guilty of contempt of court. Given that the 2009 bill was drafted by a retired Supreme Court Justice, fellow communists could argue that Namboodiripad was accurate in his description of the judiciary.

When the bill finally made its way back from the Select Committee to the Rajya Sabha for a vote in December 2011, a thoroughly unprepared Salman Khurshid, the then Law Minister, was caught on the back-foot by a merciless opposition, led by the then leader of opposition, Arun Jaitley. In the Rajya Sabha debate, Ravi Shankar Prasad, a lawyer of some repute and now a cabinet minister, questioned the propriety of fast-tracking certain civil litigation, saying, “What kind of signal are we giving to ordinary litigant [sic] in the country? ‘Your case will wait in the turn; some cases are high priority cases; therefore, they will be taken out of turn not by a single judge but by a division bench.’” Prasad’s fellow party man, former Justice M Rama Jois called the bill a “retrograde step.” Jaitley then shred the bill to bits on the grounds that it was an “unworkable piece of legislation.” His main ground of opposition was not ideological; he did not oppose the principle of prioritising high value commercial litigation, but that the bill would not achieve its aims because of design flaws. Jaitley criticised the bill for “transferring all commercial disputes to the slowest and the laziest layer of the Indian judicial system.” He also proceeded to point out a litany of serious, almost absurd, drafting defects in the bill. Since the UPA did not have the numbers to push the bill through the Rajya Sabha at the time—or perhaps out of deference to the Opposition—the government withdrew the bill from the Council, with a promise to reintroduce it in a few weeks after correcting the bad drafting. However the bill was never reintroduced. Years passed, and in 2014, the Narendra Modi-led government came to power, with Arun Jaitley at the helm of its finance arm. In January this year, the Twentieth Law Commission headed by the retired Justice AP Shah took up the bill once again in its 253rd report, titled “Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015.”

While there is no denying that the Law Commission has done an admirable job of fixing both the obvious design faults and the several drafting defects pointed out by Jaitley, there is still a question mark on whether the Law Commission has rightly identified the reasons for the slow progress of commercial litigation in Indian courts. Without an accurate diagnosis, the remedy suggested by the Commission is likely to be ineffective. The Law Commission report does provide statistics on the pending litigation before the High Courts in the country. It notes, for example, that at the end of 2013, a total of 32,256 civil cases were pending in the five courts that have original side jurisdiction (the jurisdiction to hear and decide civil suits at the first instance)—Delhi, Bombay, Himachal Pradesh, Madras and Calcutta. Of  these, 16,884 were commercial disputes. However,  the report does not specify the average time being taken per case, or the nature of the cases themselves, both of which are crucial to understanding the problems with the litigation process. After all, statistics alone cannot be enough to provide a complete picture of why commercial litigation is so slow before the High Court.

Nowhere in its report does the Law Commission pin-point the reasons for the snail’s pace of commercial litigation in India. It does make sweeping statements such as “one reason for the large pendency of cases could be the lack of judges allocated to the original side in these High Courts.” Similarly, it also makes references to the problems with litigation culture, saying that there is a “deep malaise within the conduct of litigation in the civil justice system,” but does not consider pertinent issues such as the competence of judges and disruptive strikes held by lawyers. As a remedy, it prescribes certain procedural reforms to counter the issue, but if procedural reforms can change litigation culture, the reforms could have simply been applied across the board for all forms of litigation rather than confine such reform to only high value commercial disputes. Procedural reforms do not cost the exchequer much.

The larger question with regard to this ordinance is whether mere procedural reform—shortening deadlines, curtailing appeals—will work effectively. On paper, these measures may look like the panacea to the problem of judicial delays, but similar procedural measures proposed in the wide-sweeping amendments to the Code of Civil Procedure (CPC) in 1999 and 2002 failed to hasten civil litigation in India. For example, one amendment to Order XVII of the CPC allowed all civil judges to impose costs on litigants requesting an unreasonable adjournment and also mandated that each side could ask for only three such adjournments. This is a rule followed more in its breach than in observance—judges saddled with unmanageable case-loads on a daily basis are looking for reasons to adjourn cases and are glad to oblige lawyers who seek an adjournment without imposing any costs on such lawyers. Similarly, the amendments recommended a thirty-day period to file a written statement as a response to a lawsuit. Surprisingly, this provision worked to a large extent, but litigants then started facing delays at the trial stage. The amendments also allowed litigants the option of conducting the trial before a court-appointed commissioner, rather than the court itself. This practice as well, has failed to expedite trials.

In April this year, about four months after the Law Commission report was released, the same Arun Jaitley who, in 2011, vehemently opposed transferring commercial disputes to the high courts, introduced the new version recommended by the Law Commission in the Rajya Sabha, after which it was once again sent to a standing committee, whose report is due on 30 November. The aspect of the bill that Jaitley had earlier opposed—that it transfered litigation to the “slowest and laziest layer of the Indian judicial system,” the high courts—remains unchanged.

The failure of the 1999 and 2002 procedural amendments demonstrates that merely changing civil procedure is not going to expedite legal proceedings. The problems with civil litigation in India are much deeper. Any genuine reform will require an honest assessment of these issues, which include the calibre of judges, their accountability, the dysfunctional nature of the Bar Council of India and the lack of transparency in the judicial system. Until the government recognises this, no amount of tweaking civil procedure—as has been done with the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill 2015—is going to make a substantial difference to the speed of India’s snail-paced civil litigation system.