17 December, 2019
The Querist has approached us, seeking our opinion in relation to the applicability of the provisions of the Code of Civil Procedure, 1908 (hereinafter “CPC”) and the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (hereinafter “Commercial Courts Act”) with respect to the below-mentioned hypothetical situation is placed before us:
A. Facts in Brief:
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The Querist Company is a company incorporated under the provisions of Companies Act, 1956. In pursuance of its business operations, the Querist Company was providing certain materials to one of its Distributors and the accounts for the said transaction were recorded by way of a ledger maintained by the Querist.
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That the Querist company issued a Demand Notice to the Distributor calling upon the Distributor to make the payment of the amount due.
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That upon the issuance of the above-mentioned Demand Notice, the Distributor issued 3 (three) cheques in favour of the Querist Company, which were dishonored upon presentation and the amount could not be recovered by the Querist Company from the Distributor
With regard to the above-mentioned hypothetical situations, there can be two possible outcomes/assumptions:
Situation 1: There is a balance confirmation by the party for whole amount.
Situation 2: There is no balance confirmation by the party.
B. Queries:
1. Assuming Situation 1 to be true, the present dispute falls under the ambit of Order 37: Summary Procedure of CPC and needs to be filed as a summary suit. However, upon the enforcement of the new Commercial Courts Act two questions arise,
I – Whether a summary suit can be filed under the provisions of the new Commercial Courts Act and what would the procedure to do the same?
II – If the answer to (i) is in the affirmative, what would be the legal position of the Querist Company in the matter at hand?
2. Assuming Situation 2 to be true, the present matter at hand would fall within the ambit of an Ordinary Suit. However, after the enforcement of the new Commercial
Courts Act would ordinary civil recovery suits (with or without injunction) be covered under the said scope of Commercial Courts Act. If yes, what would the legal position of the Querist Company under the said circumstances?
3. If any of the above condition falls under the ambit of the Commercial Courts Act, then would filing the matter at hand before the Commercial Courts mandatorily require a Pre-Litigation mediation? If so, what would be the exact legal provision for the same and what would be the correct procedure under the Commercial Courts Act to proceed with the present matter at hand.
C. Advice:
To address the queries of the Querist Company, the Situation–wise advice is rendered herein below:
1. Assuming above mentioned Situation 1 to be true.
It is presumed that the Distributor has admitted its liability for the whole outstanding amount. Therefore, such admission would bring the present case under the ambit of a summary suit as provided under the provisions of Order 37: Summary Procedure of CPC.
Order 37 Rule 1 Sub-rule 2 of CPC specifies the classes of suits which can be tried by way of summary procedure. Further, the transaction herein is a commercial transaction and dispute arising between the parties is a commercial dispute covered under Section 2(c) of the Commercial Courts Act. Hence, Commercial Court has the jurisdiction to adjudicate the present dispute in accordance with the provisions of the Commercial Courts Act.
Additionally, it is pertinent to note that the provisions of Section 6 of the Commercial Courts Act provide for the jurisdiction of the Commercial Court to try all suits and applications relating to a commercial dispute of a specified value. Further, Section 3(1) of the Commercial Courts Act provides for the pecuniary jurisdiction of a Commercial Court at the High Court level to not less than three lakh rupees and not more than the pecuniary jurisdiction exercisable by the District Courts, as it may consider necessary.
Thus, in view of above the Querist Company can file a Summary Suit under the provisions of Order 37 of CPC before a Commercial Court constituted under sub – section (1) of Section 3 for the recovery of the outstanding sum.
2. Assuming the above-mentioned Situation 2 to be true.
Since there has not been an admission on the part of the Distributor to pay the total outstanding amount to the Querist Company. In that situation, the Querist Company can file an ordinary civil suit for the recovery of the outstanding amount in accordance with the relevant provisions of CPC.
As has already discussed above, a Commercial Court constituted under the provisions of Section 6 of the Commercial Court Act has the jurisdiction to try an ordinary civil suit relating to a commercial dispute of a specified value. Therefore, a civil suit filed by the Querist Company can be adjudicated by the concerned Commercial Court.
3. It is pertinent to state herein that Section 12 A has been inserted in the vide The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018 which provides for a Pre-Institution Mediation process in matters where no urgent, interim relief is required to provide an opportunity to the parties to resolve the dispute outside the ambit of the court.
Therefore, in view of the provisions of Section 12 A of the Commercial Court Act, 2015, Pre-Institution Mediation process has been made mandatory before the institution of any suit before a Commercial
Court where no urgent interim relief is required based on the circumstances of the individual case.
The procedure for institution of the same has been provided under Chapter III A of the Commercial Courts Act. The said chapter provides that such procedure ought to be followed as is notified by the Central Government through the Official Gazette to authorities constituted under the Legal Services Authorities Act, 1987.
Further, the Legal Services Authorities Act, 1987 discusses the aspect of mediation under Part II. For the purposes of the same, the Querist Company may along with the Distributor in agreement appoint a sole mediator to resolve the dispute. If an agreement with regard to the appointment of the mediator cannot be reached by the parties, the Court can be requested to appoint a mediator(s) for the mediation procedure under the provisions of Part II Rule 3 of the Legal Services Authorities Act, 1987.
It is therefore advised that the Querist Company can file both a summary suit and an ordinary civil suit depending upon the facts and circumstances of the case before the Commercial court as defined under Section 2 (b) of the Commercial Courts Act. However, before filing of the any suit, it shall be mandatory by the Querist Company to refer the said suit for the pre-institution mediation process as defined under Section 12 A of the Commercial Courts Act unless an urgent interim relief is sought.
For further information, please contact:
Manoj Kumar, Partner, Hammurabi & Solomon
Manoj.kumar@hammurabisolomon.com
