Colonial Protocol Salutions In Indian Courts

(By S.K. Premraj Menon, Advocate, High Court of Kerala)

a. The ghost of colonial legacy still haunts Indian judiciary, particularly, the Supreme Court and the High Courts, where the Judges are still addressed as ‘My Lord’ or ‘Your Lordship’. Indiscriminate usage of these colonial salutations and bowing before the Judges are all those which we borrowed from the antiquated British system which existed in India during the late 1700 and which gradually crystallized into a symbol of prestige and honor, despite the constitutional motto of right to equality. The internationally renowned jurist and Senior Advocate Fali.S.Nariman said that the reason to call Judges with elective honorifics is simply because they simply love it and that Judges are humans. An interesting anecdote is seen narrated in his autobiography, Before Memory Fades.

b. ‘My Lord’ or ‘Your Lordship’ are distinct expressions while making submissions or formally addressing Judges of superior Courts in India. When you address someone as ‘My Lord’ or ‘Your Lordship’, you are acknowledging that they are your master, that they have dominion over you and that you owe them service and obedience. A Judge who delivers a verdict in a case may have a measure of power, but certainly, he is neither your master, nor do you owe him any service, is my most humble take on this point.

c. Colloquial application of titles as in United Kingdom which we see in their manners and rules of aristocracy, materially differs from the protocol salutations which we now witness in the superior Courts in India. The English peerage - Marquess, Earl, Viscount and Baron are addressed as ‘My Lord’ or ‘Your Lordship’, except by their upper class. The Marchioness, Countess, Viscountess and Baroness are addressed as ‘My Lady’ or ‘Your Ladyship’, except by their upper class. Sons of the Duke and Marquess as well as the eldest son of Earl are also addressed as ‘My Lord’ or ‘Your Lordship’, except by their upper class. The daughters and daughters-in-law of the Duke and Marquess as well as the eldest daughters-in-law of Earl are addressed as ‘My Lady’ or ‘Your Ladyship’, except by their upper class. In England and Wales, they use the medieval sounding ‘My Lord’ and ‘My Lady’ for High Court and Court of Appeals Judges. Magistrates can be called ‘Your Worship’ or ‘Sir/Madam’ and circuit Court Judges are addressed as ‘Your Honour’. In Italy, you address a Judge as ‘signor presidente della corte’ or ‘Mr President of the Court.’ In Spain Judges are addressed as ‘su señoría,’ which translates to ‘Your Honour.’ Male Judges in Germany are addressed as ‘Herr Vorsitzender’ and female Judges are referred to as ‘Frau Vorsitzende’, which translates as ‘Mister Chairman’ or ‘Madam Chairperson’. When addressing a Judge in South Korea, it is proper to use the gender neutral ‘pansa-nim’ which means Honourable Judge. In Brazil, Judges can be called ‘juiz’ or ‘juiza’ - the male and female versions of Judge. In the United States of America, Judges are addressed as Justice/Madam Justice or Judge followed by their names. In the United States Supreme Court website, a document titled ‘Guide for Counsel in Cases To Be Argued Before The Supreme Court of The United States’ it is seen stated that under the present practice, ‘Mr.’ is only used in addressing the Chief Justice whereas others are referred to as ‘Justice’ or ‘Your Honour’. If you are in doubt about the name of a Justice whom you are addressing, it is better to use ‘Your Honour’ rather than mistakenly address the Justice by another Justice’s name. The Singapore Supreme Court website also says that the Judge/Registrar can be addressed as ‘Your Honour’. In Australia, in the High Court and the Federal Court, Judges are addressed as ‘Your Honour’. In this context, it will not be out of place to mention that the younger sons of Earls and the children of Viscounts and Barons bear the courtesy title ‘Honourable’, except when being addressed by their upper class. This title is what see affixed in front of the names of the Judges of the Supreme Court and the High Courts in India.

d. The letter No.124-CJ1/73 dt. 19th April, 1973 from the then Acting Chief Justice of India J.M.Shelat, addressed to the Chief Justices of all the High Courts vis-a-vis the mode of addressing the Courts would state that after having received replies on this issue from almost all the Chief Justices of the High Courts, a meeting of the Full Court of the Judges of the Supreme Court of India was held on 12th March, 1973, wherein it was resolved that the Judges and the Chief Justice of the Supreme Court may be addressed by the members of the Bar as ‘Mr. Justice’ and ‘Mr. Chief Justice’ respectively, and when addressing the Court the form of address would be ‘This Honourable Court’. If in the course of arguments, if it becomes difficult to address a Judge as ‘Mr. Justice’ he may be addressed as ‘Sir’. Vide this letter, it was decided, in consultation with the Supreme Court Bar Association, to introduce the new mode of address on and from 1st May, 1973. A uniform mode of address in the Supreme Court and in the High Courts was inter alia suggested to be proper. Vide his letter dt. 22nd June, 1973 from the then Acting Chief Justice of the Kerala High Court to the Advocate General and the President of the Kerala High Court Advocatess’ Association, stated that w.e.f. 1st July, 1973, the Judges of the Kerala High Court may be addressed by the members of the Bar as ‘Mr. Justice’ and the Chief Justice as ‘Mr. Chief Justice’ and that if it becomes difficult to address a Judge as ‘Mr. Justice’ in the course of the arguments, he may be addressed as ‘Sir’. The form of addressing the Court was ‘This Honourable Court’ A suggestion for introducing similar methods of address in the subordinate judiciary was also made, pursuant to which, the High Court of Kerala had issued Circular No. 9/1973 dt. 26th July, 1973 introducing the mode of address in subordinate Courts, whereby the Presiding Officer of a Court including Munsiffs and Magistrates may be addressed by the members of the Bar as ‘Mr. Judge’ and if in the course of arguments, it becomes difficult to address the officer as ‘Mr. Judge’, he may be addressed as ‘Sir’. The Court was to be addressed as ‘This Honourable Court’. In consultation with the Bar Associations of the concerned districts, all the District Judges, District Magistrates and the State Transport Appellate Tribunal were requested to introduce this new mode of address with immediate effect.

e. Debates of Court etiquettes in India has always been an interesting topic. This was triggered again a few days back, i.e., on 23rd February, 2021 when the Supreme Court Bench headed by Chief Justice of India S.A.Bobde objected to a petitioner addressing the Judges as ‘Your Honour’. Chief Justice Bobde told the petitioner – a law student, “When you call us Your Honour, you either have the Supreme Court of United States or the Magistrate in mind. We are neither”, following which, the petitioner apologized and said that he would henceforth use ‘My Lords’, to which the Chief Justice replied, “Whatever. We are not particular what you call us. But don’t use incorrect terms”. Is the mode of addressing as ‘Your Honour’ less dignified? I feel, not. One needs to remember that even the general public are made to address the Judges of the Supreme Court and the High Court as ‘My Lord’ or ‘Your Lordship’ despite the fact that neither would the Bar Council of India Rules bind them nor would the fore-referred letter of the then Acting Chief Justice of India J.M.Shelat.

f. In this context, it is pertinent to advert to the fact that the Bar Council of India Rules, which regulate legal practice, do not mandate the usage of ‘My Lord’ and ‘Your Lordship’ when it comes to addressing the Bench. There have been efforts to purge the Courtroom protocol salutations ‘My Lord’ and ‘Your Lordship’ – the practice we inherited from British rule.

The Advocates Act of 1961, under Section 49(1)(c) empowers the Bar Council of India to make rules on professional and etiquette standards to be observed by advocates. To address this issue, a Resolution by the Bar Council of India in 2006 added Chapter III-A to Part VI of the Bar Council of India Rules. The provision and its explanation read as follows :

CHAPTER III-A : To address the Court

Consistent with the obligation of the Bar to show a respectful attitude towards the Court and bearing in mind the dignity of judicial office, the form of address to be adopted whether in the Supreme Court, High Courts or subordinate Courts should be as follows : ‘Your Honour’ or ‘Honourable Court’ in Supreme Court and High Courts and in the subordinate Courts and Tribunals it is open to the lawyers to address the Court as ‘Sir’ or the equivalent word in respective regional languages.

Explanation - As the words ‘My Lord’ and ‘Your Lordship’ are relics of a colonial past, it is proposed to incorporate the above rule showing respectful attitude to the Court.

This rule categorically acknowledges and points out that the words ‘My Lord’ and ‘Your Lordship’ are relics of the colonial past and discourages the use of ‘My Lord’ and ‘Your Lordship’, prescribing ‘Your Honour’ or ‘Honourable Court’ as an acceptable way for addressing the Supreme Court and High Courts, and ‘Sir’ in the subordinate Courts and Tribunals. Reportedly, after the recent imbroglio, the Bar Council of India has issued a statement stating that there was some other resolution, which despite my research, I could not trace any further amendments to Chapter III-A.

g. One needs to recall that in 2009, Justice K.Chandru of the Madras High Court banned lawyers from addressing him as ‘My Lord’ or ‘Your Lordship’. Justice Muralidhar of the Delhi High Court followed the practice as prescribed by the Bar Council of India and urged lawyers to address his bench as ‘Sir’. The Registry was directed to show the direction as part of his cause list every day. In 2014, the then Chief Justice of India H.L.Dattu had clarified that it was not mandatory to address Judges as ‘My Lord’ or ‘Your Lordship’ and that lawyers could address them in any dignified manner, respectfully. The resolution of the Full Court of the Rajasthan High Court in 2019 is a welcome step that should serve as an example for other Courts in the country. Last year, Chief Justice Thottathil Radhakrishnan of the Calcutta High Court asked the subordinate judiciary to address him as ‘Sir’ instead of ‘My Lord’ or ‘Your Lordship’.

h. There are corridor whispers that some Judges are pompous enough to take umbrage if you do not address them as ‘My Lord’ or ‘Your Lordship’. It is high time to depart from this age-old colonial convention, realizing that lawyers are not slaves of Judges and am sure, none of the Judges would have even a tiny twinge of annoyance, if lawyers don’t address them as ‘My Lord’ or ‘Your Lordship’. If I could also add in a lighter sense, lawyers would never feel insulted or annoyed even if Judges do not address them as learned counsel. As we have seen, the COVID-19 pandemic has even introduced virtual hearings and we see the Judges wishing lawyers ‘Good Morning’ and lawyers reciprocating the wish, just prior to the roll calls, though Judges are meant to hear the submissions instead of a weather report. Let us hope that we would soon end the colonial shadow which has befallen the Indian judiciary, though I realize that it is too difficult for many lawyers to give up this colonial practice. I would only say, let history give us only the Court system and not the bizarre system of honorifics.

Operating Heart And Soul !

(By Advocate Biju Antony, Asst. Prof. Bharata Mata School of Legal Studies, Aluva, Research Scholar of JJT University, Rajasthan)

INTRODUCTION

The Father of the Indian Constitution, Dr.B.R. Ambedkar had once said, “If I was asked to name any particular article in this Constitution as the most important - an article without which this Constitution would be a nullity - I could not refer to any other article except this one. It is the very soul of the Constitution and the very heart of it”[1]. The Article 32 Part III

of the Indian Constitution permits all the Indian citizens to go to the Supreme Court of India in case of violation of Fundamental Rights. These rights are the rights of each and every citizen of a democratic state where the state cannot make a law which takes away or curtails any of the rights of the citizen guaranteed. The Article 32[2] is so important and integral part of the very basic structure of the Indian Constitution for it is meant to ensure observance of rule of law.

The learned Chief Justice of India, Hon’ble Justice Sharad Aravind Bobde recently made a remark that we are “trying to discourage”[3] individual from filing petitions under Article 32 of the Indian Constitution while considering Kerala journalist Siddique Kappan’s bail who had been arrested for moving to Harthras to report news where U P police forcefully cremated the body of Dalit woman allegedly gang raped and murdered by four men. Chief Justice had reiterated the words again in the following day too. Pratap Bhanu Mehta, eminent academician and former Vice Chancellor of Ashoka University very sarcastically said “unwittingly let the cat out of the bag” in a very scathing article ‘Their Lordships & Masters’ concerning the comment of CJI on Article 32.[4] The very words of CJI is some or other way demoting the Article 32 which is the watch dog of the fundamental right of each and every citizen of India. Article 32 being the very soul which shields the fundamental rights of citizen if tampered by such dispiriting expressions involves episodic suspension of it and which eventually lead to a document of barbarism in democracy through judicial barbarism. The application of the law if depended on the whims of each Judge by judicial barbarism, the spirit of the Constitution will be alienated. It is also good to peep into the words of former Chief Justice of the Supreme Court of India Ranjan Gogoi, Judiciary is “ramshackled” …if you go to the court, you would be washing dirty linen in the court. You will not get a verdict”[5]

ARTICLE 32 MAKES THE CONSTITUTION PEOPLE’S CONSTITUTION

The Constitution of India becomes ‘people’s constitution’ by the very existence of the Article 32. It is also known as the people’s Constitution because it is the ‘Protecting Article’ of the very fundamental rights of each and every citizen of India. Fundamental rights are the very basic human rights preserved in the Constitution of India which are guaranteed to all citizens. Article 12 to 35 of the Indian Constitution deals with the fundamental Rights enshrined in the Indian Constitution. They are Right to Equality, Right to Freedom, Right against Exploitation, Right to Freedom of Religion, Cultural and Educational Rights and Right to Constitutional Remedies. These rights are considered to be most sacred rights bestowed upon the citizens of India.

The declaration of the fundamental right is meaningless without appropriate and effective machinery for the enforcement of the rights. The fundamental rights are safeguarded with Article 32 which is the appropriate remedy enshrined in the constitution. The Constitution drafting committee members had a towering dream while incorporating a long list of fundamental rights and so endowed with an effective remedy for the enforcement of these rights under Article 32 of the Constitution[6] which is also kept as a fundamental right of the citizen of India.

ARTICLE MAKES SUPREME COURT PEOPLE’S COURT

The very existence of the fundamental right to Constitutional Remedies in the Constitution of India makes it a ‘people’s Constitution’ and elevates Supreme Court of India as ‘people’s Court’. It is because the way the fundamental rights are treated and enforced is varied from ordinary legal rights by the Article 32. If a legal right of a person is violated, the aggrieved person cannot directly move to the Supreme Court bypassing the lower courts. Article 32(1) guarantees the right to move to the Supreme Court by “appropriate proceedings” for the enforcement of the fundamental rights enshrined in Part III of the Constitution. The aggrieved citizen of India obtains an appropriate direction from the Supreme Court of India under Article 32 clause (2) with appropriate writs in the nature of habeas corpus, mandamus, prohibition, quo-warranto and certiorari for the enforcement of any of the rights discussed in Part III of the Constitution[7]. This sanctifies the Constitution as ‘people’s constitution and elevates the Apex Court to ‘people’s Court’. Every act to curb Article 32 takes away the spirit of the Indian Constitution which is for all Indians without any sort of distinction of creed, cast or religion.

ARTICLE PROTECTING FUNDAMENTAL RIGHTS

Article 32 is the ‘Protecting Article’ for there is no limitation in regard to the kind of proceeding visualized in Article 32. So each and every citizen can directly move to the Supreme Court to protect their fundamental rights. It does not mean that the Article may litter the precious time of the Apex Court for it says, “appropriate proceedings”. The word “appropriate proceedings” means each and every case is to undergo and would be evaluated of in the light of the purpose for which the proceeding is to be taken, namely the infringement of the fundamental rights. In Bandhu Mukti Morcha v. Union of India[8] case the court observed that “here limitation in regard to the kind of proceedings envisaged in clause (1) of Article 32 except that the proceedings must be ‘appropriate’ and this requirement of appropriateness must be judged in the light of the purpose for which the proceeding is to be taken, namely, enforcement of a fundamental right[9]. It means that if the purpose of the writ under Article 32 is to protect the fundamental rights, the proceedings of the Writ are “appropriate”. The court need not also follow the adversary system that is used in the Common Law countries in the case of Article 32. The draft makers of the Constitution knew that any unbending pattern or strait-jacket modus operandi would not work in India where there is much of poverty, ignorance, illiteracy, derivation and exploitation[10]. So it is the most solemn and sacred duty of the Supreme Court of India to be the protector and guarantor of fundamental rights and it is also by the Article 32 bestows the court with the responsibility to entertain proceedings seeking protection against any violation of such rights[11]. Once a citizen has exposed of infringement of his fundamental right the court cannot turn down to entertain petitions seeking enforcement of fundamental rights enshrined.[12]

AN ARTICLE FOR POOR AND MARGINALIZED

Article 32 is an article of the poor and marginalized. The court is not bound to follow the adversary procedure visualized in the CPC and Evidence Act. Such a shift of the court is to avail most suitable enforcement of any violation of fundamental rights in our social reality where a vast majority of people are unable to fight for their rights due to poverty, ignorance, illiteracy etc. It is for that cause that the court has started “the practice of appointing commissions for the purpose of gathering facts and data in regard to a complaint of breach of a fundamental right made on behalf of the weaker sections of the society”.[13] It is to be noted that the wide power of the court to devise its own procedure under Article 32 cannot be constrained or abridged by any statute or even by the Supreme Court Rulings.[14] The Supreme Court can act to protect any infringement even at a letter or telegram of a citizen and in Mohanlal Sharma v. State of U.P.[15] the telegram send alleging that the petitioners son was murdered by the police in the police lock-up was treated as a Writ Petition and the Court directed the CBI to conduct a detailed and thorough investigation. The extended and sacred hands of the poor for enforcement of their fundamental rights would be chopped off if any sort of “trying to discourage” takes place from the part of the Supreme Court.

The Supreme Court of India has grown to the reach of the poor by the very survival of the Article 32. It is an Article which upholds, defends and protects its citizen from any kind of infringement of fundamental rights due to any doubt of unfair investigation owing to various kinds of influences. The Court under Article 32 and High Courts under Article 226 can direct the Central Bureau of Investigation (CBI) to conduct an investigation which the Court finds “appropriate” even without the consent of the State concerned though the CBI Act requires that the Center cannot order investigation in a State matter without the consent of the concerned State.[16] To clarify it the Apex Court has said, “no Act of Parliament can exclude or curtail power of the constitutional courts with regard to the enforcement of fundamental rights”.[17] The Supreme Court of India can intervene and act against any sort of infringement of fundamental rights at anytime and anywhere in India.

The verdict of Bhagwati, J., in Bandhu Mukti Morcha[18] which is a landmark judgment which has opened the doors of the highest court of India to the poor and oppressed says, “Art.32 does not merely confer power on the Court to issue a direction, order or writ for the enforcement of the fundamental rights but it also lays a constitutional obligation on this Court to protect the fundamental rights of the people and for that purpose this Court has all incidental and ancillary powers including to forge new remedies and fashion new strategies designed to enforce fundamental rights. It is in realisation of this constitutional obligation that this Court has innovated new methods and strategies particularly for enforcing the fundamental rights of the poor and disadvantaged who are denied their human rights and to whom freedom and liberty have no meaning”. The milestone judgment has unbolted the doors of Supreme Court to the poor by permitting its citizens to seek enforcement of fundamental rights from the Supreme Court by writing a letter to any Judge of the Court even without the support of an affidavit.

ARTILCE 32: VIGILENT REQUISITE

For the administration of justice the Article 32 of the Indian Constitution is with those who are vigilant over their fundamental rights and not with those who sleep on their rights. The court will not entertain its jurisdiction in favour of the party who approach the court after a substantial delay and is guilty of laches. The remedy should be sought in a reasonable time though there is no prescribed time of 90 days as it is in Limitation Act and still the court is not with the indolent but the vigilant. If the party present due and convincing explanation for the delay the court would consider the plea of infringement of fundamental rights i.e. a writ would not be dismissed for the sole reason of delay.[19] In Trilokchand Motichand v. H.B. Munshi[20] case Justice Hedge took the view that there should not be any prearranged period of limitation of entertaining petitions under Art.32 and so if acceptable explanation of delay is prayed the Court should not refuse to entertain a petition merely on the ground of delay and the provisions of the Limitation Act.

MOST FLEXIBLE ARTICLE TO SAFE GUARD FUNDAMENTAL RIGHTS

The Article 32 is said to be most elastic article to uphold the fundamental rights preserved in the Constitution of India. It is said to be flexible because the wording of Article 32 is so expandable that it allows all necessary adaptation without legislative sanction from time to time so as to make possible effective enforcement of the fundamental rights. Even if the aggrieved fail to put up a proper writ and has not prayed for the appropriate remedy in proper way still if there is an infringement of fundamental rights the application cannot be thrown out for the Article 32 permits large prudence to the Supreme Court to grant appropriate relief by molding the exigencies of a particular case demand.[21]

CONCLUSION

The words “trying to discourage” Article 32 is very much embarrassing for the Article constitutes the basic structure of the Constitution which cannot be changed even by an amendment under Article 368. The right bestowed in Article 32 cannot be abrogated, abridged or taken away even by an Act of the legislature. Thus anything retarding the serenity to violate fundamental rights would be unconstitutional. It is the very reason why the Apex Court in Prem Chand Garg case even stepped down to rectify its own decision in which court had asked the petitioner to deposit an amount as a condition precedent to the hearing of a petition. Moreover it is the responsibility of the Apex Court to create new remedies and fashion new strategies well designed to enforce fundamental rights according to the time and tide of the nation. “Justice delayed is Justice denied” is a legal maxim. As per the statics that came out in February 1st 2020 there are 3.65 crore total pending cases in India. It is very high time to unbolt the operation of constitutional remedies under Articles 32 and 226 even to the District and Session courts of the country to promote fair justice to its citizens. The protection of the Constitution and its procedure should not be a hand-maiden of justice in its way of access to fairness of justice.

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Foot Note:-

1. Constitution Assembly Debates Vol. VII at 953

2. Article 32:

(1) The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by this Part is guaranteed.

(2) The Supreme Court shall have power to issue directions or orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, whichever may be appropriate, for the enforcement of any of the rights conferred by this Part.

(3) Without prejudice to the powers conferred on the Supreme Court by clauses (1) and (2), Parliament may by law empower any other court to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause (2).

(4) The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitution.

3. https://www.livelaw.in/top-stories/supreme-court-issues-notice-to-up-govton-plea-for-release-of-iournalist-siddique-kappan-165915 on 16th November 2020

4. PB Mehta in Article : SC was never perfect, but the signs are that it is slipping into judicial barbarism; In Indian Express, Saturday December 19, 2020

5. The New Indian Express, Kochi, on 14th February 2021

6. Dr.J.N. Pandey, ‘Constitutional Law of India’, Central Law Agency – Allahabad (2019) , 56th Edition. P 446.

7. Ibid.

8. Bandhu Mukti Morcha v. Union of India, 1984 KLT OnLine 1212 (SC) = (1984) 3 SCC 161 : AIR 1984 SC 802

9. Bandhu Mukti Morcha v. Union of India, 1984 KLT OnLine 1212 (SC) = (1984) 3 SCC 161 : AIR 1984 SC 802, 813-814.

10. S.P.Gupta & Ors. v. President of India & Ors., 1982 KLT OnLine 1002 (SC) = AIR 1982 SC149

11. Romesh Thappar v. State of Madras, 1950 KLT OnLine 805 (SC) = AIR 1950 SC 124, 126 : 1950 SCR 594, 597

12. Ibid.

13. Bandhu Mukti Morcha v. Union of India, 1984 KLT OnLine 1212 (SC) = (1984) 3 SCC 161, (AIR) 816, Para 14

14. Bandhu Mukti Morcha v. Union of India, 1984 KLT OnLine 1212 (SC) = (1984) 3 SCC 161, 190-91

15. Mohanlal Sharma v. State of U.P. (1988 (2) KLT OnLine 1131 (SC) = (1989) 2 SCC 600.

16. State of W.B. v. Committee for Protection of Democratic Rights, 2010 (1) KLT 723 (SC) = (2010) 3 SCC 571: AIR 2010 SC 1476

17. Ibid, (SCC) 600

18. 1984 KLT OnLine 1212 (SC) = AIR 1984 SC 802

19. State of U.P. v Bahadur Singh, 1983 KLT OnLine 1254 (SC) = (1983) 3 SCC 73.

20. 1969 KLT OnLine 1067 (SC) = AIR 1970 SC 898; R.S. Deodhar v. State of Maharashtra, 1973 KLT OnLine 1155 (SC) = AIR 1974 SC 259; Har Swarup v. G.M., Central Rly., 1974 KLT OnLine 963 (SC) = AIR 1975 SC 902.

21. Chiranjit Lal Chaudhari v Union of India, 1951 KLT OnLine 808 (SC) = AIR 1951 SC 41.

Deduction under Section 80P of the I.T. Act to PACS --
Supreme Court Settles the Issue

(By R.Muralidharan, Puducherry Civil Service Officer (Retd.),
Director, Catalyst (The Training People))

 

At the end of the tunnel, there is always light. Curtains are down to the long journey of battle between the co-operative societies and authorities under the Income Tax Department. Various High Courts are interpreting the provisions of exemption applicable to co-operative societies, especially Section 80P of the Income Tax Act, 1961 based on the judgments of the Apex Court. Reading and analysing these judgments often tend to think that time and again the Courts miss woods for trees and leaving the soul for skin. Putting an end to such differing and divergent views, the Supreme Court found the true intent of Section 80P and held in unequivocal terms that it is a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general and hence it must be read liberally and reasonably, and if there is ambiguity, it is in favour of the assessee. The Court has held that co-operative societies registered as primary agricultural credit societies are entitled to deductions under Section 80P(2)(a)(i) of the Income Tax Act, even when they may also be giving loans to their members which are not related to agriculture. It observed that the giving of loans by a primary agricultural credit society to non-members is not illegal and held that the only effect of it is that profits attributable to such loans cannot be deducted under Section 80P. The judgment of the Apex Court in the Mavilayi Service Co-operative Bank Ltd., & Ors. v. Commissioner of Income Tax (Civil Appeal Nos.7343-7350 of 2019 with Civil Appeal No.8315 of 2019 dated 12.1.2021 (2021 (1) KLT 485 (SC) = 2021 (1) KLT OnLine 1001 (SC) is illuminating and path-breaking in more than one respect as it interprets Section 80P beyond any pale of doubt and justice is done to co-operativesector. A proper reading of the judgment leaves little scope for interpretation that defeats the purpose, intent and object of the benevolent provision.

 

These appeals have been filed by Co-operative Societies who have been registered as ‘primary agricultural credit societies’, together with one ‘multi-State co-operative society’, and raise important questions as to deductions that can be claimed under Section 80P(2)(a) (i) of the Income Tax Act, 1961 (‘IT Act’); and in particular, whether these assessees are entitled to such deductions after the introduction of Section 80P(4) of the IT Act by Section 19 of the Finance Act, 2006 with effect from 1.4.2007. It may be stated at the outset that all these assessees, who are stated to be providing credit facilities to their members for agricultural and allied purposes, have been classified as primary agricultural credit societies by the Registrar of Co-operative Societies under the Kerala Co-operative Societies Act, 1969 (‘Kerala Act’), and were claiming a deduction under Section 80P(2)(a)(i) of the IT Act, which had been granted to them up to Assessment Year 2007-08.

 

Divergent Decisions by the Division Benches

The assessing officer denied their claims for deduction, relying upon Section 80P(4) of the IT Act, holding that as per the audited Receipt and Disbursal statement furnished by the assessees in these cases, agricultural credits that were given by the assessee-societies to its members were found to be negligible – the credits given to such members being for purposes other than agricultural credit. The decisions of the assessing officers were challenged before the Kerala High Court. Before the High Court, the assessees relied upon a decision of a Division Bench of the Kerala High Court in Chirakkal Service Co-operative Bank Ltd. v. C.I.T. (2016 (2) KLT 535). The Division Bench held that once a Co-operative Society is classified by the Registrar of Co-operative Societies under the Kerala Act as being a primary agricultural credit society, the authorities under the IT Act cannot probe into whether agricultural credits were in fact being given by such societies to its members, thereby going behind the certificate so granted. Since all the assessees were registered as primary agricultural credit societies, they would be entitled to the deductions under Section 80P(2)(a)(i) read with Section 80P(4) of the IT Act.

 

However, the Department contended that the judgment in Chirakkal(supra) was rendered per incuriam by not having noticed the earlier decision of another Division Bench of the Kerala High Court in Perinthalmanna Service Co-operative Bank Ltd. v. I.T.O. & Anr.(2014 (1) KLT Online 1117) where, in an appeal challenging orders under Section 263 of the I.T. Act, it was held that the revisional authority was justified in saying that an inquiry has to be conducted into the factual situation as to whether a Co-operative Bank is in fact conducting business as a Co-operative Bank and not as a primary agricultural credit society, and depending upon whether this was so for the relevant assessment year, the assessing officer would then allow or disallow deductions claimed under Section 80P of the I.T. Act, notwithstanding that mere nomenclature or registration certificates issued under the Kerala Act would show that the assessees are primary agricultural credit societies. These divergent decisions led to a Full Bench of the Kerala High Court in The Mavilayi Service Co-operative Bank v. Commissioner of Income Tax, reported in 2019 (2) KLT 597.

 

Finding of the Full Bench

The Full Bench of the Kerala High Court, by the impugned judgment  referred to Section 80P of the I.T.Act, various provisions of the Banking Regulation Act and the Kerala Act and held that the main object of a primary agricultural credit society which exists at the time of its registration, must continue at all times including for the assessment year in question. Notwithstanding the fact that the primary agricultural credit society is registered as such under the Kerala Act, yet, the assessing officer must be satisfied that in the particular assessment year its main object is, in fact, being carried out. If it is found that as a matter of fact agricultural credits amount to a negligible amount, then it would be open for the assessing officer, applying the provisions of Section 80P(4) of the I.T. Act, to state that as the co-operative society in question – though registered as a primary agricultural credit society – is not, in fact, functioning as such, the deduction claimed under Section 80P(2)(a)(i) of the IT Act must be refused. This conclusion was reached after referring to several judgments, but relying heavily upon the judgment in Citizen Co-operative Society Ltd. v. Asst. C.I.T., Hyderabad  (2017 (4) KLT Online 2013).

 

The essence of the judgment of the Full Bench is that in Chirakkal Service Co-operative Bank (supra)the Division Bench expressed a divergent opinion without noticing the law laid down in Antony Pattukulangara v. E.N.Appukuttan Nair & Ors. (2012 (3) KLT SN 123 (C.No.129)and Perinthalmanna Service Co-operative Bank (supra). Hence the said judgment in Chirakkal Service Co-operative Bank is not good law, in view of the law down by the Apex Court in The Citizen Co-operative Society (supra). The judgment of the Division Bench in Perinthalmanna Service Co-operative Bank has to be affirmed. Since each assessment year is a separate unit, the intention of the legislature is in no manner defeated by not allowing deduction under Section 80P of the I.T. Act, by reason of sub-section (4) thereof, if the assessee society ceased to be in the specified class of societies for which the deduction is provided, even if it was eligible in the initial years. Inveighing and impugning the judgment of the Full Bench, the appellants have approached the Supreme Court in these appeals.

 

Assertion by the Appellant

The gravamen of the grievance of the appellant, based upon the language of Section 80P(1) and (2), is that Section 80P is a beneficial provision which is meant to further the co-operative movement in India. For this purpose, certain income of a co-operative society, once it is registered under a State Act, becomes deductible from its gross total income. The moment a co-operative society that is registered as such is engaged in providing credit facilities to its members, the inquiry of assessing officer stops there. The Full Bench was wholly incorrect in adding credit facilities related to agriculture, as no such thing is contained in Section 80P(2)(a)(i), as contrasted with Sections 80P(2)(a)(iii) to (v) of the I.T. Act. A distinction must be drawn, therefore, between eligibilityfor deduction, and whether the whole of the amounts of profits and gains of business attributable to any one or more such activities under the sub-section is to be given. Placing reliance upon the speech of the Finance Minister dated 28.2.2006 moving the amendment to Section 80P by introducing sub-section (4) thereof, that the object of the amendment was to remove co-operative banks from Section 80P(1) and (2) as such banks, like any other commercial bank, are lending amounts to members of the general public and that, therefore, merely by being co-operative banks, should not be entitled to avail of the deductions given under Section 80P. Since none of the assessees are co-operative banks licenced by the Reserve Bank of India to carry on banking business, Section 80P(4) has no application. Any inquiry into whether the assessee is a primary agricultural credit society so as to be outside Section 80P(4) should not, in any manner, cut down the beneficial provision contained in Section 80P(1) and (2), as Section 80P(4) is in the nature of a proviso which cannot cut down the main enacting part. In any case, once a registration certificate stating that the assessee is a primary agricultural credit society is given by the Registrar under the Kerala Act, then short of such certificate being cancelled under the Kerala Act and rules thereunder, the assessing officer, who is an authority for purposes of collection of revenue, cannot possibly go into whether, in substance, the society continues to be a primary agricultural credit society.

 

The next limb of contention was that the Full Bench of the Kerala High Court completely misread this Court’s judgment in Citizen Co-operative Society Ltd.(supra). If the judgment is seen closely, all the assessees’ contentions in law were answered in their favour. However, on facts, it was held that since the Co-operative Society in that case carried on business illegally i.e., by giving loans to nominal members who had no place under the statute under which it was registered, and was also giving loans to the members of the general public, it could not be said to be a Co-operative Society at all, as a result of which the findings of fact of all the authorities below were not interfered with by the Supreme Court. There was no argument, neither was there any finding by the Court in that case that the assessing officer is entitled to go behind a certificate given under a particular statute. Indeed, he pointed out that both under the Banking Regulation Act, 1949 and the Kerala Act, if any dispute arose as to classification of a society as being a primary agricultural credit society versus being a co-operative bank, it is the RBI alone who is to decide such dispute under the Banking Regulation Act, 1949, and the Registrar of Co-operative Societies, who is to decide on classification under Rule 15 of the Kerala Co-operative Societies Rules, 1969. Thus, the judgment in Citizen Co-operative Society Ltd.is directly in their favour on the applicability of Section 80P(4), which has been completely missed by the Full Bench.

 

Refute by the Respondent

In oppugnation, the respondent would contend that The Full Bench was wholly correct in stating that a mere certificate of registration as a primary agricultural credit society would not avail. For the assessment year in question, the assessing officer has to be satisfied that the assessee is ‘engaged in’ activities as a primary agricultural credit society i.e. in giving loans for agricultural and allied purposes to its members. The fact is that loans given for agricultural purposes by the aforesaid societies were negligible, the main business being that of banking, as such loans were given for purposes other than agricultural credit. The whole object of Section 80P would be defeated if the Division Bench in Chirakkal (supra) was held to be correct in law, as then, despite being engaged in activities other than agricultural credit, a society undeserving of any deduction would still get such deduction contrary to what was sought to be achieved by Section 80P(4) of the I.T. Act. The Supreme Court judgment in Citizen Co-operative Society Ltd.was correctly read by the Full Bench, as permitting an assessing officer to get to the real facts of a case in order to conclude as to whether activities of a primary agricultural credit society were, in fact, being carried out in the assessment year in question.

 

Analysis, Approach and Adjudication

The Supreme Court has made extensive reference to the relevant provisions of the I.T. Act, Banking Regulation Act, Kerala Co-operative Societies Act and the bye-laws of the appellant societies. It is important to note that though the main object of the primary agricultural society in question is to provide financial assistance in the form of loans to its members for agricultural and related purposes, yet, some of the objects go well beyond, and include performing of banking operations as per rules prevailing from time to time, opening of medical stores, running of showrooms and providing loans to members for purposes other than agriculture.

 

The Court observed that Section 80P is a benevolent provision enacted by Parliament to encourage and promote the credit of the Co-operative sector in general and hence it must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. The judgment in Citizen Co-operative Society Ltd.,does not hold that the assessing officer can go behind the registration of a society and arrive at a conclusion that the society in question is carrying on illegal activities. It is settled law that it is only the ratio decidendi of a judgment that is binding as a precedent.

 

Interpreting Section 80P, the Court noted as follows:

(i) The marginal note to Section 80P which reads ‘Deduction in respect of income of co-operative societies’ is important, in that it indicates the general ‘drift’ of the provision.

 

(ii) For purposes of eligibility for deduction, the assessee must be a ‘Co-operative Society’. This, therefore, refers only to the factum of a co-operative society being registered under the 1912 Act or under the State law. For purposes of eligibility, it is unnecessary to probe any further as to whether the co-operative society is classified as X or Y.

 

(iii) The gross total income must include income that is referred to in sub-section (2).

 

(iv) Sub-clause (2)(a)(i) speaks of a Co-operative Society being ‘engaged in’ carrying on the business of banking or providing credit facilities to its members. What is important qua sub-clause (2)(a)(i) is the fact that the Co-operative Society must be ‘engaged in’ the providing credit facilities to its members. The statutory provision involved does not require the appellants to be primary agricultural credit societies to claim a deduction under Section 80P(2)(a)(i) in the first place.

 

(v) The burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under Section 80P. Therefore, the assessing officer under the I.T. Act cannot be said to be going behind any registration certificate when he engages in a fact-finding enquiry as to whether the co-operative society concerned is in fact providing credit facilities to its members. Once this task is fulfilled by the assessee, by placing reliance on such facts as would show that it is engaged in providing credit facilities to its members, the assessing officer must then scrutinize the same, and arrive at a conclusion as to whether this is, in fact, so.

 

(vi) What is important to note is that the expression ‘providing credit facilities to its members’ does not necessarily mean agricultural credit alone. Section 80P being a beneficial provision must be construed with the object of furthering the co-operative movement generally, and Section 80P(2)(a)(i) must be contrasted with Section 80P(2)(a)(iii) to (v), which expressly speaks of agriculture. Once it is clear that the co-operative society in question is providing credit facilities to its members, the fact that it is providing credit facilities to non-members do not disentitle the society in question from availing of the deduction. The distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted.

 

(vii) Section 80P(1)(c) also makes it clear that Section 80P is concerned with the co-operative movement generally and, therefore, the moment a Co-operative Society is registered under the 1912 Act, or a State Act, and is engaged in activities which may be termed as residuary activities i.e., activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). This puts an end to any argument that in order to avail of a benefit under Section 80P, a Co-operative Society once classified as a particular type of society, must continue to fulfil those objects alone. If such objects are only partially carried out, and the society conducts any other legitimate type of activity, such Co-operative Society would only be entitled to a maximum deduction of ` 50,000 under sub-clause (c).

 

(viii) Sub-clause (d) also points in the same direction, in that interest or dividend income derived by a co-operative society from investments with other Co-operative Societies, are also entitled to deduct the whole of such income, the object of the provision being furtherance of the co-operative movement as a whole.

 

The limited object of Section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e., which lend money to members of the public. The ratio decidendi of Citizen Co-operative Society Ltd.,must be given effect to. Section 80P of the I.T. Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the Co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, by adding the word ‘agriculture’ into Section 80P(2)(a)(i) when it is not there. Further, Section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are Co-operative Societies engaged in banking business i.e., engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Co-operative Society Ltd.Clearly, therefore, once Section 80P(4) is out of harm’s way, all the assessees in the present case are entitled to the benefit of the deduction contained in Section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members; profits attributable to such loans obviously cannot be deducted.

 

It must also be mentioned here that unlike the Andhra Act that Citizen Co-operative Society Ltd.,considered, ‘nominal members’ are ‘members’ as defined under the Kerala Act. Considering the definition of ‘member’ under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under Section 80P(2)(a)(i).

Further, unlike the facts in Citizen Co-operative Society Ltd., the Kerala Act expressly permits loans to non-members under Section 59(2) and (3). Thus, the giving of loans by a primary agricultural credit society to non-members is not illegal. Resultantly, the impugned Full Bench judgment is set aside.

 

It is as clear as crystal that the Apex Court has applied the statutory fabric on the specific facts of the issue keeping in mind the purpose for which the exemption is given for promotion of co-operative movement. In view of the emphatic enunciation and the legal proposition as above, one can be of the unhesitant opinion that this judgment will end all the ongoing litigation in various forum and give a much needed relief to the co-operative societies and also a quietus to the matter once for all.

Constitution of Commercial Courts and Appellate Courts in Kerala,
Whether Requires A Relook -- An Overview

(By K.L.Varghese*, Senior Advocate, High Court of Kerala)

 

I.INTRODUCTION:THE GENESIS OF THE COMMERCIAL COURTS ACT, 2015 AND 2018

 

The Commercial Courts Act, 2015 was preceded by two Law Commission Reports, the 188th Report and the 253rd Report. The 188th Report of the Law Commission of 2003 was on the‘Proposals for constitution of Hi-tech Fast Track Commercial Divisions in High Courts’, proposing that commercial suits of high pecuniary value, shall go directly before the ‘Commercial Division’ of the High Court adopting a ‘fast track’ procedure with high tech facilities of video conferencing and so on. The proposals were with the intent to send a clear message of faster disposal of commercial disputes in India. A wide definition was given to the term ‘commercial disputes’.¹As per the Commercial Division of High Courts Bill, 2009 the pecuniary value for commercial disputes was fixed at ` 5 crores. On 18th December 2009, the 2009 Bill was approved by the Lok Sabha. The Bill was referred to a Select Committee of the Rajya Sabha on 22nd December, 2009 which presented the report on July 29, 2010. Owing to reservations of various members of Parliament, the Bill was referred to the Twentieth Law Commission of India.One of the concerns was that by setting up of Commercial Divisions and Commercial Appellate Division in the High Court with the ‘Commercial Division’ acting as the Court of first instance, the Bill would be vesting original civil jurisdiction in the High Courts that did not have it and that the Bill was contrary to the recommendations of the Malimath Committee and the Satish Chandra Committee, which had recommended the abolition of the original jurisdiction of the High Courts. Another reason was that there was no statistical analysis or study for fixing the threshold of commercial disputes at ` 5 crores and no reason to exclude other civil disputes of similar value as the object is speedy disposal of such civil disputes.²

II. THE PASSING OF THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND
      COMMERCIAL APPELLATE DIVISION OF HIGH COURTS ACT, 2015

After further scrutiny of various provisions of the Bill through discussion papers by an Expert Committee of judges and specialised legal professionals, the Commission came out with the 253rd Report titled ‘Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015’. This bill recommended setting up of Commercial Courts at the District level, except in territories where High Courts had ordinary original civil jurisdiction³, as also Commercial Division and Commercial Appellate Divisions in the High Courts.To that end, procedural changes in the form of amendments to the Civil Procedure Code, 1908 were also suggested.

 

 

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Act No. 4 of 2016dated 31.12.2016) was enacted by notification in Official Gazette of India dated 01.01.2016, and the ‘Statement of Objects and Reasons’readas under:

 

“The proposal to provide for speedy disposal of high value commercial disputeshas been under consideration of the Government for quite some time. The high value commercial disputes involve complex facts and question of law. Therefore, there is a need to provide for an independent mechanism for their early resolution. Early resolution of commercial disputes shall create a positive image to the investor world about the independent and responsive Indian legal system.”             (emphasis supplied)

 

“4.2 The Commercial Courts, the Commercial Divisions and the Commercial Appellate Divisions of High Courts that have been recommended are intended to serve as a pilot project in the larger goal of reforming the civil justice system in India. The goal is to ensure that cases are disposed of expeditiously,fairly and at reasonable cost to the litigant. Not only does this benefit the litigant,other potential litigants(especially those engaged in trade and commerce) are also advantaged by the reduction in backlog caused by the quick resolution of Commercial disputes. In turn, this will further economic growth, increase foreign investment, and make India an attractive place to do business.

 

Further, it also benefits the economy as a whole given that a robust dispute resolution mechanism is a sine qua non for the all-round development of aneconomy”.    (emphasis supplied)

 

In Para 7, It is stated that the proposed Bill shall accelerate economic growth, improve the international image of the Indian justice delivery system, and the faith of the investor world in the legal culture of the nation.”

 

Under the Act of 2015, Section 3(1)provided for constitution of Commercial Courts at District level with a proviso that no Commercial Courtshall be constituted for the territory over which the High Court has ordinary original civil jurisdiction.

 

Section 4 provided that in all High Courts having ordinary civil jurisdiction, the Chief Justice may constitute a ‘Commercial Division’of one or more benches of Single judges and nominate such Judges of the High Court having experience in dealing with commercial disputes to preside over the Commercial Division of the High Court.

 

Section 5 provides that after issuing notification under sub-section (1) of Section 3 or under sub-section (1) of Section 4, the Chief Justice of the concerned High Court shall, by order constitute Commercial Appellate Division having one or more division benches and under Section 5 (2), the Chief Justice shall nominate such judges of the High Court having experience in dealing with commercial disputes to be judges of the Commercial Appellate Division.

 

III. THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND COMMERCIAL APPELLATE
      DIVISION OF HIGH COURTS (AMENDMENT) ACT, 2018 (HEREINAFTER  REFERRED TO  AS “ACT OF 2018”) EFFECTIVE FROM 20.08.2018 – SALIENT FEATURES

 

1.A close look at the Commercial Courts Act, 2015 in view of the amendments of 2018 reveals:

(i)    the pecuniary jurisdiction of the Commercial Courts has been reduced from
one crore to specified pecuniary value now being not being less than three lakhs rupees.

(ii)   the power conferred on the State Government by Section 3 is limited to‘constitute’ Commercial Courts

(a)   below the level of a District Judgei.e.,Subordinate Judge level(S.3(1)) ⁴;

(b)  at District Judge levelin territories having High Courts with ordinary original civil jurisdiction after consultation with such High Courts (S.3(1) proviso)(applicable to Bombay, Calcutta, Madras, Delhi and Himachal Pradesh)

(c)   and to designatesuch number of Commercial Appellate Courts at District Judge level after consultation with the High Court (S.3A) in territories over which High Courts have no ordinary original civil jurisdiction.

(d)  The power for constitution of‘Commercial Division’under Section 4(1) by the Chief Justice has been limited to High Courtsexercising ordinary original civil jurisdictionhowever without any change to Section 5(1)for Constitution of Commercial Appellate Division in the High Court by the Chief Justice.

 

IV.  CONSTITUTION OF COMMERCIAL COURTS IN KERALA

It was after the amendment Act of 2018,Commercial Courtsand Commercial Appellate Courtswere constituted for the first time in Kerala vide Government Notification dt. 24.02.2020 ⁵  designating the Principal Subordinate Judge’sCourt in 14 Districts as Commercial Courts vide S.R.O.No.176/2020 ⁶, and the pecuniary value was specified as not less than ` 3 lakhs (without upper limit) for the whole State and vide S.R.O.No. 177/2020, as per Section 3A,designating the ‘Principal District Court’in each district as the ‘Commercial Appellate Court’.

 

V. RELEVANCE OF SECTIONS 19 AND 20 OF THE COMMERCIAL COURTS ACT

The intention of the legislature for ‘constitution’ (or formation) of new courts for the Commercial Courts at District level (Subordinate Judge) and Commercial Appellate Court at District Judge level(where High Courts have no ordinary original civil jurisdiction) is supported by Section 19fastening liability on the State Government to provide necessary infrastructure to facilitate the working of a ‘Commercial Court’or a ‘Commercial Division’ of a High Court. Similarly, under Section 20, a further liability is cast on the State Government to establish necessary facilities, providing for training of Judges who may be appointed in the Commercial Courts and Commercial Appellate Courts upto District Judge level as also Commercial Division or Commercial Appellate Divisionin a High Court. This may indicate that the Commercial Courts and Commercial Appellate Courts have a unique distinction with other courts and require special skill in handling cases of Commercial Disputes and it should be treated as a novel mechanism or a forum.

 

In the aforesaid factual matrix, the question whether the very purpose of constitution of ‘Commercial Courts’ and ‘Commercial Appellate Courts’as above in Keralawould achieve the purpose for which such courts are constituted becomes relevant.By introduction of the Act of 2015, to a certain extent, ‘the formation of Commercial Courts and Commercial Appellate Division’ were useful in reducing the pending commercial cases before the High Courts in State/territories like Delhi, Bombay, Calcutta as the cases were transferred to the Commercial Courts constituted at the District Judge level. However, with the amendment in 2018 with drastic changes made, whether that would achieve the objectives envisaged, at least in States like Kerala, is doubtful and that is the issue which forms the basis of this paper with reference to notification in Kerala dt. 24.02.2020.

 

VI. MERITS AND DEMERITS OF AMENDMENT OF PROVISIONS IN THE 2015 ACT BY 2018 ACT

 

(i.)‘Commercial Disputes’ by the very definition under S.2(1)(c) contains 22 items with sub items (a) to (i) including transactions relating to commerce, trade and financeand so on including for export or import,admiralty and maritime law, carriage of goods, construction and infrastructure contracts, franchising agreements, contracts of various types etc.S.10 relates to proceeding in arbitration matters inter alia international commercial arbitration and domestic arbitration.Thus, a wide variety of disputes in anyway related to contracts or agreements fall within the definition. Any sort of adjudication device either by suit or ADR resolution including arbitrations also come within the purview of this Act.

 

(ii.) Reducing the pecuniary jurisdiction of Commercial Courts from ‘one crore rupees’ in 2015 Act to a meagre‘three lakhs rupees’in 2018 Act, in and by S.3(1), proviso 2 to S. 3,
and S. 3(1A) bring out the following anomalies:

 

(a) In States like Kerala (where High Court has no ordinary original civil jurisdiction), Commercial Courtsshould be deemed to have pecuniary jurisdiction from three lakhs rupees to any higher amount without limit, unless specifically limited to any amount. Of course, as per the prevalent law and practice, Subordinate Judgehad jurisdiction to deal with civil casesinvolving any amount above `10 lakhs. (Suits with pecuniary value of 10 lakhs rupees and less falls within the jurisdiction of the Munsiff Court.) That means, with the designation of ‘Commercial Court’as ‘Principal Sub Court’ in each District, as per notification dated 24.02.2020 as per Section 3(1) of the Act,the Subordinate Judge’s Court now has unlimited pecuniary jurisdiction as regards commercial disputes above 3 lakhs rupeesand all such commercial matters, including arbitration matters from the entire District have been transferred to the Principal Sub Judge’s Court.

 

(b) Regarding the appellate jurisdiction, both under Section 3A and Section 13 of the Act, the appeals from the judgments or orders of the Commercial Court below the level of a District Judge(i.e., Subordinate Judge level) shall be filed before theCommercial Appellate Courtat District Judge level.The judgment or order of the District Judge in the appellate jurisdiction shall be final and binding on the parties, since further appeal is prohibited[S.13(2)]of course with right to move theSupreme Court.

 

(c) High Court has no judicial role in Kerala as per 2018 Act with respect to Commercial Disputes if we go by the plain reading of the provisions.By the Scheme of the Act of 2018 as stated above, it seems, from a judgment or order of the Commercial Courtat Subordinate Judge level,appeal shall be filed before the Commercial Appellate Court at District Judge levelonly and judgment or order of the Commercial Appellate Court attains finality as per S. 3A read withS.12(3) and S.13(2), in which case the High Court has no judicial role to play (except for consultation by the State for appointment of Subordinate Judges and District Judges under S.3(3) and 3A of the Act of 2018).Interestingly, the cause list shows that the High Court has constituted Commercial Appellate Division.Of course, S. 5(1) provides that after issuing notice under sub-section (1) of Section 3,or order under sub-section (1) Section 4,the Chief Justice of the concerned High Court shall constitute Commercial Appellate Division. If so, what is the role of District Judge with appellate jurisdiction for unlimited amount beyond 3 lakhs rupees remains obscure.

 

Incidentally, inPranathmaka Ayurvedics Pvt. Ltd. v. Cocosath Health Products⁷, the Hon’ble High Court of Kerala while exercising jurisdiction under Art.227 considered the question whether an order under Section 9 of the Arbitration and Conciliation Act, 1996 passed by a Commercial Court (Principal Sub Court) is appealable under Section 13(1) of the Commercial Courts Act, 2015 i.e., before the Commercial Appellate Division (notified as the Principal District Court). Adverting to Section 13 (1) and (2) of the Commercial Courts Act the Hon’ble Court found that the Commercial Courts Act had restricted the scope for filing appeals from any order or decree of a Commercial Division or Commercial Court in accordance with provisions of the Act. It also found that an order passed under Section 9 was appealable under Section 37(1)(b) of the Arbitration Act which states that an appeal shall lie from an order granting or refusing to grant any interim measure. While holding that the right to appeal was a substantive right, the Court found that nothing contained in
Section 13(1) or Section 13(2) of the Commercial Courts Act curtails right of appeal. Hence the Hon’ble Court concluded that the Petitioners had not shown any reason for availing remedy of appeal against the impugned order in the original petition and while declining to invoke power under Article 227 of the Constitution, leave was granted to move the appellate court (District Court). It did not go into the question whether the Section 9 petition was heard by the competent ‘Court’ as defined under the Arbitration Act under Section 2 (1) (e).

Hence as the law now stands in Kerala, consequent to the notification, the ‘Commercial Court’ having been notified as the ‘Principal Sub Court’ and the Commercial Appellate Court as the ‘Principal District Court’ in the concerned District as regards arbitration matters also the Hon’ble High Court will not have any role except for appointment of arbitrators and extension of mandate of the Arbitrator under Section 29 A of the A & C Act. Interestingly, in States like Gujarat, though a similar notification as in Kerala was passed on 15.04.2019 designating Senior Civil Judges/Judges of Small Causes Court as Commercial Courts, as regards arbitration matters, a Division Bench in Kirtikumar Futarmal Jain v. Valencia Corporation⁸ held that notification designating Courts at District level, below or inferior to the ‘Court’ as defined in Section 2(1)(e) of the A and C Act would not be applicable being contrary to the Arbitration Act and effect has to be given to the Special statute. This was again reiterated and followed in a Division Bench ruling in Fun N. Fudu v. GLK Associates ⁹.

 

(d) Provisions relating to arbitration-whether counter-productive?The provision applicable to arbitration matters under Section 10 of the Act 2018 raises many questions.

(i) Section 10provides a remedy in respect of both international commercial arbitra-tions as also domestic arbitrations.As per Section 10(1),if an arbitration is an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996which have been filed in a High Court,shall be heard and disposed of by the Commercial Division where such Commercial Division has been constituted by such High Court.

 

(ii) Under S.10(2)applications and appeals arising out of arbitration other than international commercial arbitration filed in States where the High Court has original civil jurisdiction(which is not applicable in Kerala), such applications shall be entertained by such ‘Commercial Division’if constituted in the High Court.In States like Keralawhere there is no immediate need in the event that international commercial arbitrations take place,which is the forum for applications or appeals arising out of the international commercial arbitration,as per the Commercial Courts Act remains obscure.

 

(iii) Section 10(3)indicates that in respect of applications relating to domestic arbitration (other than international commercial arbitration) “applications or appeals relating to such arbitration under the Arbitration and Conciliation Act, 1996, that would ordinarily lie before any Principal Civil Court of original jurisdiction, shall be filed and heard and disposed of by the ‘Commercial Court’ (Subordinate Judge’s Court) exercising the jurisdiction where such arbitration occurs and Commercial Court has been constituted”.

 

(iv)  2018 Act is silent as to the fate of arbitration matters having pecuniary value upto three lakhs rupees. There is yet another anomaly also, because as per the ‘specified value’,in the Commercial Court or Commercial Division, the pecuniary jurisdiction starts only from three lakhs rupees. If so, in case of an arbitral award for less than three lakhs rupees passed under the Arbitration Conciliation Act, what is the remedy, again remains obscure. Since there is no provision in the Commercial Courts Act, 2018, necessarily the said awards will have to be filed in District Courtas per the A & C Act, 1996which still prevails with amendments. This creates an embarrassing situation because the Commercial Court at Sub Judgelevel can entertain arbitral awards with pecuniary value beyond three lakhs rupees (upto any limit) whereas the District Courtwill have to entertain applications under the Arbitration Act relating to which pecuniary value is less than three lakhs.

 

VII. APPEALS UNDER S.13 OF THE COMMERCIAL COURTS ACT AND SECTION 37 OF
       THE ARBITRATION AND CONCILIATION ACT

a.As per S.13,appeals from the judgment or order of a Commercial Courtbelow the level of a District Judgei.e., Subordinate Judge, shall be filed in theCommercial Appellate Court which is the District Judge (S.13(1)).

 

b. From the judgment or order of a ‘Commercial Court’at the level of a District Judgeexercising original civil jurisdiction or ‘Commercial Division’ of a High Court, appeal has to be filed before the Commercial Appellate Division (S.13(1A).

 

c. Section 13(2) prohibits appeal from any order or a decree from a Commercial Division or a Commercial Court otherwise than in accordance with the provisions of the Act i.e., as per S.13 above.

 

d. It is significant to point out here that S.8 of the Act of 2015 bars Civil Revision application/petition against any interim order of a Commercial Division or Commercial Court including on the question of jurisdiction and such a challenge shall be only subject to S.13 appeal provision which however prohibits further appeal under S.13(2).

In this context, it may be apposite to refer to a judgment of the Supreme Court in Kandla Export Corporation and othersv. OCI Corporation & Ors.(2018) 14 SCC 715, referring to Section 13(2) of the Commercial Courts Act as amended in 2018, commencing with a non-obstanteclause reading, “notwithstanding anything contained in any other law for the time being in force or Letters Patent of a  High Court no appeal shall lie from any order or a decree of a Commercial Division or Commercial Court otherwise than in accordance with

 for constitution of a Commercial Divisionas stated above, but the provisions of this Act”(Commercial Courts Act) and Section 50 of the Arbitration and Conciliation Act, held that the Arbitration and Conciliation Act itself is a self-contained Code providing for various situations which cannot be ignored.

VIII. CONFLICTING PROVISIONS OF LIMITATION IN THE CASE OF APPEALS AS PER

THE ARBITRATION AND CONCILIATION ACT AND THE COMMERCIAL COURTS ACT,  2015  

             

Under Section 37(1) of the Arbitration and Conciliation Actas amended, appeal shall lie to the Court in respect of orders under Sections 8, 9 and 34. Under Article 116 of the Limitation Act, 90 days time has been provided; of course, subject to application to condone the delay under Section 5 of the Limitation Act, in case of delay.  Same time limit may be applicable under Section 37(2) from an order of the arbitral tribunal in respect of orders under sub-section (2) and sub-section (3) of Section 16 as also order of interim measures granted under Section 17 to the District Court (now the concerned Commercial Court). However, the provision for appeals under Chapter IV of the Commercial Courts Act, Section 13 restricts the period of limitation as 60 days from the judgment or order of the Commercial Court, both below the level of a District Judge as also Commercial Division of a High Court. Section 14 of the Act of 2018, again provides for expeditious disposal of appeals filed before the Commercial Appellate Court and the Commercial Appellate Division, within a period of 6 months from the date of filing the appeal.

 

Restricting the time limit for filing appeals and disposal of appeals are in the larger interest of expeditious disposal. However, since there is conflict between the Arbitration and Conciliation Act and the Commercial Courts Act, relating to limitation, a doubt may arise which is the provision applicable? Of course, Section 21 of the Commercial Courts Act provides as follows:

 

“21. Act to have overriding effect.– Save as otherwise provided, the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law for the time being in force other than this Act”.                                        (emphasis supplied)

 

It is a settled position of law that when a special statute restricts the time limit, general provisions of the Limitation Act may not be applicable. However, as found by the Apex Court in Kandla Export Corporation & Ors.v.O.C.I. Corporation & Ors.(supra), after referring to Section 13(2) of the Commercial Courts Act as amended in 2018, commencing with a non-obstanteclause and Section 50 of the Arbitration and Conciliation Act, held that theArbitration and Conciliation Act itself is a self-contained Code providing for various situations which cannot be ignored giving binding force to the provisions in the Arbitration and Conciliation Act. There is no reason why same analogy cannot be adopted in the case of provision for limitation as regards appeals in arbitration cases to set at rest the conflict.

 

IX. WHETHER TIME LIMIT FOR DISPOSAL OF SUITS/APPLICATIONS OR APPEALS
               UNDER THE ACT OF 2018 IS PRACTICAL UNLESS COMMERCIAL COURTS ARE

CONSTITUTED TO DEAL WITH COMMERCIAL DISPUTES EXCLUSIVELY?

 

Section 14 of the Act of 2018,provides for expeditious disposal of appeals within a period of six months from the date of filing. Section 13(2) of the Act of 2018 read with Code of Civil Procedure incorporated as per amendments in 2018, effective from 03.05.2018, by Order XV-A of the Code of Civil Procedure under the head ‘CASE MANAGEMENT HEARING’ makes it obligatory on the Commercial Court and Commercial Division to fix the ‘First Case Management Hearing’within four weeks from the date of filing of affidavit of admission or denial of documents by all the parties to the suit (O.XV-A) and fix time limits for the purpose of Rule 2 viz.‘Case Management Hearing’ after hearing the parties and setting out issues of facts and law, the Commercial Court/Commercial Division shall ensure that the arguments are closednot later than six months from the date of the first case management hearing (Rule 3). But how far it will be practicable considering the different steps in the procedure to be followed, unless the Commercial Courts are constituted to deal with ‘commercial disputes’ exclusively,turns to be tested because usually in Sub Courts, at least in cities, there would be large number of criminal/sessions cases to be disposed, giving priority over other cases.

 

Section 18 empowers the High Court to issue notifications regarding the practice-directions to supplement the provisions of Chapter II of the Commercial Courts Act and/or the Code of Civil Procedure in so far as such provisions apply to the hearing of commercial disputes. At the same time, under Section 21, provisions of the Commercial Courts Act shall have overriding effect over the provisions of any other law for the time being in force. Since the Apex Court has already held that the Arbitration and Conciliation Act is a self-contained code and in case of conflict between two provisions as in case of Kandla Export Corporation(supra), how far this provision will be forceful remains to be tested in the case of similar situations, as we have seen in the case of limitation of time for filing appeals.

 

Section 21Awhich is added by the 2018 Act, power is conferred on the Central Government to make rules for carrying out the provisions of the Act of 2018.  Even though the Act is falling under the concurrent list of the Constitution of India, empowering both the Centre and the State to enact or supplement the provisions, the State Government is not conferred with any power even if difficulties arise (as in theState of Kerala) as stated above.

 

X. PENDENCY OF CASES RELATING TO DISPUTES UNDER ARBITRATION IN KERALA

In Kerala, in the number of ‘commercial disputes’ pending in Courts, there will be vast variation from place to place.  In the district of Wayanad, pendency of arbitration cases alone is to the extent of 37 whereas pending arbitration cases in the district of Ernakulam alone is around 1591 as on 18.01.2021¹⁰. This will indicate that the strength of Commercial Courts required in Wayanad may not be the same as in Ernakulam, and the yardstick to be used for the constitution of Commercial Courts will inevitably be different.  

 

XI. IMPLEMENTATION OF THE COMMERCIAL COURTS ACT, 2015 BY STATES WITH             

      HIGH COURTS NOT EXERCISING ORIGINAL JURISDICTION

In various High Courts which do not exercise original jurisdiction, Courts at District Level as well as at District Judge Level have been designated as Commercial Courts under Section 3 of the Commercial Courts Act. Further, in many such High Courts, a Commercial Division and Commercial Appellate Division have been set up in the High Court, (in some cases immediately after coming into effect of the Commercial Courts Act of 2015) which was limited to High Courts exercising original jurisdiction by the amendment of 2018. In States like Gujarat, the Commercial Appellate Division was set up as late as on 27.10.2020 and hence the implementation of the Commercial Courts Act, as amended in 2018 by constituting Courts at various levels has been different from State to State.

 

In the case of Andhra Pradesh and Telangana, the Commercial Division and Commercial Appellate Division in the High Courts were set up on 10th June, 2016 by gazetted Judicial notifications¹¹  and all the Principal District and Sessions Judges in the State of Andhra were notified as Commercial Courts on the same date by a Government Notification¹² . Subsequently, vide another notification of 3rd April, 2018¹³  partially modifying the earlier Government notification ‘Special Courts’ were set up as ‘Commercial Courts’ at ‘Vijayawada’ and ‘Visakhapatnam’ exercising jurisdiction over the limits of Municipal Corporation areas of Visakhapatnam, and Vijayawada respectively and the above Court set up has been functioning in the State.

 

In the State of Karnataka, initially vide notification no. RJ 65 of 2017 dated 30.10.2017, the Hon’ble High Court constituted a commercial appellate division in the principal bench at Bengaluru, Dharwad and Kalaburagi to deal with appeals arising from orders, judgments and decrees passed by commercial Courts. Thereafter, vide a subsequent notification on 12th February, 2018, in suppression of earlier circular dated 30.10.2017, exercising powers under Section 5(2) of the Commercial Courts Act, the Commercial Appellate Division headed by the The Chief Justice Bench was notified as the Court to deal with Commercial Appeals at Principal Bench, Bengaluru. Though various Commercial Courts were initially set up at the District level (Subordinate Judiciary) i.e. before the City Civil Courts as per notification dated 31.07.2018, vide a subsequent notification dated 09.10.2019, the Principal District Courts have been designated as Commercial Courts in the respective Districts except for Commercial Courts notified in Bengaluru City, Bengaluru Rural and Bellary as notified in 24.10.2019 and 20.06.2020.

 

In the case of Gujarat, the State Government vide notification dated 15th April, 2019, notified some Courts at District level, (Subordinate Judges Court) as Commercial Courts¹⁴
and Courts at the Principal District Judge Level as the Commercial Appellate Court.

 

However, as per the latest notification dated 27.10.2020 Commercial Appellate Division has been constituted in the High Court of Gujarat, Ahmedabad, to deal with appeal against the judgment or order passed by the Commercial Courts constituted under sub-section (1) of Section 3 of the Commercial Courts Act, 2015 namely, (i) Judge of City Civil Court, Ahmedabad; (ii) Additional District Judge; (iii) Senior Civil Judge (where the amount or value of the subject matter of the original suit or proceedings is more than Fifty Lakh Rupees) and Commercial Division of High Court which shows that Courts have been constituted/designated as ‘Commercial Courts’ both at the District level and at the District Judge level.

 

In the State of Bihar, Commercial Division and Commercial Appellate Division have been constituted in the High Court of Patna. Subsequently, in 2019, in various Districts, Commercial Courts have been set up both at the District level and District Judge level. For instance, in the District of Bettiah, the Court of the Sub-Judge I Bettiah is designated as the ‘Commercial Court’, with regard to commercial disputes where the value of suit or dispute is up to `1 crore and with regard to commercial disputes with value exceeding`1 crore, it is the District Judge, West Champaran, Bettiah which is the designated Commercial Court. The ‘Commercial Appellate Court’ is the District Judge, West Champaran, Bettiah with regard to appeals arising from judgment or orders passed by the ‘Commercial Court’ below the level of the District Judge. Court set up at the Sub Judge level.

 

XII.PROPOSAL OR SUGGESTIONS IN ORDER TO MAKE THE ACT MORE EFFECTIVE AND RESULT ORIENTED IN STATES LIKE KERALA

Explore the possibility of constituting Commercial Courts at District level (i.e. Subordinate Judge) as also District Judge level so that suits or applications or petitions with specified valueupto 40 lakhs rupees or so, (as decided by the High Court) can be  filed in Commercial Courts at Subordinate Judge’s level and similar suits, applications or petitions with specified value beyond 40 lakhs rupees (as deemed fit), shall be filed before the Commercial Court at District Judge’s level both functioning as Commercial Courts as per S.3(3) and S.3(1A). If the source of power under S. 3(1A) and Section 3(3) is felt doubtful, the necessity of such a power can be brought to the notice of the Central/State Governments so as to make necessary modifications by way of ‘proviso’ or ‘explanation’ effected by the concerned Governments, since many of the subjects as per definition of ‘Commercial Dispute’ under S.21(c) fall under the Concurrent List of the Constitution of India, however, keeping in mind the implications, S. 22(1) empowers the Central Govt. to make such provisions and that too within 2 years’ time limit as per the mandate of the statute.

 

Regarding the appeals,in such cases as above, a single bench of the High Court(Commercial Division) can be designated as the‘Commercial Appellate Court’ or deciding appeals from the judgments or orders of the Commercial Court at the Sub Judge leveland Commercial Appellate Division with two judges for deciding the judgments and orders arising from the Commercial Court at District Judge level.(S.5 of the Commercial Court Act read with Section 37 of the Arbitration and Conciliation Act as per the ratio of the decision in Kandla Export Corporation & Ors. (supra),ruling that the Arbitration and Conciliation Act itself is a self-contained code providing for various situations which can be relied on as source of power for appeal under S.37 of the Arbitration and Conciliation Act, 1996. In such cases, the application relating to international commercial arbitrations also can be decided by the High Court.

 

The Commercial Courts at the District level (Principal Subordinate Judge’s Court) shall be exclusively for dealing with the commercial disputes with pecuniary value beyond three lakhs up to specified value (`40 lakhs or any other amount) mentioned in case of the Commercial Court at District Judge level as proposed above for the time being, at least till amendments, if any, are brought in by the concerned governments. Considering the number of cases involved, there can be more than one Commercial Court at the Subordinate Judge’s level and District Judges level, as in the case of all District Courts which were dealing with arbitration cases, on the principle of coordinate power, notwithstanding the hierarchy.

(Alternatively)

 

The jurisdiction of Commercial Courts to entertain other type of cases over and above those concerning the ‘commercial disputes’ shall be subject to preference being given to deal with the commercial disputesensuring disposal of the cases strictly as per the timeline under O. XV-A of CPC – case management hearing.

 

Advantages

 

 

(a). It will ease the burden of Principal Subordinate Judge as also Principal District Judge functioning as the notified Commercial Court and Commercial Appellate Court respectively in the concerned Districts in the State and also enable the Commercial Courts to follow the case management hearing under Order XV-A of the Code of Civil Procedure.

 

(b). The alternative suggestion i.e.,constitution of Commercial Courts at the District level (Subordinate Judge’s Court) exclusively for dealing with individual items of disputes (for eg.Arbitration, partnership etc., in one Court and other subjects in other Courts) falling under the definition clause Section 2(1)(c), will help in streamlining the adjudication process. If sufficient number of Courts are constituted for the said purpose, pendency of routine works in the Commercial Courts dealing with same type of cases can be reduced and adjudication can be faster, avoiding multiplicity of proceedings and keeping uniformity in decisions.

 

(c). In subjects like arbitration (which will be more in number and volume of work), latest decisions can be discussed and relied on in identical cases which would save a lot of time for disposal. 

 

(d). High Court will have occasion/power to render binding decisions applicable throughout the State, sitting in appeal (Single Bench and Division Bench as per the pecuniary valuation now being followed i.e., upto `40 lakhs before the Single Bench and beyond `40 lakhs before the Division Bench) from the decrees/judgments/orders of Commercial Courts both at Subordinate Judge level and District Judge level.

 

(e) It would remove the anomaly created by the amendment brought inby Act 2018 in the Commercial Courts Act 2015, that the High Court has no judicial role except by virtue of S.5(1) to constitute Commercial Appellate Division in view of the possible argument that S.5(1) focuses only on the occasion to constitute the appellate forum based on the expression “after issuing notification under S.3(1) and S. 4(1)”rather than to look for source of power to constitute Commercial Appellate Division. The parties who are aggrieved by the decisions in appeal by the District Judge (attaining finality otherwise) can avail their chance in High Court before approaching the Apex Court.

 

In this context, the anxiety and anguish expressed by Justice M.Jagannadha Rao whose wisdom and in-depth knowledge could not be doubted as the former Chief Justice of our High Court, and subsequently, elevated as the Judge of the Supreme Court of India, later appointed as the Chairman of the Law Commission in the 188th Law Commission Report is evident from his observation;

 

“There is 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, and that, therefore Indian defendants can be sued in US and UK Commercial Courts, even if there is no cause of action in those countries, provided the Indian defendant has a branch or local representative in that country or is trading in the stock exchange of that country. This trend has to be immediately reversed by bringing in ‘fast-track, high-tech Commercial Divisions’ in all the High Courts. The Commission is of the view that the overall benefits that may accrue by way of increased investment in India, both from domestic and foreign investors, will be in hundreds of millions of dollars and the expense in constituting these fast-track, high-tech Divisions in High Courts will only be a very small fraction thereof.” which is eloquent and self-speaking.

 

The raison d’être for the enactment of the Commercial Courts Act is that Commercial Disputes involving high amounts of money should be speedily decided as stated by the Hon’ble Apex Court in Kandla Exports Case (Supra). But thus far, if one looks back from the 188th Law Commission Report, a minor reform by introduction of a new High Court Division has transformed into a structural reform of the subordinate court structure on the civil side. Therefore, it is most imperative that given the legal framework, the implementation of the Act in Kerala has to be made more objective and purposeful because in the long run, this Act would have far reaching ramifications in the disposal of commercial cases in Kerala including prospects for the lawyering community.

 

CONCLUSION

While the Commercial Court Act of 2015 was enacted with the intention for speedy and quick resolution of high value commercial disputes, in view of the amendments brought about to the Act in 2018 and consequent designating of Principal Sub Court as Commercial Court with appeal to the Principal District Court as Commercial Appellate Court, the objectives for setting up such Commercial Courts seems to have been negated in practice.

 

 

 

 

 

 

* Assisted by Ranjith Varghese & Rohan Babu Joseph, Advocates.

1.   Law Commission of India, Report on Proposals for Constitution of Hi-Tech Fast-Track

  Commercial Divisions in High Courts, Report No.188, (December 2003), available at:

  <http:/lawcommissionofindia.nic.in/reports/188th%20report.pdf>[Accessed 18 January 2021].

2.   PROF.P.J.KURIEN COMMITTEE, Report of the Select Committee on the Commercial Division

  of High Courts Bill, 2009 as passed by Lok Sabha, (July 29, 2010), available at:

  <http:/wwwprsindia.org/uploads/media/Division%20High%20Courts/Select%2Committee%20 Report pdf>[Accessed 18 January 2021.

3.   High Courts having ordinary original civil jurisdiction viz. High Courts of Bombay, Delhi, Calcutta, Madras and Himachal Pradesh.

 

4.  Section 3. Constitution of Commercial Courts– (1) The State Government, may after consultation with the concerned High Court, by notification, constitute such number of Commercial Courts at District level, as it may deem necessary for the purpose of exercising the jurisdiction and powers conferred on those Courts under this Act:

      [Provided that with respect to the High Courts having ordinary original civil jurisdiction, the State Government may, after consultation with the concerned High Court, by notification, constitute Commercial Courts at the District Judge level:

      Provided further that with respect to a territory over which the High Courts have ordinary original civil jurisdiction, the State Government may, by notification, specify such pecuniary value which shall not be less than three lakh rupees and not more than the pecuniary jurisdiction exercisable by the District Courts, as it may consider necessary.]

      3A.Designation of Commercial Appellate Courts.– Except the territories over which the High Courts have ordinary original civil jurisdiction, the State Government may, after consultation with the concerned High Court, by notification, designate such number of Commercial Appellate Courts at District Judge level, as it may deem necessary, for the purposes of exercising the jurisdiction and powers conferred on those Courts under this Act.

      4. Constitution of Commercial Division of High Court.– (1) In all High Courts, having [ordinary original civil jurisdiction], the Chief Justice of the High Court may, by order, constitute Commercial Division having one or more Benches consisting of a single Judge for the purpose of exercising the jurisdiction and powers conferred on it under this Act.

      (2)The Chief Justice of the High Court shall nominate such Judges of the High Court who have experience in dealing with commercial disputes to be Judges of the Commercial Division.

5. Constitution of Commercial Appellate Division.– (1) After issuing notification under sub-section (1) of Section 3 or order under sub-section (1) of Section 4, the Chief Justice of the concerned High Court shall, by order, constitute Commercial Appellate Division having one or more Division Benches for the purpose of exercising the jurisdiction and powers conferred on it by the Act.

      (2)The Chief Justice of the High Court shall nominate such Judges of the High Court who have experience in dealing with commercial disputes to be Judges of the Commercial Appellate Division 5.        Kerala Government Notification vide G.O.(Ms) No. 51/2020/Home dt.24.02.2020 (Published as S.R.O.No.175/2020, in Kerala Gazette Extraordinary Vol. IX, No. 783 dt. 05.03.2020)

6.   In exercise of the powers conferred by sub-section (1A) of Section 3 of the Commercial Courts Act, 2015 (Central Act of 2016) the Government of Kerala in consultation with the High Court of Kerala, hereby specify the pecuniary value to be not less than three lakh rupees for the whole State for the purposes of the Act.

7.   2020 (6) KLT 620

8.   2019 SCC OnLine Guj. 3972.

9.   2019 SCC OnLine Guj. 4236.

10. National Judicial Data Grid. 2021. District And Taluka Courts Of India. [online] Available at: <https://njdg.ecourts.gov.in/njdgnew/?p=main/pend_dashboard&state_code=32~4&dist_code=2&est_code=undefined> [Accessed 18 January 2021].

11.   Commercial Division in the High Court was set up by exercising powers vested in the Hon’ble Chief Justice under Section 4 (1) of the Commercial Courts, Commercial Appellate Division of High Courts, Act 2015 (Act. No.4 of 2016) vide Notification No.18/SO/2016 dated 10.06.2016 Judicial Notifications, Notifications by Heads of Departments and Commercial Appellate Division was set up similarly vide Notification No. 19/SO/2016 dated 10.06.2016

12.   Vide G.O.Ms. No.74/Home (Courts. A), 10th June, 2016, all Principal District and Sessions Judges were notified as Commercial Courts by exercise of powers under Section 3 (1) of the Commercial Courts, Commercial Appellate Division of High Courts, Act 2015 by the Government of Andhra Pradesh in consultation with the High Court at Hyderabad.

13.   Vide G.O.Rt.No.251, Law (L, LA & J Home-Courts-A), 3rd April, 2018, Government Notification

14.  Notification No. GK/09/2019/SPC/102017/GOI-44/D dated 15th April, 2019.

15. Krishnaswamy, P. and Aithala, V., 2020. Commercial courts in India: Three puzzles for legal system reform. Journal of Indian Law and Society, [online] 11(1), pp.20-47. Available at:<https://jils.co.in/wp-content/uploads/2020/08/Commercial-Courts-in-India-Three-Puzzles-for-Legal-System-Reform.pdf> [Accessed 18 January 2021.

2020 (3) KLT 17 – Is it A Good Precedent

(By P.B.Menon, Advocate, Palakkad)

 

The above second appeal relates to a Will. Relevant provisions in the Will are 1) the entire assets are bequeathed to the wife of the testator absolutely, 2) the other provision in the Will is that if any property is left behind by the legatee the same should go to their foster daughter.

 

Evidently, in interpreting this Will two views are possible, one is, as the entire assets are given to the legatee wife absolutely, the second clause cannot prevail as it may be construed as repugnant to the first clause. The other view is that the second clause is not at all repugnant to the first clause. The same does not offend the first clause, as such subsequent provision does not in any way affect the absolute rights of the legatee to deal with the property in any way, by sale, gift or any other transaction including even a Will choosing someone else other than their foster daughter. The second provision which is an independent clause not affecting the first clause will come into effect only when the legatee has left behind some property; if so how does the same becomes repugnant to the first clause of absolute right of the legatee. In other words the absolute rights conferred on her lasts upto the time of her death only. After that what should happen is what is provided for in the Will, in case any property is left behind. It is that which makes a difference in interpreting such Wills.

 

After  citing  several  decisions  the  court  finally  relies  on  2010 (4) KLT SN 52 (C.No.59) SC = AIR 2011 SC 294, a relevant portion of the judgment is extracted in this judgment.

 

The first part of that paragraph reads this “Where the intention of the testatrix to make an absolute bequest in favour of her daughters in earlier part of Will was unequivocal, use of expression “after demise of my daughters the retained and remaining properties shall devolve on their female children only”, in subsequent part of Will would not strict sensu amount to a bequest contrary to the one made earlier in favour of the daughters of the testatrix. The expression does not detract from the absolute nature of the bequest in favour of the daughters.  All that the testatrix intended to achieve by the latter part was the devolution upon their female off-springs all such property as remained available in the hands of the legatees at the time of their demise. There would obviously be no devolution of any such property upon the female offspring in terms of the said clause if the legatees decided to sell or gift the property bequeathed to them as indeed they had every right to do under the terms of the bequest. Seen thus, there was no real conflict between the absolute bequest which the first part of the Will made and the second part which dealt with the devolution of what and if at all anything that remains in the hands of the legatees. The two parts operate in different spheres, namely, one vesting absolute title upon the legatees with rights to sell, gift, mortgage etc., and the other regulating, devolution of what may escape such sale, gift or transfer by them”.

 

The second part in continuation of this paragraph reads thus: “The latter part was redundant by reason of the fact that the same was repugnant to the clear intention of the testatrix in making an absolute bequest in favour of her daughters. It could be redundant also because the legatees exercised their rights of absolute ownership and sale thereby leaving nothing that could fall to the lot of the next generation females or otherwise. The stipulation made in the latter part did not in the least affect the legatees being the absolute owners of the property bequeathed to them. Corollary would be that upon their demise estate owned by them would devolve by the ordinary law of succession on their heirs and not in terms of the Will executed by the testatrix”.

 

Which part of this paragraph is good in law, certainly not the second half. It is a cardinal principle of interpretation/so called golden rule of interpretation that the intention of the testator is always important and if effect could be give to all the clauses in the Will without affecting the intention of the testator which is paramount it is that interpretation/construction that should prevail.

 

By giving effect to the second part of that paragraph in the judgment of the Hon’ble Supreme Court, the High Court has gone wrong in considering the claim of the foster daughter and preferring the legal heirs of the legatee. The net result is the intention of the testator is totally eschewed from consideration. Why was the so called arm chair theory/the harmonious construction theory developed by courts of law not given effect to, in this case.

 

Was justice rendered to the foster daughter in this case and really who are benefitted, ones, not thought of by the testator or legatee.