Commercial Disputes Law in India: An overview

In present scenario, when the Indian economy is progressing rapidly towards 5 Trillion economy from 3 Trillion economy, the trade and commerce in India is bound to increase. Also, with increasing commercial activity, the disputes between the parties entering into the commercial transaction, also arises, and based upon the differences arising in the business relationships, the parties lockhorns and this gives rise to Commercial Disputes and the same is requlated by Commercial Disputes Law, prevailing in India.

Classification of Commercial Dispute Law

The Commercial Disputes Law is not a single act or code in itself. On the Contrary, the legislations which are useful in resolution of the commercial disputes or have implications in the Commercial transactions are known as Commercial Dispute Laws. Since, we are looking into the disputes part, we need to focus on the Commercial Disputes Laws having implication in disputes. They are as under:

  1. The Commercial Disputes Act, 2015 (as amended)
  2. The Arbitration and Conciliation Act, 1996 (as amended)

Commercial Disputes in which the Commercial Disputes Laws which can be resolved by Commercial Disputes

The commercial disputes arises mainly due to non-compliance of the terms on which the business activities were to be undertaken, the disputes which can be referred as commercial disputes are the one, which arise between the two business entities be it firm or a company. Usually, the commercial disputes are with respect to recovery of the dues or claiming damages by one party from another based upon different facts and circumstances. The resolution of the disputes, so arising, can be resolved by the Commercial Disputes Laws, based upon their implication.

In modern days, the terms and conditions of the business between the two business entities are recorded in an agreement or a contract. The terms are detailed and almost all possibilities are specified in the agreement. However, the disputes arise when certain activities or scenarios are not specifically covered in the contract or the agreement and the parties are compelling each other to do a particular activity or pay for a particular business activity. These activities can be resolved by taking recourse to the Commercial Disputes Laws, as applicable in the given scenario.

The Implications of Commercial Disputes Laws and Dispute Resolution Clauses in the Contract or Agreement

The contract or the agreement also covers a scenario, wherein, the disputes between the parties may arise in the near future, and for that matter, the dispute resolution clauses are provided in the agreement or contract which has been executed with respect to the business activity to be undertaken by the parties. The clause also provides with the Dispute Resolution Laws under which, the resolution shall be reached by and between the parties.

The dispute resolution clauses are mainly to pronged, the first  is one, with respect to which, out of court settlement can be reached by the parties. These options available under the Commercial Disputes Laws have been classified under three types;

  1. Arbitration
  2. Mediation and;
  3. Conciliation

The second Class of Commercial Disputes Laws, relates to the circumstances, when recourse to the civil courts shall be undertaken. It is pertinent to note that, previously, the recourse of filing civil suit before the district as well as High court used to undertake. But, now, with the advent of the Commercial Disputes Act, 2015 (as amended from time to time), the commercial disputes laws have been streamlined to the needs of parties to the Commercial Transactions.

Commercial Disputes Laws for out of court settlements

  1. Arbitration

Arbitration is a process by which the parties to a dispute submit the dispute, to an impartial and neutral third party and then the third party renders a binding decision on the parties to the dispute. The procedure of arbitration takes place only if both the parties have agreed to it, and only when, there is an arbitration clause in the agreement or contract. The Arbitral Award passed in the arbitral tribunal holds value equivalent to that of a judgement of a civil court.

This mode of commercial Disputes Laws can be invoked, only if, an arbitration clause is mentioned in the agreement, then the parties are mandated to go for arbitration. The process of appointment of arbitrator is always specified in the arbitration clause of the agreement. Thus, when a dispute arises then either of the parties may invoke arbitration clause by sending an invocation notice. If the parties fail in the appointment of the arbitrator, then the party invoking the arbitration may file a petition under section 11 of the arbitration and conciliation act in the district court as well as High court in accordance with the pecuniary jurisdiction of the Commercial Dispute in question.

Consequent to an appointment of arbitrator, the arbitration proceeding begin with the filing of claim petition by the claimant in the arbitration proceeding and the same is replied by statement of defence by the respondent. The procedure followed thereafter is usually in accordance with the Commercial Disputes Laws prevailing in India. However, it is not mandatory to abide by the Code of Civil Procedure, in an arbitral proceeding and the arbitrator may devise his own rule for arbitrating the dispute before him. Such process is usually known as ad hoc arbitration.

In some of the arbitration agreement or clauses, the seat of arbitration as well as the institution under which the arbitration shall take place and the rules governing such arbitration are devised by that particular institution. These types of arbitration are usually known as institutional arbitration. For Example: Hong Kong seat arbitration, Singapore seat arbitration and London seat arbitration. Thus, Commercial Disputes Laws play a crucial role in the resolution of Dipsutes through Arbitration.

2. Mediation

The other type of Commercial Disputes Law is Mediation, which is basically a process by which the parties try to resolve their dispute or conflict with the help of neutral third party called “Mediator”, who is someone neutral and  impartial or they have no interest in the outcome of the dispute.

Mediation can be approached by the parties, if both the parties give consent to such mediation. So, it is always advisable to have a mediation clause specified in the agreement. When the mediation clause is not specified in the agreement then, it depends upon the parties whether to go for mediation or not. The commercial dispute act being the most important Commercial Disputes Laws,  provides for pre-litigation mediation with legal services authority. Any commercial dispute with respect to which a commercial suit is to be filed before the District or High Court and if the value of the suit is more than 3 lakhs, then it is mandatory to take recourse to pre-litigation mediation before filing the commercial suit in view of the Commercial Disputes Laws specifically, the Commercial Courts Act.

In mediation process, the mediation cell sends notices to the defendant to participate in the mediation. However, it is upon the defendant to participate or not in such mediation. If the mediation takes place, then there is likelihood that the same be resolved. In case, the disputes are not resolved then the mediation centre issue a non-starter certificate which is thereafter annexed with the suit and commercial suit is filed. Thus, the Commercial Disputes Laws play a pivotal role in Dispute Resolution.

3. Conciliation

Conciliation is other form of Commercial Disputes Law in which, a conciliator is appointed to settle a disputes arising out of a business relationship between the parties and the court doesn’t play any active part in this process.

The conciliator has a significant role to play in this process, as the conciliator attempts to reach some middle ground by persuading the parties to reach a settlement which is usually an amicable solution for the dispute between the parties, with the help of this form of Commercial Dispute Resolution Law.

The conciliatory mechanism needs to be specified in the agreement  or the contract while entering into the business relationship. The clause shall also provide for the conciliatory body and its  constitution, and in case of any dispute arising the conciliatory body is approached as per prescribed process of conciliation provided in the agreement. The parties are mandated to undergo conciliation before resorting to other modes of dispute resolution. This form of Commercial Disputes Resolution Laws is crucial in resolution of Disputes.

Commercial Dispute resolution through Indian courts 

The commercial disputes Laws in Indian law have been streamlined and are governed by commercial court Act, 2015 (as amended from time to time). The commercial court act provides for the classification with respect to types of disputes which fall under the ambit of commercial disputes and can be adjudicated by Commercial Courts Act, 2015.

Once the dispute qualifies to be a commercial dispute the same can be adjudicated by the commercial disputes laws, specifically the Commercial Courts Act, 2015. The plaintiff is mandated to opt for mandatory pre-litigation mediation and if the dispute is not settled in mediation, then the same is required to be filed before the commercial court. The commercial courts have been classified under the commercial court act, in view of pecuniary jurisdiction. All the disputes which fall within the pecuniary limit of 3 lakhs to 1 crores go before the commercial courts constituted in each district court. When the pecuniary limit of the disputes is more than 1 crores, then the respective High courts exercise their original jurisdiction before the High Court and the plaintiff can file commercial suit within the original jurisdiction of that particular High Court.  The Commercial Disputes Laws have a significant role in the Commercial Disputes arising between the parties to the business transactions.

Why Choose Edge Law partners as Commercial Disputes Lawyers?

With years of legal experience, Edge Law Partners specializes in Commercial Dispute Resolution and has been handling Corporate Commercial, Litigation, Arbitration, Recovery, and Intellectual Property Disputes. Edge Law Partners has worked on various matters relating to Commercial Disputes and its resolution.

The Advocates of Edge Law Partners, regularly appears before the District Courts in Delhi, Gurgaon and Noida, Delhi High Court as well as Supreme Court and have been able obtain favorable orders from Delhi High Court in various matter.