President Pranab Mukherjee has signed the ordinances to amend the Arbitration and Conciliation Act and bring into force the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015.
One of the ordinances provides for the constitution of Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of specified value and for matters connected there with or incidental thereto.
The other ordinance is for amending the Arbitration and Conciliation Act 1996.
For speedy settlement of commercial disputes, the Cabinet had in August cleared a bill to amend the Arbitration Act to fix a timeline for arbitrators to resolve cases. The bill was not introduced in Parliament.
Under the proposed amendments to the Arbitration and Conciliation Act, 1996, an arbitrator will have to settle a case within 18 months.
However, after the completion of 12 months, certain restrictions will be put in place to ensure that the arbitration case does not linger on, the sources said.
In the initial ordinance approved by the Cabinet in December last year, the timeline was fixed at nine months. The formulation was changed after inter-ministerial discussions.
The amendments to the law come amidst keenness of the government to attract the greater foreign investment. Certain foreign companies were said to be hesitant to do business in India because of the long-drawn litigations.
Another amendment to the law puts a cap on the fee of an arbitrator. The arbitrator will now also have to spell out if there is a conflict of interest in a case he or she is taking up.
The Prime Minister has been stressing on steps to promote ease of doing business in India.
In its report submitted last year, the Law Commission had also supported amendment to the arbitration law to help India become a favoured destination, after Singapore and London, for international arbitration.
The bill on creating commercial benches in select high courts was pending before a Parliamentary panel which had been given three extensions to give its report on the bill.
The committee has been given time till 30 November to submit its report on the bill. With the ordinance on the bill coming into force, all pending suits and applications relating to commercial disputes involving a claim of Rs.1 crore and above in the high courts and civil courts will be transferred to the relevant commercial division or commercial courts, as the case may be.
Commercial divisions are to be set up in those high courts which are already exercising ordinary original civil jurisdiction such as Delhi, Bombay, Calcutta, Madras, and Himachal Pradesh high courts.
Commercial divisions will exercise jurisdiction over all cases and applications relating to commercial disputes.
The commercial division shall have territorial jurisdiction over such area on which it has original jurisdiction.
Commercial courts which will be equivalent to district courts are to be set up in states and Union territories where the high courts do not have ordinary original civil jurisdiction.
Once the winter session, likely to commence after 19 November, starts, the government will have to seek Parliament’s approval for the ordinances within 42 days/six weeks or else these will lapse.
Article 123 of the Constitution grants the President certain law making powers to promulgate Ordinances when either of the two Houses of Parliament is not in session and hence it is not possible to enact laws in the Parliament.
An Ordinance may relate to any subject that the Parliament has the power to legislate on. Conversely, it has the same limitations as the Parliament to legislate, given the distribution of powers between the Union, State and Concurrent Lists. Thus, the following limitations exist with regard to the Ordinance making power of the executive:
Legislature is not in session: The President can only promulgate an Ordinance when either of the two Houses of Parliament is not in session.
Immediate action is required: The President cannot promulgate an Ordinance unless he is satisfied that there are circumstances that require taking ‘immediate action’.
Parliamentary approval during session: Ordinances must be approved by Parliament within six weeks of reassembling or they shall cease to operate. They will also cease to operate in case resolutions disapproving the Ordinance are passed by both the Houses.