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Adapting to A Coherent Legal Framework For Commercial Disputes: Special Focus On Covid -19 Pandemic.

On the advent of the last decade of 20th century, India has seen a more open economy in terms of globalization and liberalization for investment and development in the Country. As a corollary, ease of doing business has been a major focus of all the governments, since then in order to attract investments as also job opportunities, in the country. While the policies of the government have been reflective of such shift, much was needed in the legal framework. Owing to such neglect on part of the government in bringing out the necessary changes, in their existing legal framework, the investors have been apprehensive in doing business not only in India but also, with Indian parties. One of the major concerns of such investors have been the realization of its rights and monies, in case of any dispute with the territory of India or with Indian parties, given the red-tapism in the functioning of judicial system exacerbated by the procedural delay elapses provided in the rule books. It is not the case that the government has not been cognizant of such apprehensions of the business class, which is evident from the fact that, lately, the rule books have in fact been amended to suit the needs of the investors as also to cater to their apprehensions. Two of such significant legislative changes have been the amendments in the law of arbitration (vide amendments in 2015 and 2019) and amendments in The Code of Civil Procedure, 1908 (“CPC”) by introduction of the Commercial Courts Act, 2015 (“CCA”).

It is not out of context to say that both these changes have been made prior to the economy being struck with COVID-19 pandemic, which has only aggravated the existent problem in disputes commercial in nature. The Commercial Courts Act brought out the definition of a commercial dispute for the first time in Indian law and suitably amended as also substituted provisions in CPC, after over a century, including Section 26, 35, 35 A, as well as Order V, VI, VII, VIII, XI, XIIIA, XVA, XVII, XVIII, XIX, XX. The most prominent features of the amendments were two-fold; first, mandatory time limits for quick disposal of the commercial disputes; and second, efficient disposal through pre-institution mediation as well as through a summary judgment prior to even a trial. This has definitely seen a reduction in the case load before judicial forums as well as quicker disposal of commercial disputes thereby, instilling a sense of confidence and hope for the investors and business houses. However, a deeper insight in the amendments through the CCA may show that such happiness might be short lived. As stated above, the provisions of the CPC which were amended mostly pertain to the initiation of adjudication of commercial disputes till its culmination into a judgment/ decree/disposal. The amendments in sections i.e., 26, 35, 35 A are under the head “Part I Suits in General”. It is pertinent to mention that there have been no amendments in Part II and beyond which deal with execution, other proceedings and appeals. Likewise, among the Orders as well the amendments have been made only till Order XX, while the execution, other proceedings and appeals have been left untouched which are provided under Order XXI and beyond. The short sightedness lies in the set lacuna. A businessman/investor or a party to a commercial dispute would not only want an efficient and timely disposal of its disputes but would be equally and more interested in seeing the color of the money or the property being the subject matter of the dispute. The same is not possible without a robust execution as well as appeal mechanism, unfortunately the execution mechanism provided in the CPC remains without any mandatory time frame or timeline even after a over century of its introduction. While, the quick disposal of adjudication of disputes result into a paper award / decree cover. The said paper decree has to float and linger through the same age-old execution process which more likely than not results into nothing in the hands of decree holder. The sufferer of the decree uses or rather utilizes the existing provisions to either evade the process or to evade the decree. Not only this, barring Sections 13 and 14 of the CCA providing for the expeditious procedure (directory in nature), no amendments have been made in the provisions relating to appeals in the CPC, including in section 96 - 112 as well as corresponding Order XXXVI – XXXXV. This has led to a situation where while the amendment in the CPC is one step forward, the non-focus on execution and appeals is a two step backward. The original proceedings culminate with mandatory timeline while the appeal lingers on for ages. The same is the situation in respect the execution proceedings as well. Effectively and consequently, the benefits of the CCA and the changes that it brought in are short lived as long as, the decree is passed pursuant to such changes and put to test in execution. Since, CCA was notified w.r.e.f. 3rd May 2018, the decrees passed pursuant to the CCA are yet to be seen in execution as it has only been over four years of the legislative changes out of which the justice clock was virtually stopped for over two years owing to the Covid-19 pandemic.

The COVID-19 pandemic has also increased the debt scale in all commercial transactions as also accumulation of proceedings to be initiated or adjudicated owing to non-filing of such disputes during pandemic. Accordingly, all the parties to such disputes have already waited for long for such recoveries to be made and all such proceedings culminating into a decree or disposal almost at the same time soon without robust and effective execution mechanism. It would see debt traps, non-recoverable bad debts as well as debt cycles thereby hampering the entire industry and competitive market. Therefore, it is imperative to bring out expedient and necessary changes in the execution as also the appeal mechanism in order to avoid economic fiasco and to promote the ease of doing business, amidst robust legal and regulatory framework. The hints from the changes in the Arbitration law can also be taken into consideration while bringing about such changes, keeping in view the recent pandemic. Special mechanism, process and forums which are just and equitable for dealing with debts accruing or arising during the COVID-19 pandemic can be one way forward.




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