7 ASIAN LEGAL BUSINESS – INDIA E-MAGAZINE WWW.LEGALBUSINESSONLINE.COM BROUGHT TO YOU BY SARTHAK ADVOCATES & SOLICITORS A significant factor in deciding to invest funds in a foreign jurisdiction is the robustness of the court system to maintaining rule of law and enforcing disputes. In fact, these parameters form part of the World Bank’s Ease of Doing Business indicia. India – being a vast geographical entity – has a diverse legal and judicial system. While it is not possible to discuss all nuances of India’s dispute resolution mechanisms in this piece, we will attempt to outline the major initiatives of the Government of India and/ or Indian judiciary to increase investor confidence. Over the last decade or so, there have been several legislative amendments that have been focused on improving the sentiment of the business community. One of the most significant developments has been the enactment of the Commercial Courts Act, 2015 (“CCA”), which provides for specialized courts at all levels of the judiciary. Enacted in 2015, the CCA aims to enhance the efficiency of the legal system in handling high-value commercial cases. The CCA also made significant changes to the Code of Civil Procedure, 1908 to provide a time-efficient regime for commercial disputes, while adhering to principles of natural justice. This effort has been supplemented with the efforts of various High Courts in providing more robust rules for discovery and inspection of documents, online filings, special rules for intellectual property disputes. According to the data published by Government of India, there has been a significant reduction in time taken for trial and judgment (1095 time-days in 2020) to 424 (Delhi) and 306 (Mumbai). In 2018, the CCA was amended, introducing two pivotal changes: a) It reduced the pecuniary jurisdiction of Commercial Courts from INR 1,00,00,000/- (Rupees One Crore only) to INR 3,00,000/- (Rupees Three Lakhs only), encompassing a significantly larger number of cases under the CCA. This adjustment aimed to enhance the ease of doing business in India and attract foreign investors. b) Section 12A was introduced mandating that a party filing a suit under the CCA must exhaust the remedy of mediation before institution of the suit (“Pre-Institution Mediation”). The data on Pre-Institution Mediation in commercial disputes shows that the measure has met with limited success, partly because of the lack of any deterrent measures against parties who refuse to participate and other attitudinal factors affecting litigating parties. The Indian government has taken further strides to promote mediation as a means to resolve disputes in India. India has a longstanding history - whether in the form of Panchayats for community conflict resolution or codified in Section 89(1) of the Code of Civil Procedure, 1908, which empowers courts to recommend arbitration, conciliation, judicial settlement, or mediation as alternative dispute resolution methods. In order to promote and facilitate mediation (particularly in the private sphere), the government introduced the Mediation Bill, 2021. After a review by the Standing Committee the bill, now titled Mediation Act, 2023 (“Mediation Act”), received presidential assent on September 15, 2023. As of the date of this piece, only some provisions of the Mediation Act, 2023 have been notified. Fundamentally, the primary objective of the Mediation Act is to encourage and streamline the process of mediation in domestic disputes. It places specific emphasis on institutional mediation, online mediation, and community mediation, all geared towards expeditiously resolving disputes. Additionally, the Mediation Act includes provisions for the enforcement of mediated settlement agreements and the establishment of a regulatory body responsible for registering mediators and institutions. It is hoped that the Mediation Act will alleviate the court backlog and encourage alternative dispute resolution methods. As of March 2023, the high courts of India are grappling with 60,50,600 pending cases, while district courts are burdened with 4,27,18,466 cases.1 Unlike the CCA, the Mediation Act does not mandate Pre-Institution Mediation in all cases. The legislative journey of the Mediation Act, including input from the Standing Committee, reflects a deliberate effort to strike a balance between voluntary participation and judicial involvement. This process aims to safeguard the confidentiality and privileged communications of parties seeking amicable dispute resolution. However, it must be noted that the Mediation Act does not adopt the Singapore Convention on Mediation, to which India became a signatory in August, 2019. The bulwark of dispute resolution – particularly in the commercial contracts – is also supported by arbitration. Arbitration serves as a crucial pillar in the architecture of dispute resolution in India. In the contemporary context, it has emerged as the predominant default mechanism within the legal framework of India due to its efficiency, flexibility and confidentiality. The intricate arbitration legal framework in India is regulated by the Arbitration and Conciliation Act, 1996 (“1996 Act”). This comprehensive statute encompasses diverse arbitration scenarios, encompassing both domestic and international arbitration, as well as addressing the enforcement of foreign awards and conciliation in accordance with the UNCITRAL Conciliation Rules of 1980. Measures such as streamlining arbitration procedures, implementing mandatory pre-arbitration steps, and establishing time constraints for arbitrations are being adopted to enhance efficiency and cut costs. Crucially, the Indian judiciary has embraced a pro-arbitration stance, adding to the credibility of the arbitration process. Courts are increasingly supportive of arbitration agreements and demonstrate a willingness to enforce arbitral awards. However, some teething issues remain including the time taken in challenges to arbitral awards, enforcement and realisation of the arbitral award. India has amended the 1996 Act in 2015 and 2018 to align it with international standards, underscoring the nation’s dedication to promoting international arbitration. Despite these advancements, challenges persist in the form of backlog issues and the selection of arbitrators, adversely affecting the swiftness of the arbitration process. This also encompasses India’s capacity to adopt technological innovations to uphold procedural efficiency and efficacy. India’s potential as a global leader in arbitration hinges on its judicial system’s approach to fulfilling the additional goals and prerequisites of arbitration. Implementing such enhancements are pivotal for India to attain true global competitiveness in the field. Dispute Resolution in India 1 - Mani Gupta, Partner 2 - Pranav Malhotra, Senior Associate Sarthak Advocates & Solicitors S-134 (LGF), Greater Kailash-II, New Delhi-110048 T: (91) 11 4171 5540, (91) 11 4155 4393 E: contact@sarthaklaw.com W: www.sarthaklaw.com 1 2 1 Shri Kiran Rijiju, Minister of Law and Justice, answering a question in Lok Sabha on 17 March 2023.
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