Improving Delivery Of Justice In Commercial Cases: Could Modern India Look To Its Pre-Modern History For Some Lessons?

India has a patchy track record of commercial dispute resolution. There are lakhs of commercial cases pending before various courts of the nation. The lack of a clear timeline for disposal of cases creates a significant impediment for doing business in India. This affects investments into India and employment generation which has second order effects in other areas such as poverty alleviation and nutrition.

The Indian Contracts Act, modelled on the British law of the same name, came into force in 1872. The English Law was ultimately derived from Greek and Roman laws which were modified for use during the middle ages and which eventually evolved into the modern law during the Industrial Revolution. The codification of contract law was then exported to other nations of the British Empire - including India. Hence, the law as we have it today is a product of Greco-Roman, Enlightenment and Industrial Revolution legacies. However, the culture of jurisprudence in India is far older and has its origins in ancient India.

Until 2015, commercial disputes used to be adjudicated exclusively by civil courts which were already overburdened with civil cases. In 2015 the Government of India introduced the Commercial Courts Act which allowed the government to set up commercial courts with exclusive jurisdiction on commercial disputes above a certain value. Over the last two years, Delhi, Mumbai, Bangalore and Calcutta High Courts have established Commercial Courts for speedy disposal of such cases.

Data from these courts suggest an improvement in the rate of disposal of these cases and this has an effect of improving India's rank in enforcing contracts as measured by the World Bank's Ease of Doing Business Index where India has improved from rank 186 in 2014 to 163 in 2020. By comparison, the rank of other BRICS nations in 2020 are as follows: 5 for China, 21 for Russia, 58 for Brazil and 102 for South Africa. Clearly, even with remedial measures, India is an outlier among major economies in this commercial dispute resolution.

Firstly, enforcing contracts is a feature of our ancient civilization - one of the four legs of jurisprudence in pre-modern India was dharma which was (is) understood as immutable and divine. A practical manifestation of this in our collective consciousness is the fact that it is intuitively understood by Indians that a promise made has to be kept - no matter how extenuating the circumstances are. This collective consciousness has to be tapped into to ensure enforcement of contracts by civil society itself. In terms of modern-day India and its patchy record in enforcing contracts, this translates to the fact that Alternative Dispute Resolution (ADR) mechanism has to play a central role in commercial dispute resolution. ADR happens outside of the formal court system and relies more on the inherent better judgement of the disputing parties. This is where our inherent sense of dharma becomes an arbiter of justice rather than an externally imposed code. ADR overseen by an impartial third party is sine qua non for unclogging the legal system and has to be leveraged maximally. A clause for ADR has to be mandatorily built into every contract in India which would include a cooling off period between the emergence of conflict and the time the parties refer the conflict to a commercial court. This period has to be utilised for trying to solve the issue via the ADR mechanism.

Acknowledging the importance of ADR, amendments were made to the Commercial Courts Act to allow for mandatory mediation in case the matter doesn't require urgent interim relief. However, different High Courts have interpreted this differently and this matter is still not settled in jurisprudence. In addition, India is a signatory of the Singapore Mediation Convention which has provisions for global recognition of mediated settlements among its member states. This has led to India drafting a Mediation Bill which was expected to be passed in the Winter Session of the Parliament but has been delayed. However, the effectiveness of the draft Bill considering the many exemptions and limitations of the draft Bill remains to be seen.

Secondly, there were an ample number of courts and adjudicators at all levels in pre-modern India. A unique feature of jurisprudence in ancient India was that guilds were also given jurisdiction over disputes involving the members of or matters pertaining to the guild. The Yagnavalkyasmriti refers to Shrenis which were courts run by guilds in ancient India with jurisdiction over its members. This is an idea which modern India can tap into where the modern equivalent of guilds - professional associations and regulatory bodies - can be given jurisdiction over certain commercial disputes. This will ensure both specialization of justice delivery and unclogging of the system. A similar idea is already in action in India in the form of Telecom Disputes Settlement and Appellate Tribunal which adjudicates disputes in the telecom sector. This has been extended to other tribunals such as NCLT - but there is no reason why this cannot be extended to many other sectors as well. The idea has global cachet as well - the Dubai International Financial Centre has commercial courts which have exclusive jurisdiction on disputes arising from business done there.

These two steps - mandatory application of ADR in contracts and increasing the number of bodies which can adjudicate - would reduce pressure on the judiciary, help with quicker resolution of commercial disputes. This will make India a better place to do business in and ultimately improve the employment and economic prospects of India. The ancients might have a trick or two up their sleeve which we can still use.