This country-specific Q&A provides an overview of Litigation that may occur in India.
This Q&A is part of the global guide to Litigation. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/litigation-second-edition/
Published June 2019
What are the main methods of resolving commercial disputes in your jurisdiction?
Commercial disputes in India are typically resolved either by way of litigation in courts/ tribunals or by way of alternate dispute resolution, which includes arbitration, mediation and conciliation.
In litigation, commercial matters are contested before the civil courts and the High Courts of each State. For this purpose, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Commercial Courts Act) has also been enacted, which provides for the constitution of commercial courts at district level and Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of a specified value.
Further, certain specialised courts/tribunals along with their appellate bodies have also been created for resolving commercial disputes under various statutes, which include forums such as the National Company Law Tribunal (NCLT), Debt Recovery Tribunal (DRT), etc.
The alternate dispute resolution mechanism is governed by the Arbitration & Conciliation Act, 1996 (Arbitration Act), which provides for resolution of disputes by means of arbitration, conciliation and mediation. Section 30(1) of the Arbitration Act, in particular, authorises the arbitral tribunal to, with the agreement of the parties, use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement.
What are the main procedural rules governing commercial litigation?
In India, the Code of Civil Procedure, 1908 (Code) is the law governing the principles relating to the powers of the court, procedures, methods and manner in which the jurisdiction of the civil courts may be exercised. Similarly, the principles and procedures pertaining to evidence are governed by the Indian Evidence Act, 1872 (Evidence Act).
Aside from the above, there are a number of other statutes that may also govern the procedural rules in commercial litigation. As an example, the Commercial Courts Act has been enacted to ensure speedy disposal of commercial disputes by providing for stricter timelines for resolution of disputes.
Further, the procedure as adopted by different specialized forums/tribunals is determined by statutes under which such forums/tribunals have been created. For example, the procedure followed by the DRT is governed by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Similarly, the procedure followed by the NCLT is determined by the Companies Act, 2013 and the rules framed thereunder.
In the case of arbitration proceedings, Section 19 of the Arbitration Act states that an arbitral tribunal is not bound by the provisions of the Code or the Evidence Act. In this regard, Section 19(2) provides that the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. Further, Section 19(3) provides that in the absence of any agreement between the parties on the procedure, the arbitral tribunal is free to conduct the proceedings in the manner it considers appropriate.
However, it may be noted that in practice, the tribunals in India are guided by the provisions of the Code and the Evidence Act, particularly in domestic arbitrations. In the case of international commercial arbitrations, the rules of the arbitral institution chosen by the parties or the relevant internationally accepted rules of procedure, such as the relevant Rules formulated by the International Bar Association (IBA) may be adopted by the arbitral tribunal.
What is the structure and organisation of local courts dealing with commercial claims? What is the final court of appeal?
In India, the court of the District Judge is the highest court for each district and there are various courts subordinate to the court of the District Judge. Each state comprises of a number of such districts, and the court of the District Court in each district is subordinate to the High Court of that particular State (which may have a bench at more than one place in the said State).
Finally, the High Court of each state is subordinate to the apex court/final court of appeal in the country i.e. the Supreme Court of India. An appeal may be filed in the Supreme Court against a decision of the High Court, if the High Court certifies that the case involves a substantial question of law of general importance. However, additionally, the Supreme Court may also grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.
Additionally, as stated above, there are various specialised tribunals/forums such as the NCLT, DRT, etc. which have been established under different statutory enactments. Any appeal against the orders passed by these Tribunals lies to their respective Appellate Tribunal.
How long does it typically take from commencing proceedings to get to trial?
The time taken from commencing proceedings to getting the dispute to trial in the Civil Courts of India largely depends upon the nature and complexity of the dispute, the number of counter parties involved, the place where the proceedings have been instituted and the backlog of pending cases in the court where the proceedings have been instituted.
However, in general, considering the large number of cases pending across all courts/ forums in India, the process is fairly time consuming. The ratio of judges-population in India is also very low as a result of which, it could take anywhere between two to five years for a civil proceeding to come to the stage of trial.
Pertinently, with a view to make timelines stricter, the Code was amended in 2002 to provide that the time limit for filing the written statement shall be thirty days, further extendable by the Court, for reasons in writing, up to a maximum of ninety days from the date of service of summons.
In an endeavour to further expedite the proceedings, the Commercial Courts Act was also enacted in the year 2015. It inter alia provides that a case management hearing shall be held within four weeks from the filing of affidavit of admission/denial of documents. In this hearing, a further schedule is required to be fixed so that arguments in the matter are completed within a period of six months and the judgment is then pronounced within ninety days of the conclusion of arguments between parties.
The Arbitration Act was also amended in 2015 with a view to expedite arbitration proceedings taking place in India. These amendments inter alia require the arbitral tribunal to make its award within a period of twelve months from the commencement of arbitration proceedings, which timeline can be mutually extended by the parties by a further period of six months. However, in case the award is not made within the aforesaid period of eighteen months from the date of arbitrator entering reference upon the matter, then an extension of time has to be sought from the concerned court.
Are hearings held in public and are documents filed at court available to the public? Are there any exceptions?
Hearings in India take place in open court and anybody can attend the hearings Moreover, in the interest of transparency, a pilot project for video recording (no audio) of judicial proceedings is also being considered in some courts. Such recordings however would not be available to anybody without prior permission of the High Court. This project is only at experimental stage. Also, as regards online streaming of proceedings, vide judgment dated 26 September 2018, the Supreme Court has approved the live streaming of proceedings subject to a few exceptions with a view to balance various interests regarding administration of justice, including open justice, dignity and privacy of participants. [Swapnil Tripathi v. Supreme Court of India, (2018) 10 SCC 639].
In so far as access to court documents is concerned, typically only litigants and their counsels in a particular dispute are entitled to access court documents pertaining to their pending case, including pleadings filed by the parties to the proceedings. However, the court may: (i) allow third parties to access court documents, on showing a reasonable cause; and (ii) in its discretion, pass an order to keep certain documents/pleadings in a sealed cover to ensure the confidentiality of a sensitive document.
Orders and judgments passed by the courts may, however, be available not only to the parties but also to the general public. In so far as accessibility to information is concerned, the state High Courts, Supreme Court, certain tribunals regularly update their websites. In addition to orders and judgments, these websites, in some cases, also provide other information regarding filing of pleadings by the parties to a case, the cases listed on a particular date and the listing dates of a particular matter. While presently very few district courts in India maintain a website of their own, efforts are being made to ensure that district courts all across India provide this facility.
What, if any, are the relevant limitation periods in your jurisdiction?
Broadly speaking, the limitation periods prescribed for disputes in India are governed by the Limitation Act, 1963 (Limitation Act). The Schedule to the Limitation Act prescribes the periods of limitation in various cases. As an example, Part I of the Schedule provides that the limitation in various cases of suits relating to accounts shall be three years. It also provides the time from which the limitation period shall begin to run. Similarly, Part II of the Schedule provides for limitation in cases of suits relating to contracts. The Schedule further provides that the limitation for suits and applications, for which no period of limitation is provided elsewhere shall be three years from the date when the right to sue/apply accrues.
However, for the purposes of initiating proceedings/filing appeals, respective statutes provide for their own limitation period. As an example, Section 34 of the Arbitration Act provides that an application for setting aside the arbitral award is required to be made within three months of receipt of the award, which is extendable for a further period of thirty days but not thereafter. Further, as per Order XXI of the Supreme Court Rules, the limitation period for filing a Special Leave Petition before the Supreme Court is sixty days from the date of the order of refusal in cases where the High Court refuses to grant a certificate of fitness to appeal and ninety days from the date of the judgment or order in any other case.
What, if any, are the pre-action conduct requirements in your jurisdiction and what, if any, are the consequences of non-compliance?
Under the Code, there are no general procedural rules governing the parties' pre-action conduct. However, as per Section 80 of the Code, an action against the government or public officers (in relation to acts done in their official capacity) cannot be brought unless a two-month prior notice is given, stating the cause of action. In urgent matters, it is also provided that the court can dispense with this requirement.
Additionally, certain statutes may also provide pre-requisites that are required to be met prior to initiation of legal proceedings. As an example, under Section 21 of the Arbitration Act, the arbitral proceedings commence on the date on which a request for that dispute to be referred to arbitration is received. For this purpose, the High Court of Delhi has, in Alupro Building Systems Pvt. Ltd. v. Ozone Overseas [2017 SCC Online Del 7228], held that this requirement of issuing a notice invoking the arbitration clause under Section 21 is mandatory unless there is an agreement to the contrary between the parties.
Further, amendments have also been carried out in Section 34(5) of the Arbitration Act to provide that an application for setting aside the arbitral award shall be filed only after issuing a prior notice to the other party. However, there are conflicting decisions of various High Courts on whether this provision is directory or mandatory in nature and this issue is currently pending adjudication before the Supreme Court.
How are commercial proceedings commenced? Is service necessary and, if so, is this done by the court (or its agent) or by the parties?
In general, commercial proceedings will stand instituted by filing a claim/petition before the appropriate court/forum and serving the counter party is not a pre-requisite to commencement of proceedings.
Thus, in case of a suit, the proceedings are commenced by filing a plaint i.e. the claim with the court. The claimant must also pay the requisite court fees for such filing subsequent to which the court issues summons to the defendant. The summons issued by the court normally contains a direction to the defendant to appear before it and respond to the claim in the form of a written statement of defence.
Order V (Rules 9 to 30) of the Code governs the principles pertaining to service of summons upon the defendant. It is provided that the summons is served either by an authorised officer of the court or by the court itself through registered post, speed post or any other such courier services with due acknowledgement. In addition to this, a copy of summons signed by the court may be given to the plaintiff for service to the defendant personally.
Under the Arbitration Act, the arbitration proceedings commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent from the claimant.
How does the court determine whether it has jurisdiction over a claim?
Jurisdiction over a claim is established based on the value of the subject matter i.e. pecuniary jurisdiction and where the defendant is situated or where the cause of action arises i.e. territorial jurisdiction.
The amount of pecuniary jurisdiction may be different from State to State. In Delhi, for example, vide notification dated 07.07.2018, the High Court of Delhi has authorised District Judges/Additional District Judges of respective districts to deal with commercial matters of value between INR 3 lacs to INR 2 crores.
If a proceeding can be initiated in multiple courts, it may be filed by the petitioner/plaintiff in any of those courts, unless the parties have conferred exclusive jurisdiction on one of such courts by way of an agreement.
In addition to this, jurisdiction may be conferred based on the subject matter of dispute to specific tribunals that may have been instituted specifically for the said subject matter.
How does the court determine what law will apply to the claims?
Generally speaking, two Indian nationals contesting a dispute are not permitted to derogate from Indian law and the same may be opposed to the public policy of the country. Also for all procedural matters the law of the forum (lex fori) will apply. For substantive dispute it will apply the law chosen by the parties or the law which has closest nexus to the dispute. However a plea based on a point of foreign law ought to be pleaded like any other fact as Indian courts do not take judicial notice of foreign laws. Further, it has also been held that the Evidence Act permits proof being tendered and opinion of experts being adduced in evidence in proof of a point of foreign law [Hari Shanker Jain v. Sonia Gandhi (2001) 8 SCC 233].
In the case of arbitration proceedings, the arbitral tribunal for a domestic arbitration taking place in India is required to decide the dispute submitted to arbitration in accordance with the substantive law of India. However, in the case of international commercial arbitrations taking place in India, Section 28(1)(b)(i) of the Arbitration Act provides that the arbitral tribunal is required to decide the dispute in accordance with the law designated by the parties.
In what circumstances, if any, can claims be disposed of without a full trial?
Under Order XXXVII of the Code, summary proceedings may be initiated by the plaintiff for suits concerning monetary claims upon negotiable instruments, recovery of debt, etc.
In respect of commercial disputes of a specified value, Order XIIIA of the Code (as inserted by the Commercial Courts Act) states that a party may file an application for summary judgment any time after summons has been served on the defendant but before the Court has framed issues in respect of the suit. However, it is also provided that such an application cannot be made if a suit in respect of any commercial dispute has been originally filed as a summary suit under Order XXXVII of the Code. It is further provided that the court may give a summary judgment against a plaintiff or defendant on a claim if it considers that:
a) the plaintiff has no real prospect of succeeding in the claim or the defendant has no real prospect of successfully defending the claim; and
b) there is no other compelling reason why the claim should not be disposed of before recording oral evidence.
Further, as per Order XVA of the Code (as inserted by the Commercial Courts Act), the court may also, in a case management hearing, dismiss or give judgment on a claim after a decision on a preliminary issue.
Additionally, the plaint filed by the plaintiff may also be returned/rejected at the initial stage under the provisions of Order VII Rule 10 (return of plaint) and Order VII Rule 11 (rejection of plaint).
In arbitration proceedings, Section 29B provides that the parties to arbitration agreement may agree to have their disputes resolved by the fast track procedure, wherein the dispute may be decided solely on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing.
What, if any, are the main types of interim remedies available in your jurisdiction?
The court may, in order to prevent the ends of justice from being defeated, grant a temporary injunction or make such other interlocutory orders in accordance with the principles prescribed under Order XXXIX of the Code. In this regard, Section 37 of the Specific Relief Act, 1963 states that temporary injunctions are such, as are to continue until a specified period of time, or until a further order of the court.
The courts in India have wide discretionary powers and may grant interim relief, as may be appropriate to preserve the ends of justice, such as security for costs, arrest and attachment before judgment, order for interim sale, etc.
As regards arbitration proceedings, interim measures may be granted by the arbitral tribunal under Section 17 of the Arbitration Act or by the court under Section 9 of the said Act for securing the amount in dispute, for preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement, for the appointment of a receiver, etc.
After a claim has been commenced, what written documents must (or can) the parties submit and what is the usual timetable?
In the case of suits, once a plaint is instituted by the plaintiff, along with all the supporting documents, the defendant is required to file the written statement (and counter-claim, if any), along with the relevant documents within thirty days from the date of service of summons, which is further extendable by the court to ninety days on sufficient cause being shown.
The court may also permit the plaintiff to file a rejoinder to the written statement and will thereafter, proceed to frame issues. The parties are then required to file their respective affidavits of admission-denial of documents, followed by the filing of their respective affidavits of evidence in chief supporting the suit/defence. The parties have a right to cross-examine the witnesses of the other party. In some cases, the parties may also be permitted to file written submissions/arguments for the convenience of the court.
In terms of timelines, litigation in India is time consuming and it could take anything between three to five years for a suit to be finally heard and disposed of. However, interim relief may be available within a few days of institution of the suit.
Recently, the Commercial Courts Act has also been enacted with a view to ensure expeditious disposal of commercial cases. The said Act provides that a case management hearing shall be held within four weeks from the filing of affidavit of admission/denial of documents. Moreover, it also provides for the Court to ensure that arguments in the matter are completed within a period of six months and the judgment is then pronounced within ninety days of the conclusion of arguments between parties. It is, however, relevant to note that the said Act is a fairly nascent development and it remains to be seen how well it is implemented in the coming years.
In the case of arbitrations, the procedural timetable for the filing of a statement of claim and subsequent pleadings is determined either by the rules of the concerned arbitral institution in case of institutional arbitrations or by the arbitral tribunal in case of ad hoc arbitrations.
Although Section 19 of the Arbitration and Conciliation Act 1996 specifies that the arbitral tribunal shall not be bound by the Code, courts in India have held that principles analogous to the Code should be followed in arbitral proceedings to ensure basic principles of natural justice and fair trial.
The timelines for filing the pleadings in arbitrations are usually strict in view of the recent amendments to the Arbitration Act, which require that the arbitral tribunal shall make its award within a period of one year from the commencement of arbitration proceedings. Such timeline can also be mutually extended by the parties by a further period of six months, however, the permission of the Court is required to be obtained in case any further extensions are required.
Further, as stated earlier, the parties to an arbitration agreement may also agree to have their disputes resolved by the fast track procedure in accordance with Section 29B of the Arbitration Act, wherein the dispute may be decided solely on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing.
What, if any, are the rules for disclosure of documents? Are there any exceptions (e.g. on grounds of privilege, confidentiality or public interest)?
The disclosure, production and discovery of documents is governed by Order XI of the Code. Order XI Rule 14 provides that it shall be lawful for the Court, at any time during the pendency of any suit, to order the production of documents. Parties also have the right to ask for discovery and inspection of documents and to pose specific questions to the other party in the form of interrogatories.
With the enactment of the Commercial Courts Act, Order XI has been amended in respect of commercial disputes of a specified value and it has been provided that the parties are required to file a list of all documents and photocopies of all documents in their possession, control or custody, pertaining to the suit along with the plaint/written statement irrespective of whether the same is in support of or adverse to their case.
However, there are certain documents/communication that are excluded from the scope of disclosure as per the Evidence Act such as: (a) communications during marriage except in matrimonial matters; (b) evidence as to affairs of the State; (c) official communications made to a public officer in official confidence, when he considers that the public interests would suffer by their disclosure except with the permission of the department concerned; and (d) professional communications between lawyers and their clients in the course of or for the purpose of their employment.
An arbitral tribunal is also empowered to allow the discovery, production and disclosure of documents. While the provisions of the Code are not binding on the tribunal, typically tribunals in domestic arbitrations follow the provisions thereof while deciding such applications. In international arbitrations, tribunals may also place reliance on the IBA Rules on the Taking of Evidence in International Arbitration in some cases.
The Supreme Court has, in the case of M.L. Sethi v. R.P. Kapur [(1972) 2 SCC 427], held that the documents sought to be discovered need not be admissible in evidence and it is sufficient for the purposes of discovery of documents if the documents would be relevant for throwing light on the matter in controversy.
How is witness evidence dealt with in commercial litigation in your jurisdiction (and in particular, do witnesses give oral and/or written evidence and what, if any, are the rules on cross-examination)? Are depositions permitted?
The examination-in-chief of witnesses in civil trials is generally carried out by way of affidavit. If the counter-party so desires, the witness is then cross-examined, if the party calling the witness so desires thereafter, the said witness is re-examined. The evidence is recorded either by the court or by the commissioner appointed by it.
Section 138 of the Evidence Act provides that the examination and cross-examination of witnesses must relate to relevant facts, but the cross-examination need not be confined to the facts to which the witness testified on his examination-in-chief.
Further, Section 146 of the Evidence Act provides a list of questions lawful in cross-examination. It states that a witness may be asked any questions which tend to test his veracity, discover who he is and what his position in life is. Further, in cross-examinations, it is also permissible for a party to ask leading questions. However, pre-trial recording of oral evidence in the nature of depositions is not recognised under the Code.
In domestic arbitrations, the arbitral tribunals in India typically follow the principles of the Code and Evidence Act in dealing with witness evidence.
Is expert evidence permitted and how is it dealt with? Is the expert appointed by the court or the parties and what duties do they owe?
Under Indian law, expert evidence is permitted under Sections 45 and 45A of the Evidence Act. Expert evidence is called for when the court has to form an opinion upon a point of foreign law or of science or art, or as to identity of handwriting or finger impressions, or any information transmitted or stored in any computer resource or any other electronic or digital form.
Section 45 defines an expert as a person who is especially skilled in a given field. Expert opinion is not binding on the Court and is of an advisory nature. The expert is required to place before the Court all the materials, together with reasons underlying his conclusions, so that the Court, although not an expert, may form its own judgment on the basis of those materials.
In the case of arbitration proceedings, Section 26 of the Arbitration Act specifically provides for the appointment of an expert by the arbitral tribunal, unless it is agreed otherwise agreed by the parties. The arbitral tribunal may also require a party to give the expert any relevant information, or to produce, or to provide access to any relevant documents, goods or other property for his inspection. Further, the arbitral tribunal may also require the expert to participate in an oral hearing.
The credibility of an expert can be challenged by cross-examination, or by contrary evidence of another expert or by showing that he had expressed a different opinion on the same question previously or under Section 155 of the Evidence Act, which generally deals with impeaching the credit of a witness. The experts may be appointed by the parties and the court also has the power to suo moto appoint an expert for opinion.
Can final and interim decisions be appealed? If so, to which court(s) and within what timescale?
An appeal lies from every final decree passed by any court exercising original jurisdiction to the court authorized to hear appeals from decisions of such court both, on questions of fact and law. A second appeal, only on a question of law, may also lie to the High Court. In the case of certain specified interim orders, an appeal can be filed in accordance with the provisions of Order XLIII of the Code.
Under the Commercial Courts Act, Section 13 provides that an appeal may lie against a decree of the Commercial Court or Commercial Division of a High Court to the Commercial Appellate Division of that High Court within a period of sixty days from the date of judgment or order. However, it further clarifies that in the case of orders, an appeal shall lie only from such orders as are specifically enumerated under Order XLIII of the Code and Section 37 of the Arbitration Act.
In arbitration proceedings taking place in India, interim orders may be appealed in accordance with Section 37 of the Arbitration Act. However, in the case of certain orders under the Arbitration Act, an appeal may not lie immediately and the party seeking to appeal against such order would have to wait until the final award is passed. As an example, no appeal shall immediately lie against an order rejecting a challenge to the jurisdiction of the arbitral tribunal under Section 16 of the Arbitration Act and for this purpose, the party whose application is rejected shall have to wait until the final award is passed.
Further, an application for setting aside an arbitral award, including an interim award may lie under Section 34 of the Arbitration Act. Such application is required to be made within three months of receipt of the award or if a request for correction or interpretation of the award had been made, within three months of the date on which such request had been disposed of by the arbitral tribunal.
An appeal may also be preferred to the Supreme Court against any judgment, decree or final order in a civil proceeding if the High Court certifies that the case involves a substantial question of law of general importance. However, this apart, the Supreme Court may grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.
The timescales for filing appeals have been provided under the Limitation Act, which stipulates that any appeals to a High Court from an order or decree can be filed within ninety days from the date of the decree or order. If the appeal is being filed to any other court against an order or decree, then the same can be filed within thirty days from the date of the decree or order.
In case of a special leave to appeal to the Supreme Court, the Supreme Court Rules, 2013 provide that in cases where the High Court refuses to grant leave, an appeal should be filed within sixty days of the order of refusal. In all other cases, an appeal may be filed within ninety days of the date of the judgment or order.
What are the rules governing enforcement of foreign judgments in your jurisdiction?
Under the Code, foreign judgments have been categorized as arising out of: (i) reciprocating territories; and (ii) non-reciprocating territories. Section 44A of the Code defines a ‘reciprocating territory’ as any country or territory outside India which the Central Government of India may, by notification in the Official Gazette, declare to be a reciprocating territory. It is noteworthy that a decree passed by any superior courts of a ‘reciprocating territory’ may be executed as if it had been passed by a court in India.
On the contrary, for the enforcement/execution of a foreign judgment passed by a non-reciprocating territory, the first step is to file a fresh civil suit in a domestic Indian court of competent jurisdiction. For this purpose, the foreign judgment will only have evidentiary value before the courts in India.
Further, in India, all foreign judgments are considered conclusive as to any matter between the same parties subject to certain exceptions, as illustrated in Section 13 of the Code. Some of the exceptions in this regard are listed hereinbelow:
(a) Where the foreign judgment was not pronounced by a court of competent jurisdiction;
(b) Where the foreign judgment must have been given on the merits of the case;
(c) Where the proceedings in which the foreign judgment was obtained, were opposed to natural justice; and
(d) Where the foreign judgment was obtained by fraud.
Can the costs of litigation (e.g. court costs, as well as the parties’ costs of instructing lawyers, experts and other professionals) be recovered from the other side?
The costs of litigation can be awarded by the court under Section 35 of the Code. It provides that the costs of, and incident to all suits shall be in the discretion of the court, and the court shall have full power to determine by whom or out of what property and to what extent such costs are to be paid.
Section 35 of the Code has been recently amended by the Commercial Courts Act, to the extent it is applicable to a suit in a commercial dispute of a specified value. It provides that in relation to any commercial dispute, the court has the discretion to determine whether costs are payable by one party to another; the quantum of those costs and when they are payable. The expression “costs” has also been defined to include: (i) the fees and expenses of the witnesses incurred; (ii) legal fees and expenses incurred; and (iii) any other expenses incurred in connection with the proceedings.
In practicality, however, Indian courts generally award only nominal costs for litigation.
The Arbitration Act contains a similar provision under Section 31A. The Act provides for the definition of costs as the fees and expenses of the arbitrators, courts and witnesses; legal fee and expenses; any administration fees of the institution supervising the arbitration; and any other expenses incurred in connection with the arbitral or court proceedings and the arbitral award.
What, if any, are the collective redress (e.g. class action) mechanisms in your jurisdiction?
The Code recognises representative suits under Order I Rule 8, where one person may sue or defend on behalf of all in same interest. The explanation to this Rule states that for the purpose of determining whether the persons who sue or are sued, or defend, have the same interest in one suit, it is not necessary to establish that such persons have the same cause of action as the persons on whose behalf, or for whose benefit, they sue/defend the suit.
Further, in India, the concept of ‘public interest litigation’ is also very significant. The courts in India permit public spirited individuals to approach the courts in the interest of public welfare for the redressal of their constitutional and legal rights.
Additionally, certain statutes in India also provide for provisions pertaining to collective redressal. As an example, Section 245 of the Companies Act, 2013 allows shareholders or depositors to initiate appropriate proceedings in case the management or the affairs of any company (other than banking companies) are being conducted in a manner prejudicial to the interest of the company or its members. Similarly, Section 12 of the Consumer Protection Act, 1986 also envisages collective action on behalf of numerous consumers having the same interest.
However, for arbitration proceedings, there is presently no provision of collective redressal under Indian law.
What, if any, are the mechanism for joining third parties to ongoing proceedings and/or consolidating two sets of proceedings in your jurisdiction?
The Code under Order I Rule 8A provides for the power of the court to permit a person or body of persons to present opinion or to take part in the proceedings if the court is satisfied that a person or body of persons is interested in any question of law which is directly and substantially in issue in the suit and that it is necessary in public interest to allow that person or body of persons to present his or its opinion on that question of law.
Even though there is no specific provision for consolidation of suits under the Code, the Supreme Court has, in Chitivalasa Jute Mills vs. Jaypee Rewa Cement [AIR 2004 SC 1687], stayed a suit filed later in point of time under Section 10 of the Code when the issues in two different suits were not only directly and substantially the same but also between the same parties. .
On the other hand, there are no provisions for joining third parties or consolidating two proceedings in arbitrations. However, the Supreme Court has ruled held that the benefit of a single/joint arbitration may be granted in transactions of composite nature to avoid injustice, multiplicity of proceedings and conflicting decisions [P.R Shah, Shares and Stock Brokers Private Limited v. B.H.H Securities Private Limited (2012) 1 SCC 594; Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc. (2013) 1 SCC 641].
Are third parties allowed to fund litigation? If so, are there any restrictions on this and can third party funders be made liable for the costs incurred by the other side?
While there is no definite statute providing for litigation funding in India, it is relevant to consider a constitutional bench decision of the Supreme Court in In the matter of Mr. G, a Senior Advocate of the Supreme Court [AIR 1954 SC 557], where it was noted that a ‘champerty’ contract in which returns were contingent on the success of the case was not per se illegal, except in cases where an advocate might be a party.
Moreover, as recently as in 2018, the issue of third-party funding was considered by the Supreme Court in Bar Council of India v. A.K. Balaji [(2018) 5 SCC 379] and it was held that there was no restriction on third parties funding the litigation and getting repaid after the outcome of the litigation.
Further, in India, third-party funding has also been expressly recognised in the context of civil suits in states such as Maharashtra, Gujarat, Madhya Pradesh and Uttar Pradesh. This consent to third-party funding can be adduced from the Code which governs civil court procedure in India. Order XXV Rule 1 of the Code (as amended by Maharashtra, Gujarat, Madhya Pradesh and Uttar Pradesh) provides that the courts have the power to secure costs for litigation by asking the financier to become a party and depositing the costs in court.
However, if a third-party funding agreement contains an extortionate or unconscionable objective or consideration (e.g. recovery of a gambling debt), the agreement would be rendered unenforceable under the Indian Contract Act, 1872.
What is the main advantage and the main disadvantage of litigating international commercial disputes in your jurisdiction?
A structured approach in terms of procedure is a one of the many advantages of litigating international commercial disputes in India. The Code of Civil Procedure, 1908 and the Evidence Act, 1872 are two of the primary statutes for this purpose and proceedings largely take place in accordance with the provisions of these acts. Further, Indian courts are increasingly rendering investor-friendly decisions and also respecting the choice of parties in choosing a foreign law to resolve their disputes in international commercial litigations. A transparent, independent and the recent investor-friendly approach of the Indian judiciary augurs well for the dispute settlement mechanism in the country.
In so far as disadvantages are concerned, time taken to resolve disputes in courts due to the huge backlog of pending cases remains a major cause of concern.
What is the most likely growth area for disputes in your jurisdiction for the next 5 years?
India is one of the world’s fastest growing major economies, where infrastructure is still fairly underdeveloped. The Government is engaged in a continuous effort to invite investment and develop infrastructure in the country. In the process, India is witnessing major high value disputes in the infrastructure sector, which are expected to rise in the coming years.
With the increased focus on investment, a number of private equity players are present in the Indian market today. Disputes arising out of such investments is another area where the disputes will grow.
Further, increasing focus on the environment is likely to mean a more robust regime of environment regulations in India. Resultant dispute in this sector will also thus rise.
The banking sector in India has also seen a lot of reforms – focused increasingly tackling the menace of non-performing assets. Issues arising out of foreign exchange management are also likely to remain in focus – making this sector a possible growth area for disputes.
On the technological front, India has recently adopted stringent rules on net neutrality. Further, with the right to privacy being recognized a fundamental right by the Supreme Court in India and issues relating to privacy having an impact internationally, it is expected that this sector will see a lot of disputes in the coming years.
Will be the impact of technology on commercial litigation in your jurisdiction in the next 5 years?
In India, technology has already revolutionized the way research was conducted for preparing a matter. Interestingly, not only several research portals have been developed in the last few years, but a number of mobile applications have also been designed and customised for lawyers in order to provide ready access to case details and other relevant information.
The focus on digitization has resulted in reduced paperwork in legal offices as well as courts. The High Court of Delhi, for example, has successfully implemented e-courts over the last few years and the Supreme Court is also adopting technology to implement an integrated case management system.
Lower courts in India are also expected to adopt technology in their functioning – at least in regularly maintaining and updating their websites, with a view to minimise inconvenience for litigants and lawyers.
Automation in technology is likely to assist lawyers in performing legal research in a more comprehensive manner and would save time on repetitive tasks. Artificial Intelligence (AI) is poised to be the next big thing and is likely to play an extremely significant role in India in the next five years.