No Separate Govt Notification Needed To Reduce Commercial Dispute Threshold To ₹3 Lakh After 2018 Amendment: AP High Court Full Bench
Andhra Pradesh High Court's full bench has clarified as to when the Commercial Courts (Amendment) Act, 2018 reducing the “specified value” for filing commercial disputes suits from Rs. 1 crore to Rs. 3 Lakhs becomes operational, holding that no notification from central government was required for the threshold to operate. Specified Value in relation to a commercial dispute, means that...
Andhra Pradesh High Court's full bench has clarified as to when the Commercial Courts (Amendment) Act, 2018 reducing the “specified value” for filing commercial disputes suits from Rs. 1 crore to Rs. 3 Lakhs becomes operational, holding that no notification from central government was required for the threshold to operate.
Specified Value in relation to a commercial dispute, means that the value of the subject-matter of a suit shall not be less than Rs. 3 Lakh. The 2018 amendment brought down the specified value for filing a commercial dispute suit from Rs. 1 crore to Rs. 3 Lakh.
In a 133 page order, the majority judgment of two judges ruled that the amendment became operative from May 3, 2018 and without requiring any notification from the Central Government. Meanwhile a separate opinion by the third judge has held that disputes valued between Rs. 3 Lakhs and below Rs. 1 crore could be entertained by Commercial Courts in Andhra Pradesh only after issuance of a State notification under Section 3(1A) of the Commercial Courts Act 2015.
The reference arose in a batch of Civil Revision Petitions led by 3F Industries Limited v. Transparent Technologies Solutions Private Limited, concerning the jurisdiction of commercial courts to execute arbitral awards below Rs. 1 crore but above Rs. 3 Lakhs.
The Division Bench had referred three questions to the Full Bench, including whether the amendment itself reduced the pecuniary threshold to Rs. 3 Lakhs or whether a separate notification by the Central or State Government was necessary before the amended threshold could operate.
A three judge bench of Justice Cheekati Manavendranath Roy, Justice Ravi Nath Tilhari and Justice Battu Devanand was constituted to resolve conflicting coordinate Bench rulings in U.V. Satyanarayana v. M/s. Shriram City Union Finance Ltd., CRP.No.740 of 2014 and Bellam Balakrishna v. Greenmount Developers, CRP.No.1749 of 2023, on the interpretation of Sections 2(1)(i) and 3(1A) of the Commercial Courts Act, 2015.
Justice Cheekati Manavendranath Roy and Justice Battu Devanand in its decision held that Sections 2(1)(i) and 3(1A) operate in distinct fields, that the amended Rs. 3 Lakhs threshold became operative from 03.05.2018 without any Central Government notification, and that Section 3(1A) concerns only constitution of Commercial Courts and fixation of pecuniary limits.
For context, Section 2(1)(i) Commercial Courts Act 2015, defines the “specified value” of commercial disputes and fixes the minimum threshold at Rs. 3 Lakhs after the 2018 amendment.
Section 3(1A) of the Act empowers the State Government, in consultation with the High Court, to notify the pecuniary jurisdiction for Commercial Courts within the State.
The majority observed:
“The notification by the Central Government, would be required only if the specified value under the amended Section 2 (1) (i) of the Commercial Court Act, 2015 is to be raised from three lakhs (base value) to a higher value. Otherwise, the Central Government notification is not required. In the absence of any notification by the Central Government, the specified value shall start from three lakhs rupees, without any upper cap.
The specified value under the amended Section 2(1)(i) of the Commercial Courts Act, 2015 shall be operative in the State of Andhra Pradesh, on issuance of the notification by the State Government in terms of Section 3 (1A) of the Commercial Court Act, for the part of the specified value i.e., from Rs.3 lakh up to less than Rs.1 crore. It shall not come into effect, to the extent of that part (from three lakhs to less than one Crore) from 03.05.2018 the date of amendment Act 28 of 2018. A notification by the State Government, in terms of Section 3 (1A), constituting the Commercial Courts with the pecuniary jurisdiction of that part of the specified value (from Rs.3 lakh up to less than Rs.1 crore), after consultation with the High Court is mandatory.”
The majority judgment notes that it was brought to the court's notice that despite amendment, Specified Value as per the unamended Section 2(1)(i) is being taken into consideration for the purpose of receiving the suits relating to commercial disputes by the Commercial Courts in Vijayawada and Visakhapatnam. Further, commercial disputes above three lakh rupees and up to one crore rupees are not being entertained by the said two special courts.
"Consequently, the Commercial Courts are not receiving and entertaining the commercial disputes from above three lakh rupees till one crore rupees. It is a lapse on the part of the concerned. It is resulting into causing grave injustice to the litigant public as they could not obtain speedy justice in respect of the commercial disputes involving Specified Value up to one crore rupees. Therefore, steps are to be immediately taken by the concerned to issue fresh proceedings to the two existing Commercial Courts specifying the Specified Value in terms of the amended Section 2(1)(i) of the Act," the court said.
It said that the High Court has to take steps to direct the presiding officers of the two Commercial Courts to receive the suits relating to commercial disputes involving value of above three lakh rupees with effect from 03-5-2018.
It further said that State Government may also, in consultation with the High Court, shall thereafter in case of necessity in view of increase in the pendency of commercial disputes in the special courts, take steps to appoint officers below the level of District Judge also to preside over the Commercial Courts.
For this they have to issue notification under Section 3(1A) of the Act specifying the pecuniary value which shall not be less than three lakh rupees or such higher value for whole or part of the State it may consider necessary.
"Since the Parliament conferred the power on the State Governments to confer jurisdiction to deal with the cases of commercial disputes even on the courts below the level of District Judge as and when the need arises for establishment of more courts to reduce the burden on the existing Commercial Courts, which are established at District Judge level, in case there is increase in the commercial disputes in the said courts, it is desirable for the State Government to take a decision in consultation with the High Court of Andhra Pradesh to establish more Commercial Courts even below the level of a District Judge after considering the pendency of cases in the existing Commercial Courts Act subsequent to issuing fresh proceedings to the Commercial Courts specifying the Specified Value as not less than three lakh rupees," the court added.
Noting that "everything is only on paper till now" to implement the amended provisions despite a GO issued about three years ago on 05-6-2023 to convert the existing 13 Fast Track Courts as Commercial Courts in the cadre of Senior Civil Judge.
The court noted that till now the 2023 G.O. is not implemented and the Fast Track Courts in the cadre of Senior Civil Judge are not converted into Commercial Courts and they are not established and made functional.
The majority judgment notes that the High Court also did not further pursue the matter.
"It is not clarified as to why the 13 Fast Track Courts which are converted into Commercial Courts in the cadre of Senior Civil Judge are not made functional till now. Thus everything is only on paper and the amendments are not actually implemented in its true spirit and letter. Therefore, to achieve the object of the amendment, the High Court is directed to pursue the matter with the Government and the Government shall also immediately take steps to implement G.O.Rt.No.609, dated 05- 6-2023 and make the said Commercial Courts in the cadre of Senior Civil Judge functional," the majority judgment reads.
It further directed the State Government to give notification in terms of Section 3(1A) specifying the pecuniary value of the Commercial Courts in the cadre of Senior Civil Judge as recommended by the High Court in its resolution dated 25-3- 2019 conferring pecuniary jurisdiction on the said Courts from three lakh rupees to fifty lakh rupees.
The Government should give a notification under Section 3(1A) of the Act fixing the pecuniary limits of the Commercial Courts of the District Judge cadre also conferring pecuniary jurisdiction on the said Courts from above fifty lakh rupees with unlimited jurisdiction, the order adds.
Separate opinion by Justice Tilhari
Meanwhile Justice Ravi Nath Tilhari, in a separate opinion, concurred with the majority that no Central Government notification was required for the amended Rs. 3 lakhs threshold to operate as the statutory “base value” .
"On Question No.'A' the notification by the Central Government, would be required only if the 'specified value' under the amended Section 2 (1) (i) of the Commercial Court Act, 2015 is to be raised from three lakhs (base value) to a 'higher value'. Otherwise the Central Government notification is not required. In the absence of any notification by the Central Government, the 'specified value' shall start from three lakhs rupees, without any upper cap," Justice Tilhari said.
The judge however disagreed with the majority on Section 3(1A), holding that disputes valued between Rs. 3 Lakhs and Rs. 1 crore could not automatically be transferred to the existing Commercial Courts without a State notification, and would continue before regular Civil Courts until such notification is issued. Justice Tilhari observed:
“So, now in view of the reduction of the amount of 'specified value'(not below Rs.3 lakh, from not below Rs.1 crore), unless the commercial courts are constituted with the pecuniary value from rupees three lakh upto less than rupees one crore, by notification in terms of amended Section 3 (1A), the commercial disputes of the part of the 103 specified value from Rs.3 lakh upto below Rs.1 crore, cannot be instituted in any commercial court firstly, for want of establishment of Commercial Court for such part of the specified value and secondly, the existing two commercial courts at Visakhapatnam and Krishna (Vijayawada), do not have the pecuniary value/jurisdiction for that part of the specified value i.e., below Rs.1 crore. They were constituted for the specified value starting from Rs.1 crore.
Change in 'specified value' by amendment, in my view would not automatically confer such pecuniary jurisdiction (i.e., below Rs.1 crore), as well, on the existing commercial courts unless it is so conferred by the State Government by notification under Section 3 (1A).”
Case Title: 3F Industries Limited & Ors. v. Transparent Technologies Solutions Private Limited & batch matters
Case Number: CRP No. 1847 of 2024 & batch
Counsel for Petitioner: Sri Venkat Challa, Sri G.V.S. Kishore Kumar
Counsel for Respondent: Sri V. Yatendra Kumar, Sri Somu Krishna Murthy