Contributed By Economic Laws Practice
The Indian legal system is primarily characterised as a common law system. Although India has a written constitution and laws, both procedural and substantive (which have been codified on many subjects), the doctrine of stare decisis that binds lower courts in India by the decision of higher courts is recognised in the Indian Constitution and regularly followed in India.
The Indian courts follow an adversarial form of trial where a judge decides the dispute based on the evidence produced before him.
The arguments by the parties can be in writing or oral, or both. In India, the practice that is largely followed is filing of written pleadings first, followed by oral arguments.
Being a quasi-federation, the Indian legal system has an integrated judiciary, with the Supreme Court being the highest court in the country, followed by a High Court (which may be for one state or common for two or more states) and then there are subordinate courts for the districts of each state. At the district level, the highest court for civil cases is the court of the district judge (Senior Division) and for criminal cases is the sessions court.
With the exception of the Supreme Court (which has all-India jurisdiction), all other courts have defined territorial jurisdiction. The original and appellate jurisdiction for all courts is also defined. The Supreme Court has appellate jurisdiction, limited original jurisdiction and writ jurisdiction. All High Courts have writ jurisdiction under Article 226 of the Indian Constitution and supervisory jurisdiction on all courts and tribunals over which they have territorial jurisdiction under Article 227 of the Indian Constitution. While specific high courts such as the High Courts of Bombay, Madras, Calcutta and Delhi enjoy original and appellate jurisdiction, the other High Courts enjoy only appellate jurisdiction. District courts enjoy original and appellate jurisdiction.
India also has special courts to deal with specific disputes. For instance, the commercial courts and commercial division in High Courts for hearing commercial disputes of a specified value; ie, INR300,000 and above, as established under the Commercial Courts, Commercial Appellate Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Commercial Courts Act); family courts to hear matrimonial disputes, as established under the Family Courts Act, 1984 (the Family Courts Act). Additionally, there are specialised tribunals to adjudicate specific kinds of disputes; eg, National Company Law Tribunal (NCLT), National Green Tribunal, Income Tax Tribunal and Motor Accident Claims Tribunal.
In India, while ordinarily court filings are not public documents, the Supreme Court Rules, 2013 (Supreme Court Rules) and the rules of the High Courts of the respective states inter alia set out the applicable procedure for a person/entity who is not a party to the proceeding to apply to the concerned court for inspection, search, or obtaining copies of pleadings, documents and depositions. Accordingly, such person/entity is required to furnish an application to the concerned court setting out sufficient reasons for seeking inspection, search of documents, pleadings, as the case may be.
It is pertinent to note that in Indian courts, certain court filings and proceedings are protected from public disclosure, subject to the sensitivity of the dispute, or being in the public interest, or if directed under a statute. For instance, the Family Courts Act, 1984 and Code of Criminal Procedure, 1973 (the Code of Criminal Procedure) contain provisions that provide for proceedings to be held in camera (all members of the public are excluded from the court).
Further, with the intent of preserving confidentiality of some documents, the rules of some courts expressly provide for circumstances when copies of documents cannot be obtained at all. For instance, under the Supreme Court Rules, no person has a right to receive copies of, or extracts from, any documents that are declared to be confidential in nature and/or if the Chief Justice of India has expressly directed certain documents to be kept in sealed covers or considers certain documents to be of confidential nature.
To appear before the courts in India, a person must be recognised as an advocate under the Advocates Act, 1961 (the Advocates Act). To qualify under the Advocates Act, a person must satisfy the following criteria:
However, no person can be admitted as an advocate on the state roll if he is convicted of an offence involving moral turpitude, or under the provisions of the Untouchability (offences) Act, 1955, which is now the Protection of Civil Rights Act, 1955.
All persons enrolled with a state bar council have a right of audience before all courts and/or tribunals, and/or any person authorised to take evidence across India.
The right of audience follows a hierarchy based upon designation and seniority. Accordingly, the Attorney General of India (appointed by the central government) followed by the Solicitor General of India have rights of audience and precedence over all other lawyers in court. Subject to the aforesaid, senior advocates have rights of audience over other advocates.
The Supreme Court has held that (i) foreign lawyers or foreign law firms are not allowed to carry on litigation practice or non-litigation practice in India, although they may 'fly in and fly out' of India for casual visits for a temporary period, and (ii) the Bar Council of India shall determine whether foreign lawyers are limited to giving legal advice to their clients in India regarding foreign law or their own system of law and on diverse international legal issues. Additionally, the Bar Council will determine whether foreign law firms are practising in India. The Bar Council of India and the Union of India are empowered to make rules in this regard.
The law in India prohibits advocates from being involved in any form of litigation funding, including contingency fee/damages-based agreements. However, barring this, there is no express law prohibiting third party litigation funding.
Unlike most common law countries, champerty and maintenance have not been recognised as offences in India since the late 1800s. However, such funding agreements are scrutinised closely and not given effect to in the following circumstances:
While this may be considered as limited judicial sanction for third party litigation funding, there is little legislative material in this regard. The oft-cited provision is that of Order XXV of the Code of Civil Procedure, 1908 (the Civil Procedure Code), which deals with the power of courts to order security for costs. The amendments made to this provision in the form of Rule 3 as inserted by Maharashtra, Gujarat and Madhya Pradesh begin with the heading "Power to implead and demand security from third person financing litigation". The amendment brought by the state of Uttar Pradesh uses the phraseology "plaintiff is being financed by another person." It is thus evident that there is no strict legislative disapproval of third-party litigation funding and in fact the courts may even demand security for costs from such financiers.
As there is no express bar on third party funding, nor any regulation governing it, most types of civil and commercial suits can be funded by third parties.
As there is no express bar on third party funding, nor any regulation governing it, third party funding may be opted for by the plaintiff and defendant.
As there is no express bar on third party funding, nor any regulation governing it, there is no threshold or cap placed on the amount of funding that can be received from a third party funder. However, as expressed earlier, courts are careful in their assessment of such agreements and thus proportionality of funding is always a problematic affair.
In view of the absence of any specific regulation on this issue, the type of costs that a third party funder would consider funding would be left to the discretion of the respective funders.
Contingency fee agreements or damages-based agreements cannot be entered into by advocates in India and any agreement that provides for the same shall be deemed void in view of Rules 20 and 21 of the Standards of Professional Conduct and Etiquette, Chapter II, Part VI, Bar Council of India Rules 1975 read with Section 49(1) (c) of the Advocates Act, 1961. Agreements of this nature have also been judicially disapproved in “G” A Senior Advocate, in re, AIR 1954 SC 557 and in B Sunitha v The State of Telangana and Anr, 2018 CrLJ 715 (SC).
In view of the absence of any specific regulation on this issue, it cannot be stated with certainty if any time limits exist by when a party to a litigation ought to obtain third party funding.
The Commercial Courts Act (as amended) mandates a mediation process in the event that the dispute does not involve any urgent interim reliefs. Upon a request by the plaintiff, the designated mediation centre issues a notice to the defendant setting out the date and venue of the mediation. There is no requirement for the defendant to respond formally to such a notice.
The mediation process is required to be completed within three months. On expiry of this period, if no settlement is arrived at, the plaintiff is permitted to proceed to initiate the suit before a court of law. If a plaintiff fails to adhere to this procedure then the filing of the suit will be considered premature by the courts.
With respect to claims against the government or any public officer (with respect to acts performed in an official capacity), generally a suit cannot be filed unless the plaintiff has provided a two-month notice to the government or such public officer providing particulars of the cause of action, claim involved, etc. While the government and/or the public officer are/is expected to respond to such a notice, a plaintiff can proceed to file the suit upon expiry of the aforesaid two-month notice period.
In cases that require immediate relief, a plaintiff can dispense with issuing the two-month notice to the government/public officer. However, a court cannot grant any relief without first hearing the government and/or public officer, as the case may be.
Insolvency and Bankruptcy Proceedings
For commencement of insolvency, an operational creditor (ie, one who supplies goods and/or services) must issue a notice of demand upon the corporate debtor as per the provisions of the Insolvency and Bankruptcy Code, 2016 calling upon it to pay the debt in question. Within a period of ten days thereof, the corporate debtor is required to make payment to the operational creditor or dispute the claim. In the case of non-payment by the corporate debtor, the operational creditor can proceed to initiate insolvency proceedings before the NCLT.
Non-compliance of the aforesaid procedure results in dismissal of proceedings before the NCLT.
There is no requirement for issuance of a notice by a financial creditor before filing insolvency proceedings before the NCLT.
The Limitation Act, 1963 (the Limitation Act) in general prescribes the period of limitation available under Indian law in respect to civil and commercial actions. However, special laws may provide a different period of limitation. Any inconsistency between the provisions of the general Limitation Act and the special law is resolved in favour of the special law.
The period of limitation differs depending upon the nature of the dispute/cause of action. For instance, in land-related disputes involving mortgages, the period of limitation is 12 years, whereas in general contractual disputes, the period of limitation is three years. The period of limitation begins to operate from the date that the cause of action arises; ie, facts that give a plaintiff the right to claim reliefs against a defendant.
In the case of a dispute for recovery of monies, the concerned party acknowledges its liability in writing during the period of limitation. A fresh period of limitation will then be computed from the time when the acknowledgment was so signed.
The Civil Procedure Code provides the jurisdictional requirements for institution of a suit. Accordingly, a suit can be filed in a court in whose jurisdiction a defendant resides or carries on business, or where the cause of action arises. Where a suit pertains to immovable property, the same is to be initiated in the court within whose jurisdiction the property is located.
However, the above-stated rules differ for Chartered High Courts of Bombay, Madras and Calcutta. A suit can be filed before such High Courts against a defendant who is situated beyond the jurisdiction of the said court, if the cause of action, either in whole or in part, arises within the jurisdiction of said High Court.
A departure from the general rule mentioned above is in cases of disputes arising out of IP rights such as copyrights and trade marks wherein a suit can be filed within the jurisdiction of the court in which the plaintiff resides or carries on business.
A civil suit is filed by lodging a plaint before the court. Such plaint is filed in accordance with the rules prescribed by the concerned court read with the Civil Procedure Code.
Any party to the suit may amend their pleadings with the permission of the court by showing just cause and reason. Amendments are usually permitted to bring on record fresh facts that may have transpired post the filing of the suit or the pleadings.
The rules of service of pleadings are governed by the provisions of the Civil Procedure Code read with the rules that may be framed by the concerned court.
The Civil Procedure Code requires service of the plaint through a writ of summons issued by the concerned court through its designated officer. In addition, in cases of urgency, the plaintiff may also seek permission of the court for private service upon the defendant.
With respect to service of a foreign judicial process upon a defendant in India, the provisions of the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Convention) would be relevant. As per this Convention to which India is a party, all requests for service of foreign judicial process are to be directed to the Ministry of Law and Justice of the government of India, which will serve the judicial process itself or arrange for the same to be served upon the defendant through the bailiff of the Court of Small Causes. Also, judicial process issued by the courts of India can be served upon a defendant residing outside India by following the procedure ratified under the Convention by the country in whose jurisdiction the defendant is residing. If the said country is not a signatory to the Convention and/or any other bilateral treaty on assistance in civil and commercial matters then the judicial process may be served upon the defendant (residing outside India) as per the procedure laid down under the Code; ie, by means of post or such courier services as may be approved by the High Court.
As stated above, the Chartered High Courts of Bombay, Madras and Calcutta permit a defendant (who is residing/carrying on business beyond its jurisdiction) to be sued in the said courts if it is shown that the cause of action, in whole or in part, has arisen within the jurisdiction of said High Court. Likewise, in cases of disputes arising out of IP rights such as copyrights and trade marks, a suit can be filed within the jurisdiction of the court in which the plaintiff resides or carries on business.
Despite the service of the summons, if the defendant fails to appear before the court on the date of the hearing mentioned in the summons or such other date fixed by the court (by way of a further opportunity to the defendant), the court can proceed to examine the pleadings – ie, the plaint along with the documents filed before it (original documents and in certain cases photocopies) – and after due consideration pass appropriate orders granting or rejecting the reliefs sought by the plaintiff.
Representative or collective suits viz class actions are permitted in India. With the permission of the court, the plaintiff in a representative suit need not obtain the previous consent of the persons whom he seeks to represent. Commonality of interest is the key ingredient. Thus, the only necessary condition in this regard is that the persons on whose behalf the suit is being brought must share the same grievance.
For the purposes of consumer protection laws, the Consumer Protection Act, 1986 also enables a consumer complaint to be filed on behalf of, or for the benefit of, all the consumers having a common interest or a common grievance and seeking the same/identical relief against the same person.
In the sphere of public law, the Constitution of India enables a person to file a ‘public interest litigation’ to address a legal injury caused to a person or to a class of persons by reason of violation of any constitutional or legal right.
In the context of company law, the Companies Act, 2013 enables members and depositors of a company to file a petition against the company, its directors, auditors or advisers in instances where they commit any act that is prejudicial to the interest of the company and/or where the interests of the company may be jeopardised.
As per the National Company Law Tribunal Rules, 2016 (the 2016 Rules), a member of a class action is entitled to opt out of the proceedings at any time after the institution of the class action, with the permission of the NCLT. Further, the 2016 Rules enable such a member to pursue its claim against the company on an individual basis under any other law, where a remedy may be available, subject to any conditions imposed by the NCLT.
There is no statutory requirement of providing clients with a cost estimate of the potential litigation at the outset.
A party can make an application for ad interim/interim reliefs pending a substantive hearing of the claim by the court. An application for such ad interim/interim relief is not limited to case management issues but can be made for issues such as ensuring the protection or preservation of any property, or to secure the subject matter of the suit, or the appointment of a court receiver, etc.
The Civil Procedure Code permits the filing of a summary suit with respect to claims based upon bills of exchange, promissory notes, a written contract for the recovery of a debt or a guarantee (where the claim against the principal is in respect of a debt or liquidated demand).
Courts usually decide such an application within six to nine months, when it may decide to decree the summary suit, grant conditional leave to the defendant or, in cases where the defendant raises triable issues, grant the defendant unconditional leave to defend the suit.
A court can render summary judgment on a claim in favour of the plaintiff if it is satisfied that (i) the defendant has no real prospect of successfully defending the claim and (ii) there is no other compelling reason why the claim should not be disposed of before recording of oral evidence.
Similarly, the court can proceed to dismiss the plaint filed by the plaintiff summarily if, on an application made by the defendant, it is satisfied that (i) the plaintiff has no real prospect of succeeding in the claim and (ii) there is no other compelling reason why the claim should not be disposed of before recording of oral evidence.
The plaintiff can make such an application immediately upon filing of the suit or at any stage where the defendant in his pleadings or oral submissions admits his liability or accepts the case of the plaintiff. Such an application when made by the defendant must be made at the threshold without any delay.
In either case, an applicant must make out an explicit case (including documentary evidence) for the court to pass an early judgment.
Rejection of the Plaint
The Civil Procedure Code permits a defendant to make an application for early dismissal of the claim in the form of an application for rejection of the plaint. Such an application is made inter alia on the grounds that (i) the suit does not disclose a cause of action and (ii) where the suit appears from a statement in the plaint to be barred by any law.
In determining whether a cause of action is disclosed, the court is only required to read the plaint in its entirety and on a meaningful reading arrive at a finding of non-existence of a cause of action. At this preliminary stage, courts do not consider the merits of the defence available to a defendant.
Such an application can be made by a defendant at any stage before the conclusion of the trial.
As mentioned above, common dispositive motions made by parties before trial include applications by a defendant for a dismissal of a civil suit, applications by a plaintiff/defendant for summary judgment, and applications for preservation and protection of the suit property.
Upon an application made by a third party having a vital interest in the proceedings, the court may order such third party to be impleaded in the suit as a plaintiff/defendant. The court may also implead a third party if it is of the opinion that such impleadment is essential to enable the court to adjudicate effectually and completely upon and settle all the questions involved in the suit.
A court may at any stage of a suit on its own motion or on the application of any defendant order the plaintiff to give security for the payment of all costs incurred and likely to be incurred by any defendant.
However, such an order is mandatorily required to be made in all cases in which it appears to the court that a sole plaintiff is, or (when there are more plaintiffs than one) that all the plaintiffs are, residing out of India and that such plaintiff does not possess or that no one of such plaintiffs possesses any sufficient immovable property within India other than the property in suit.
While costs are seldom awarded, the courts have the discretion to determine (i) whether costs are payable by one party to another, (ii) the quantum of those costs and (iii) when they are to be paid. It is further clarified by Section 35 of the Civil Procedure Code that the expression 'costs' means reasonable costs relating to (i) the fees and expenses incurred by the witnesses, (ii) legal fees and expenses incurred, and (iii) any other expenses incurred in connection with the proceedings.
If the court decides to make an order for payment of costs, the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party.
In making an order of costs, the courts are required to take into account the following:
Given the volume of cases pending before courts of India, a party is required to make a strong case for seeking an urgent hearing of the matter. One such ground could be the need to ensure the preservation of the subject matter of the suit. Depending upon the facts, the court may grant immediate reliefs or pass orders as expeditiously as possible.
The scope of discovery is wide and is not limited to documents that may be held to be admissible in evidence when the suit is ultimately tried.
A party to a suit is permitted to serve a notice of production of documents upon the opposite party within 15 days of receipt and the opposite party is required to disclose the document or explain the reason for its refusal under an affidavit.
The court in determining whether a document should be disclosed by a party applies the following two tests (i) whether the document is relevant and (ii) whether the document is or was in the possession, custody or power of the party or his agent.
Discovery with respect to facts is generally done by way of a series of questions known as interrogatories. An application may be made for discovery by interrogatories for examination of an opposite party or parties.
The party that is sought to be interrogated may by an affidavit raise objections to answering the interrogatories on the grounds that the questions are scandalous, irrelevant, mala fide, privileged or not material, etc. The court is empowered to decide upon the objections raised against the interrogatories. In determining an application containing objections against the interrogatories, the court is required to consider any accounts, documents, or particulars provided by the opposite party and consider the necessity of the interrogatories for disposing the suit fairly or saving costs.
Ordinarily, no party can deliver more than one set of interrogatories except with the court’s order.
Generally, costs in relation to interrogatories are borne by the party posing them. However, costs may be imposed by the court on the party at fault if the interrogatories are found to be vexatious, unreasonable or lengthy.
Upon an application by a party to the suit, the court suo motu may order discovery against third parties who are neither the plaintiff nor the defendant.
On such an application being made, a party must file a list of persons whom it wishes to call as witness(es) and elaborate the purpose for calling such witness(es); ie, whether the witness is being summoned for giving evidence or producing documents. If a sufficient cause is made out, the court may order a person to appear before it to produce documents or give evidence.
If the court finds it necessary, it may on its own motion summon a third party as a witness to give evidence or to produce any document that in the opinion of the court is required for the proper adjudication of the suit.
The prime consideration adopted by a court in making an order of discovery is that all documents required for efficacious disposal of the suit ought to be brought on record.
The Civil Procedure Code provides detailed rules for disclosure of documents. A party is required to produce all documents upon which it relies in the pleadings and upon which the claim is based. It is for the party in whose custody the best evidence is to produce the same, notwithstanding the question of burden of proof.
This information is not available.
In India, privileged communication is recognised by the Indian Evidence Act, 1872 (the Evidence Act) and the Bar Council of India Rules, which lay down the standards for professional conduct of advocates. Legal privilege is available in relation to communications between the client and its attorney/advocate only. A barrister, advocate, attorney, pleader or vakil is barred from disclosing in evidence any communications that they have exchanged with their client. The courts have extended such privilege, albeit on a limited basis, to communications between an employer and an inhouse counsel. Further, the privilege extended to communications can be waived upon receiving the concerned client’s consent to do so. Additionally,communication shall not be privileged when such communications are for unlawful purposes and for the object of commission of a crime.
In India, there is a distinction between an inhouse counsel and an external counsel. A person employed as an inhouse counsel in a corporation or business concern who is in receipt of a full-time salary is precluded from being registered as an advocate under the Advocates Act. The Bar Council of India Rules clarify that an advocate shall not be a full-time salaried employee of any person, firm, corporation or concern and such person shall cease to practise as an advocate so long as he or she continues in such employment. On the other hand, since an external counsel or advocate is registered under the Advocates Act, he or she is authorised to act or plead before courts and is subject to all the rules of conduct applicable to an advocate under Indian law.
In the circumstances, the question of whether privilege would extend to communications between an inhouse counsel and its client has arisen in Indian courts. When the issue arose before the Bombay High Court, the court held that (i) a salaried employee who advises its employer on questions of law must be entitled to the same protection of law; (ii) the protection provided under the Evidence Act shall extend to communications made by the employer to the inhouse counsel, in confidence, and for the purpose of seeking legal advice or vice versa; and (iii) protection shall not extend to the work undertaken by an inhouse legal counsel for his employer when such work is not legal in nature; eg, work undertaken in an executive capacity. Further, communications between the employees of the client in the ordinary course of business, which may have utility for anticipated litigation, are not protected.
Disclosure of documents may be denied on the grounds of privilege, which is extended to certain documents that may be prohibited from being produced, such as a document relating to confidential communication between the party and his legal advisers; or if the production of public official records relating to affairs of the state and confidential official communications would be injurious to public interest. Where privilege is claimed, the court may inspect such documents to determine whether privilege may be claimed with respect to such documents.
Parties may also object to the disclosure of documents on the grounds that the information sought is not germane to the dispute and/or is in the nature of a roving inquiry.
Other grounds that may be adopted by parties to oppose disclosure are, inter alia, that the disclosure may incriminate a party or expose him to forfeiture and that the documents/information (i) are protected by public policy, (ii) are not in the sole possession of the party or (iii) are in the possession of the party as an agent or a representative of another, etc.
The circumstances for the grant of temporary and permanent injunction are codified under the Civil Procedure Code and the Specific Relief Act, 1963 (SR Act), respectively.
When deciding upon an application for the grant of a temporary injunction, the court is inter alia required to consider whether the applicant has established a prima facie case, balance of convenience and irreparable injury. The court is also required to consider whether grant of such an injunction would enable the preservation of the subject matter of the suit. However, on a case-to-case basis, judicial precedents may add other considerations to the foregoing requirements; eg, in relation to an injunction restraining the invocation of an irrevocable bank guarantee, an injunction is not granted except on grounds of fraud.
Some of the issues that a court considers in passing an order of perpetual injunction are as follows:
Additionally, the SR Act allows courts to grant an injunction compelling performance of a negative covenant, even if such a negative covenant is a part of a contract that contains a positive agreement that the court cannot specifically enforce.
Further, the SR Act provides that perpetual injunction cannot be granted to the following acts:
In addition to the above-mentioned injunctions, courts may also grant freezing injunctions. Such an injunction is temporarily granted to restrain the defendant or his representatives from selling or disposing of properties or monies, or from removing them from the court’s jurisdiction.
Judicial precedents in India have held that the Indian courts are empowered to issue anti-suit injunctions restraining parties from instituting or continuing parallel proceedings in another country. Since the injunction intrudes upon the jurisdiction of another court, the courts mandate that the relief be granted with caution. The Supreme Court in India, while deciding the grant of an anti-suit injunction, has laid down factors that ought to be considered before an anti-suit injunction is granted:
While the time taken for the grant of an injunction varies on a case-to-case basis, in exceptional circumstances, an ad interim injunction may be granted by courts on the day of filing of the application or within such time as the court may consider appropriate, depending upon the urgency of the matter. This would necessarily require that the matter is peremptorily listed with the leave of the court.
The rules of various courts provide for their working hours and days of working, including the availability of a vacation court. Depending upon the urgency involved, courts remain available for judicial work even beyond official working hours and/or on holidays.
Courts do pass ex parte injunctive orders but only in cases where there is an urgent and overwhelming need to do so. However, ex parte injunctive orders are the exception and are entertained where the court is satisfied that notifying the respondent would defeat the purpose of the injunction. Upon such an ex parte injunctive order being passed, the applicant is required to notify the respondent of the same immediately (together with a copy of the papers and proceedings of the matter) and file an affidavit of service before the court on the same day.
If an injunction granted against a respondent is subsequently successfully discharged, the respondent can institute a suit for damages against the applicant. However, in the alternative to filing of a suit, a respondent can under provisions of the Civil Procedure Code make an application for compensation from the applicant of an amount up to INR50,000. Notably, the respondent can also claim compensation for injury caused to his reputation by grant of the injunction.
Courts in India have the power to ask the party in whose favour injunction is being granted to deposit security for compensation or to give an undertaking for the payment of the compensation, at the time of passing an order for injunction.
The position explained above would remain the same in the case of ex parte injunctions as well.
Although courts have the power to grant Mareva injunctions, there has not been any instance where a worldwide freeze of assets has been granted by the courts of India.
An order of injunction is normally issued against a party to the suit and not against a third party. This rule, however, is not absolute and depends upon the facts of the case. There have been instances of an injunction being granted against a person claiming (through a party) to the suit or who has acquired title through the owner who is a party to the suit.
In the case of disobedience of any injunctive order, the court that granted the injunction can punish the party guilty of such disobedience. This can be in the form of attachment of property that may later be sold and the earning from such a sale may be awarded to the party that had suffered damages as a result of the disobedience.
The court may also order the defaulting party to be detained in the civil prison, for a maximum period of three months. The punishment of civil imprisonment for breach of injunction is awarded in addition to attachment of the property and not in lieu of the same.
Trials in India are conducted through oral arguments with each party setting out their case in a written document before the commencement of the trial. Once the issues are framed by the court – ie, the questions that need to be determined in the facts of the case – the plaintiff and defendant are required to file their respective evidence through witness affidavits, which is in lieu of oral examination of the witness. The witnesses could be witnesses of fact and/or expert witnesses depending upon the facts of the case. Such witness affidavits are exchanged by the parties and each party is afforded the opportunity of cross-examining the witness of the other side in court. In exceptional circumstances, however, the court can direct oral examination in chief of the concerned witness. On completion of recording of the evidence, the parties present their final arguments to the court, after which the court proceeds to render a judgment.
Applications for interim relief are conducted by way of oral arguments before the court with each party setting out their case in a written document before the commencement of the hearing of the matter. Generally, the courts will require the applicant to serve notice upon the respondent before passing any orders upon such application. The respondent is entitled to file its affidavit in reply objecting to the reliefs that are being sought. At the scheduled hearing, courts require an applicant to make out a prima facie case for the grant of any reliefs pending trial. Depending upon the complexity of the dispute, the length of the hearing may vary.
With the introduction of the Commercial Courts Act (as amended), the Civil Procedure Code was amended to introduce provisions for case management hearings, which is common for all matters irrespective of their complexity. Accordingly, case management hearings are required to be held within four weeks from the ﬁling of aﬃdavit of admission/denial of documents. At this hearing, the court is required to lay down a detailed schedule for the conduct of the trial to enable the matter to be completed within six months. Judgment is then to be pronounced within 90 days of the conclusion of arguments between parties.
Trial by jury has been abolished in India except for matrimonial disputes within the Parsi community.
Under the Evidence Act, evidence is classified into oral evidence and documentary evidence. All facts except the contents of documents and electronic records may be proved by oral evidence. In dealing with oral evidence, hearsay evidence – ie, evidence of facts, which the witness has not learnt through his own bodily senses but learnt through the medium of others – is prohibited.
Documentary evidence is classified into primary and secondary evidence. Primary evidence is in the form of the original document, whereas secondary evidence is in the form of a copy of the original.
Documentary evidence is essentially required to be proved by primary evidence. However, secondary evidence can be permitted in certain cases, inter alia:
With respect to the admissibility of electronic evidence, the same is admitted in evidence on production of a certificate of authenticity signed by a person who was responsible for the computer on which the electronic record (which is being relied upon in evidence) was created or stored.
The certificate must uniquely identify the original electronic record, describe the manner of its creation, describe the particulars of the device that created it and certify compliance with certain conditions mentioned in Section 65 (B) (2) of the Evidence Act; ie, the computer containing the electronic record is functioning properly, the said computer is in regular use and the document sought to be relied upon was stored in such computer.
Parties are permitted to lead expert evidence when the court is required to form an opinion upon a point of foreign law, science, art, or as to the identity of handwriting or finger impressions.
Courts can engage experts to assist the court on such issues as may be necessary in the facts of the case and seek expert assistance in providing evidence and production of documents. Such expert opinion or report forms part of the records of the suit and the expert can be subjected to examination by the parties, with the permission of the court. Courts can also seek expert opinion on any specific issue under the recently introduced provisions of the Specific Relief (Amendment) Act 2018.
Court hearings are open for the public to attend except when by the nature of the dispute involved (eg, matrimonial disputes and sexual harassment claims) the court directs the proceedings to be held in camera; ie, all members of the public are excluded from the court.
Other than the transcript of the examination/cross-examination of witnesses, courts do not provide for the transcript of the hearing.
Judges have the authority to put questions to a witness undergoing cross-examination where required.
During the hearing of the case, the judge may require the advocates of the parties to address the court on certain issues pertaining to points of facts and law.
Usually in cases that are fact heavy, the judges prefer to dictate orders in court upon conclusion of the hearing to ensure that all facts are accurately recorded. In cases that involve a question of law or on issues that have not been decided earlier or require clarification, the court usually reserves its judgment to a later date.
Upon filing of a civil suit, a defendant is granted 30 days (extendable by a further 90 days by showing sufficient cause and upon payment of costs imposed by the court) for filing a written statement.
Within 30 days thereof, all parties are then required to complete inspection of their respective documents.
Within 15 days of completion of inspection of documents, each party is required to submit a statement of admission/denial of the documents disclosed of which inspection has been granted.
With the 2015 amendment to the Civil Procedure Code, courts are required to hold case management hearings not later than four weeks from the date of filing of the affidavit of admission and denial of documents.
In fixing the dates or setting time limits for framing of issues, filing of witness affidavits and their examination by the parties, courts are required to ensure that the arguments are closed not later than six months from the date of the first case management hearing.
However, practically, courts are unable to adhere to the above timeframes by reason of being over-burdened. As a result, from the commencement of the claim to conclusion of trial, depending upon which court in India is hearing the commercial dispute, parties can expect a final decision over a period of six to ten years.
Parties are free to arrive at the terms of settlement amongst themselves. Parties normally file settlement terms before the court, which is required to examine such settlement terms to the extent that they are legally enforceable.
However, in a representative suit, no agreement or compromise can be entered without the permission of the court and any such agreement/compromise entered without obtaining the permission of the court is void.
Depending upon the facts and circumstances, the settlement of a suit can be kept confidential. Often, parties insert confidentiality provisions in the terms of their settlement and submit the same to the court under a sealed cover to ensure its confidentiality. The parties are, however, required to explain to the court the reasons for maintaining confidentiality of the settlement.
In the event that the settlement arises out of the process of a court-ordered mediation, the terms of the settlement attract confidentiality. In this regard, the apex court has held that if mediation proceedings are successful, the mediator is only required to send to the court the agreement signed by the parties without mentioning what transpired during the mediation proceedings.
Normally a decree is drawn up by the court as per the terms of the settlement recorded by the parties. Such settlement agreements usually contain various undertakings by the concerned parties to the court to abide by the terms of the settlement. Breach of such undertakings results in the defaulting party being held liable for contempt of court for non-compliance with the terms of the settlement agreement.
Settlement agreements can be set aside where consent of one of the parties to the terms of the settlement has been obtained by fraud, misrepresentation, coercion or undue influence. However, a party seeking the cancellation of the settlement terms must approach the court without undue delay and provide full explanation in support of his contentions.
On an application by a party, a court can also set aside the terms of a settlement where the same has been obtained by practising a fraud upon the court, in cases where the court has been misled by a party or where the court itself commits a mistake that prejudices a party.
A successful litigant is entitled to contractual, equitable and/or statutory reliefs, including specific relief, where appropriate. A successful litigant may also be awarded damages on proving the same.
The grant of damages for breach of contractual obligations is, inter alia, governed by the Indian Contract Act, 1872 (the Contract Act).
Parties may contractually provide for the payment of liquidated damages in the event of a breach of contract. Such liquidated damages are granted only if the courts find the sum in question (not exceeding the amount of liquidated damages mentioned in the contract) to be a genuine pre-estimate of the damages. If not then the court will only grant reasonable compensation.
In making a claim for liquidated damages, proof of loss or damage is imperative, except in circumstances when damage or loss is difficult or impossible to prove.
In making an award for damages, courts further consider remoteness of damages and efforts made by a party to mitigate its losses.
Punitive damages are not granted/recognised by the courts of India except in cases where the damage arises out of a tort. While the considerations for granting damages under torts is similar to damages awarded for contractual breach, the test of reasonable foreseeability in torts (akin to remoteness of damages under contract law) is less stringent than the test of remoteness of damages (under contract law).
A claim for interest can be made in cases where there is a provision for grant of interest under the contract/statute. The party while initiating proceedings can claim interest from (i) the date of default till the initiation of legal proceedings, (ii) the filing of the proceedings till the disposal of the same and (iii) the date of the decree till actual payment. A specific prayer claiming interest as aforesaid has to be made in the plaint.
Generally, in deciding the interest sought for the period prior to institution of proceedings, the court considers the basis of the interest claim viz whether the claim arises (i) under a contract, (ii) on the basis of custom or trade practice, or (iii) under the provisions of substantive law; eg, the Interest Act, 1978 or the Negotiable Instruments Act.
In the absence of any interest provision in the contract, a party can issue a notice for interest under the Interest Act, 1978 calling upon the defaulting party to pay the default amount with interest and is entitled to claim interest from the date of the notice till actual payment. Such interest is normally at the bank lending rate. The court may, of course, at its discretion grant a lower rate of interest than claimed depending upon the facts and circumstances of the case.
By amendments made to the Civil Procedure Code, pleadings filed for commercial disputes must provide all details relevant for an interest claim viz the rate of interest, the date from and to which interest is claimed and whether the claim is a contractual or statutory claim, etc.
As per the Code of Civil Procedure, interest for the post-judgment period is to be granted at the court’s discretion at a rate not exceeding 6% per annum. In disputes arising from commercial transactions, courts may grant interest exceeding 6% per annum but not exceeding the contractual rate, or, in the absence of a contractual rate, the bank rate of interest.
A decree holder can enforce a domestic judgment by filing an application for execution. 'Execution' refers to carrying into effect the final decision of a court and includes the means and procedure by which a decree is enforced. The person in whose favour the judgment is passed is called the decree holder; the person against whom the judgment is passed is called a judgment debtor. A decree holder is to file an application for execution before the court that passed the decree. However, the court that passed the decree may transfer the application to another court for execution because, inter alia, the transferee court enjoys jurisdiction over the judgment debtor or over the assets against which execution is sought, etc.
The decree holder will generally be allowed to choose only one of the following modes of execution under the Civil Procedure Code, subject to certain conditions and limitations:
Further, in the event that a third party (ie, garnishee) is liable to pay a certain amount of money or deliver some movable property to the judgment debtor by an order, the court may ask the garnishee to not pay or deliver the property to the judgment debtor, but to pay or deliver the property to the decree holder. For instance, where A owes INR1,000 to B and B owes INR1,000 to C, in certain cases, the court may require that A pay the amount to C and not B if C obtains the garnishee order. Here, A is the garnishee, B is the judgment debtor and C is the garnisher or decree holder.
The Civil Procedure Code provides for reciprocating territories and superior courts. The government of India may declare a foreign country as a reciprocating territory under the Civil Procedure Code through a notification published in the Gazette of India.
Accordingly, a foreign judgment would qualify as a judgment passed by a court of a ‘reciprocating territory’ or a court of a non-reciprocating territory, as recognised under the Civil Procedure Code. The procedure for enforcement of a foreign judgment depends on whether the foreign judgment is passed by a reciprocating territory or a non-reciprocating territory.
Foreign Judgment Passed by a Court of a Reciprocating Territory
A judgment pronounced by a superior court of a reciprocating territory may be enforced by filing an execution petition under the Civil Procedure Code along with a certified copy of such decree in a competent court in terms of the Civil Procedure Code.
The executing court will call upon the party against whom execution is sought to show cause against the execution of the decree. The judgment debtor is provided with an opportunity to object to the execution on the ground that the foreign judgment is not conclusive as to the matters decided therein on the following grounds:
After hearing the objections of the party against whom the execution is sought, the court shall pronounce its order.
Foreign Judgment Passed by a Court in a Non-reciprocating Territory
When a judgment is passed by a foreign court in a non-reciprocating territory, it cannot be enforced as a decree of the Indian courts. Instead, the foreign decree holder must file a suit on that foreign decree or on the original cause of action, or both, and file the resultant decree of an Indian court for execution. To obtain a domestic decree, the applicant must pass the tests listed above.
The modes of execution for foreign judgments and domestic judgments are the same and have been elaborated above.
Broadly, orders and judgments of District Courts are subject to challenge before the concerned High Courts. Decisions of the High Courts are subject to challenge before the Supreme Court of India.
The Civil Procedure Code makes provisions for appeal, review and revision against any judgment/order of a court.
The right to prefer an appeal is a right created by statute. No party can file an appeal against any judgment/order/decree as a matter of course in the absence of any suitable provision in some law conferring on the party concerned the right to file an appeal against any judgment, decree or order.
The Civil Procedure Code lays down the general rule that unless otherwise provided by any other law, an appeal shall lie from every decree passed by any court exercising original jurisdiction to the court that is authorised to hear such appeals. Courts shall not reverse or substantially vary a decree on account of any misjoinder or non-joinder of parties/causes of action or any error, defect or irregularity in the suit that does not affect the merits of the case or the jurisdiction of the court.
Where an appeal is against a money decree, the appellant is required to deposit the amount disputed in the appeal or furnish such security within such time and on such terms as the court may permit.
The Civil Procedure Code also provides for appeals from appellate decrees by way of a second appeal to the concerned High Court. Much like in a case of appeal from an original decree (above), a second appeal is also not a matter of right and is allowed only where the case involves a substantial question of law.
A decision of a High Court can be further challenged before the Supreme Court of India if the High Court certifies (i) that the case involves a substantial question of law of general importance and (ii) that, in the opinion of the High Court, the said question needs to be decided by the Supreme Court.
In those cases where the High Courts refuse to grant the certificate of appeal, the parties can opt for the remedy of filing a special leave petition before the Supreme Court under Article 136 of the Constitution of India. Grant of such special leave is not routine and is entirely in the discretion of the court.
An appeal is to be prepared in the form of a memorandum, enclosing with it a copy of the judgment sought to be appealed against. The memorandum of appeal is required to set out the grounds of objection to the decree appealed concisely without any argument or narrative.
Where an appeal is against a money decree, the appellant may be required to deposit the amount disputed in the appeal or furnish such security within such time and on such terms as the court may permit.
The Limitation Act provides that an appeal against a decree/order is required to be filed within 90 days from the date of the decree or order, if the appeal lies to the High Court. If the appeal lies to any other court then the same is to be filed within 30 days from the date of the decree or order.
An appellant can file an appeal beyond the aforementioned period only on satisfying the court that sufficient cause exists for condoning the delay in filing of the appeal. Courts in India condone the delay in filing of an appeal if the appellant can satisfy the court that the delay was not on account of any dilatory tactics, want of bona fides, deliberate inaction or negligence on the part of the appellant.
There are three essential ingredients of an appeal:
Right to appeal is a vested substantive right and can be pursued as and when an adverse judgement or order is passed. A second appeal, unlike the first appeal, can only be filed on a substantial question of law from a decree passed by a court exercising appellate jurisdiction.
The jurisdiction of the appellate court while hearing the first appeal is very wide and it is open to the appellant to attack all findings of the trial court on facts and/or law. It is the duty of the appellate court to appreciate the entire evidence and arrive at an independent conclusion on the dispute.
However, a party is not entitled as a matter of right to adduce new evidence for the first time before the appellate court, the matter being entirely within the discretion of the court keeping in mind the facts and circumstances of the case.
It is only in exceptional cases that the appellate court may, in its discretion, allow a new point to be raised before it that was not raised before the trial court, provided there are good grounds for allowing it to be raised and no prejudice is caused to the opponent.
As mentioned above, where an appeal is against a decree for payment of money, the provisions of the Civil Procedure Code require an appellant to deposit the amount in dispute within such time as permitted by the court or furnish security as the court may think fit.
An appellate court after hearing of the appeal is conferred with the powers to (i) determine a case finally, (ii) remand a case, (iii) frame issues and refer them for trial, and (iv) take additional evidence or to require such evidence to be taken. Subject as aforesaid, the appellate court has the same powers and is required to perform the same duties as are conferred upon a trial court.
The general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party. In this regard the courts have discretion to determine the quantum of the costs as well as when they are to be paid. The Civil Procedure Code clarifies that the expression 'costs' means reasonable costs relating to (i) the fees and expenses of the witnesses incurred, (ii) legal fees and expenses incurred, (iii) any other expenses incurred; eg, filing, photocopying and miscellaneous expenses in connection with the proceedings. Thus, it is unlikely for a party to recover the entire costs spent towards the litigation as courts will only award those costs that are considered reasonable.
Where an award of costs is made against a party, and thereupon any judgment is pronounced against such party and a decree is drawn up, such party may in the appeal against the decree, inter alia,contend that such an order of costs should not have been made.
While ordinarily courts refrain from entertaining an appeal from an order of costs, the same may be allowed in certain circumstances viz the courts have allowed costs without an application of mind or without reasons, or the courts have exercised discretion arbitrarily, etc.
In making an order of costs, the courts are required to take into account:
For commercial disputes of specified value, courts are allowed and have in the recent past allowed interest on costs.
Although there is no statutorily recognised methodology for computing interest on costs, in passing such an order, courts are guided by various factors, including parties' conduct and frivolity of claimed amount.
Given the mounting caseload faced by the courts, the legislature has recognised ADR as a key to achieve speedy dispensation of justice. The apex court in India has consistently encouraged settlement of disputes between parties through an institutionalised ADR mechanism.
The recent amendments to the Commercial Courts Act prioritise mediation between the parties before the filing of the suit. This pre-suit mediation process is required to be followed in cases that do not require any urgent reliefs. On expiry of the three-month mediation period, if no settlement is arrived at, a plaintiff can proceed to file the suit.
ADR modes that enjoy statutory recognition and have gained popularity in India are arbitration, conciliation, mediation, judicial settlement and Lok Adalats.
The Indian legal system promotes ADR and has introduced several statutory provisions in support of the same. The Arbitration and Conciliation Act, 1996 (the Arbitration Act) and the Legal Service Authority Act, 1987 (the LSA Act) are some such instances. Accordingly, an award/settlement agreement under the aforesaid provisions can be enforced as a decree of the court.
Other enactments that promote settlement between parties or ADR processes by incorporating such processes in legislations are the Family Courts Act, 1984; the Industrial Disputes Act, 1947 (which provides for conciliation as a means for dispute resolution); and the Hindu Marriage Act, 1956, etc.
Where it appears to the court that the parties can amicably resolve their disputes, the courts are required to make efforts to settle the disputes between the parties by formulating the terms of settlement and at the instance of the courts, the parties may consider opting for an ADR mechanism.
Having said that, prior consent of the parties is a prerequisite to refer parties to arbitration or conciliation. Further, as stated above, in commercial disputes that do not contemplate any urgent interim reliefs, the Commercial Courts Act bars suits from being instituted unless the plaintiff has exhausted the remedy of pre-institution mediation.
However, there are certain categories of disputes that have been exempted from the ADR process, such as tax matters, criminal offences, representative suits involving public interest, cases requiring the protection of courts (eg, claims against minors or mentally challenged persons) and for declaration of title against the government, and disputes for election to public offices (as against disputes about management of societies, clubs, etc).
Parties that unreasonably refuse to attend and embrace ADR may be visited with costs by courts.
With emphasis by the courts on ADR processes, various well-organised centres have been established for providing ADR facilities. These institutions have been established by statutes (eg, the National Legal Services Authority and the State Legal Service Authority) or pursuant to initiatives by High Courts (eg, the Delhi International Arbitration Centre), or are court-annexed centres (eg, the Delhi Mediation Centre, the Bangalore Mediation Centre, etc). These institutions have rules providing for constitution of the governing body and administration of institutions. Further, the institutions have rules to conduct the ADR process; eg, the DIAC (Arbitration Proceeding) Rules, 2018, and the Mediation and Conciliation Rules, 2004 drafted by the Delhi High court. The rules provide for the establishment of the administrative bodies, consisting of retired judges or judicial officers, to monitor the functions of the institutions.
The law relating to the conduct of arbitrations, and recognition and enforcement of an award granted in domestic and international commercial arbitration is governed by the Arbitration Act.
Part I of the Arbitration Act provides for the conduct of and enforcement of awards granted in arbitrations seated in India (a Domestic Arbitration) and is based on the UNCITRAL Model Law on International Commercial Arbitration 1985 (the UNCITRAL Model Law).
Part II of the Arbitration Act provides for the recognition and enforcement of awards granted in arbitrations seated outside India (a Foreign Arbitration).
Chapter 1 of Part II of the Arbitration Act has adopted the Convention on Recognition and Enforcement of Foreign Awards, 1958 (the New York Convention).
Chapter 2 of Part II of the Arbitration Act has substantially adopted the provisions of the Arbitration (Protocol and Convention) Act, 1937 (the Geneva Convention).
The following disputes cannot be referred to arbitration in India: criminal offences, tax matters, matrimonial disputes, guardianship matters, testamentary matters, insolvency and winding-up proceedings.
Disputes relating to tenancy, which are governed by special statutes and specialised courts are conferred with jurisdiction to hear disputes under such statutes, are non-arbitrable. Adding to this list are disputes in relation to trusts, trustees and beneficiaries arising from trust deeds.
By virtue of recent judicial pronouncements, disputes involving allegations of serious fraud have been found to be not arbitrable, although allegations of fraud simpliciter can be referred to arbitration. The nature of the alleged fraud should be such that the facts in issue are complex in nature, there is a requirement of extensive evidence and in normal course they may constitute a criminal offence.
The Arbitration Act exhaustively lists circumstances on the grounds of which a domestic award may be challenged. These grounds, which correspond to the grounds available under the UNCITRAL Model Law, are as follows.
In keeping with the intent of the Arbitration Act, the courts have adopted a restrictive approach towards setting aside arbitral awards on the grounds mentioned in the Arbitration Act. It is a settled position of law that the court under Section 34(2) of the Arbitration Act does not act as a court of appeal while applying the ground of ‘public policy’ to an award and consequently errors of fact cannot be corrected under Section 34(2) of the Act.
An application challenging an arbitral award may be filed by a party within three months from the date it received the award. The court may condone a delay of 30 days, but no further delay, in filing an application for challenge of an award, provided it is satisfied that the delay arose due to a sufficient cause. The Supreme Court has time and again upheld the statutorily provided limitation period for challenging an award. Recently, the Supreme Court concluded that Section 17 of the Limitation Act, which provides that the period of limitation shall begin to run when fraud played on the award debtor is discovered or could have been discovered with reasonable diligence, would not come to the rescue of a party seeking to challenge an award under Section 34 of the Arbitration Act, when there was no fraud specific to the delivery of the award and where receipt of the award is admitted.
Domestic awards and foreign awards (rendered in convention countries) are enforceable in India as if the award was a decree of a court.
A domestic award may be enforced (i) once the period of limitation for challenging an award has expired or (ii) if pending a challenge to the award, an application seeking stay on the operation of the award has not been filed or been refused and the three-month statutory time period (extendable by a further period of 30 days) has lapsed.
An application for executing a domestic award may be filed before the courts, which have territorial jurisdiction over the properties of award debtor.
Enforcement of a foreign award is under the New York Convention or the Geneva Convention.
Under the Arbitration Act, an execution application is to be filed before High Courts having original jurisdiction to decide the subject matter of the arbitral award. Such an application is to be filed in accordance with the procedure prescribed in the Civil Procedure Code. In addition to the requirements of the Civil Procedure Code, the Arbitration Act provides that an execution application must contain the following documents:
Once an execution application is filed, a party resisting enforcement can file objections on limited grounds provided in Section 48 of the Arbitration Act. In the event that the award is found to be enforceable by the court, the foreign award is deemed to be a decree of such court and the same is executed as such.