16/01/2020
COMMERCIAL COURTS ACT
Understanding with the help of illustration
A is owner of a premises where B is a tenant, running a hotel business; a registered lease is executed between A and B in respect of the premises; B is now a defaulter in payment of rent as cheques issued by him towards payment of rent are dis-honored; repeated reminders by A have been of no avail, consequently the arrears of rent of Rs 5,00,000.00 is outstanding.
The premises is situated in a commercial area; similar premises in the vicinity are fetching higher rents & Pagadi (non-refundable deposit). B (Tenant) a defaulter of rent, is neither paying the outstanding rents nor is he willing to vacate the premises, much less willing to consider enhancement of rents.
A is suffering financially, due of non-payment of rent by B, is constrained to look for better and more beneficial options, under the circumstances as continuation of tenancy by B will not be in his best interest.
As advised and in compliance, ‘A’ issues a legal notice terminating the tenancy and demanding for the payment of arrears of rent, besides seeking damages for being in occupation of the premises after termination of the tenancy. B receives the notice, but does not respond or pay.
The resolution of dispute earlier to 2018, would have been to approach the Jurisdictional Civil Court, instituting a proceeding before a Court by paying court fee and seek for eviction of tenant and for recovering arrears of rent from B.
Premises is being used for commercial purpose and the arrears of rent due is more than Rs three lakhs is not in dispute. Consequent to the change in Law relating to commercial disputes, post 2018, A cannot file a dispute in the Commercial Court directly, without exploring mediation before the forum of Pre Institution Mediation, (PIM), thus implying A to first approach the designated service provider ( Legal Services Authority) under the Commercial Courts Act, for issue of a notice, inviting B to participate in the process of dispute resolution, to resolve the issue of outstanding dues and termination of tenancy with the assistance of a neutral third person. The definition of Commercial dispute under places two restrictions of which one would be that the claim being not less than Rs.3.00 lakhs and the dispute having arisen out of a commercial transaction.
Mediation of a commercial disputes now affords A (Landlord) and B (Tenant), a neutral platform before a neutral third party viz., mediator, who facilitates and helps A and B to negotiate amicable and acceptable lawful solution, which would have the certainty of a judgement, but reserving their liberty to approach the Court in the event of inability to resolve the dispute during the mediation process.
The objective of PIM (Pre Institution Mediation) is to help parties to understand each other’s perceptions, while providing flexibility and a congenial atmosphere, where they can communicate effectively in a neutral platform and attempt for an early resolution of a dispute thereby ensuring cost-effectiveness besides peace to focus on trade and commerce. In other words, achieve win-win situation, as opposed to litigation in Courts, which results in win-lose situation.
The parties may also achieve settlement partly, wherein the arrears of rent is cleared but the question of eviction from the premises would be deferred to be adjudicated before Court or the arrears is contested while eviction from the premises is accepted; therefore parties may agree to agree and settle, while respectfully disagreeing partly. This enables the parties to approach the Commercial Court for adjudication, later, only on such unresolved issues.
New law helps in quick resolution of disputes; the process could also help in narrowing the scope of the dispute between the parties.
To conclude, Pre-Institution Mediaition is a worthwhile option to explore the commercial interest of the parties, reserving the right to approach the Commercial Court to the future.
S N Prashanth Chandra
