Dedicated courts to handle corporate disputes

The shortage of dedicated courts to handle corporate disputes – particularly those relating to matters such as annual general meetings (AGMs), share distributions, or minority-shareholder rights – has exacerbated the challenges facing shareholders and companies alike. Ideally, such courts should be readily available to address these internal conflicts efficiently. However, despite a High Court (HC) judgment advocating for the establishment of dedicated courts in every district, the required facilities fall short of this necessity.
The Companies Act of 1994 also underscores the need for registered companies to address disputes at dedicated company courts. In the absence of specialised lower courts, businesses are forced to seek resolution courtesy of two benches within the High Court Division. However, with the rising number of cases, these two benches prove woefully inadequate, leading to a staggering backlog of pending cases. Data available from the Annual Report of the Registrar, Appellate Division of the Supreme Court show that during 2021 and 2022, the total number of original jurisdiction cases, including those under the Companies Act, increased remarkably. As of December 31, 2020, there were 12,710 original jurisdiction cases, including those under the Companies Act. In 2021, 2,114 new cases were filed, while only 374 were resolved, resulting in a net increase of 1,740. This trend continued in 2022, with 3,040 new filings, 419 resolutions, and a net increase of 2,621. According to a report published in the FE, the backlog currently stands at a daunting 15,000 cases, indicative of a systemic failure to address corporate disputes promptly and effectively.
Disputes arising from the management of company affairs necessitate swift resolution to ensure proper functioning of businesses. Matters such as the timely holding of AGMs and the announcement of dividends often require legal intervention to prevent disruptions and uphold transparency. Moreover, safeguarding the rights of minority shareholders through legal recourse is of paramount importance in maintaining equity and fairness within corporations. Shareholders, who may find themselves embroiled in disputes over crucial matters affecting their investments, are left in limbo due to prolonged legal proceedings and delayed resolutions. Similarly, companies grappling with internal conflicts are impeded in their operations, hindering growth and potentially damaging their reputation and shareholder confidence. The scarcity of dedicated company courts acts as a deterrent to foreign direct investment (FDI) also, according to legal experts. The aforementioned FE story, quoting legal experts, has pointed to the challenges faced by foreign investors seeking to exit the market. If circumstances necessitate their departure, they need clear mechanisms for retrieving their capital and transferring their shares. Unfortunately, the current system offers no easy solutions.
Given the situation, setting up dedicated courts as quickly as possible is the only way out to alleviate the burden on the judicial system and expedite the resolution of corporate disputes. The courts should be equipped with the expertise and resources necessary to handle complex corporate disputes. Only through such initiatives can the agony of shareholders and the problems of companies be alleviated, fostering a conducive environment for corporate governance and growth.