Courts for Business

Few months back, when hotel employees’ strike on the issue of 10 % service change was at its peak, Mohan Devi Shrestha, the proprietor of Shanker Hotel was among the other hoteliers who sought court’s order to ban the strike. But Mrs. Shrestha’s written request was not recognized as valid by the Patan appellate court as it was on a plain sheet of paper, not on the official letterhead of the firm. It was only when an employee of the hotel wrote the same application on a letterhead of the hotel that it was considered valid. And the message: the servant not the owner has the authority in a matter related to a business firm !

This gives an example how the business community is facing the difficulties arising out of the general court procedures in commercial disputes. Being bogged down in fulfilling the procedural nitty-gritties, the businesspersons have to risk losing their business due to delay in the court procedures. In commercial matters, the court is supposed to issue an order immediately when there is urgency. In insolvency lawsuits, the judicial principle requires the court to issue the order on the same day. But this is not the case in Nepal, says senior corporate lawyer Bharat Raj Upreti.

In normal civil cases involving transaction of debt, the transaction deed prepared in a prescribed format is required. In business one can not go for preparing such a lengthy deed for every transaction. A simple receipt or signature of the party against the amount on the firm’s register is all that is with the firm as a proof of the transaction. Fortunately, such records are recognized as valid documentation for a legal case, according to the Evidence Act. However, in practice, courts hardly accept this reality of the business and on many occasions have rejected the complaints of the business firms.

"Sometimes we have contracts with as many as one hundred distributors a day. We supply them goods by simply getting their sign on our book, but the court often asks us to submit document in the format of a loan deed, which is impossible", laments Guru Adhikari, Administrative Manager of Jawalakhel Distillery. According to the legal experts, since our judges and court personnel are basically exposed to land and family disputes, they simply cannot understand the urgency for a verdict in a commercial dispute.

In case a contract is violated, the most important thing for the victim is to get the things done on time. But the general tendency of our courts seems to be in giving importance to compensation instead of obligating the dithering party to do the job it is supposed to do as per the contract. For example, when a contract is struck between a builder and a business person for a construction work, if the builder refuses to construct a particular design that may or may not be written in the contract, then the most effective remedy for the victim is to get the same design constructed because that particular design may be the key to his or her business. Says another corporate lawyer Anil Kumar Sinha, "This is where the businessmen are very often embarrassed in Nepal".

So is the view of Upreti. "In my view the most important thing is to address urgency in business and only those judges who have expertise in corporate concepts and who understands the technical aspects can do it".

General courts have failed to make the dithering parties pay the dues on time. For example, Bhandari Builders is yet to get the money for which it won the court case way back in 1982 .

Take another instance, this time with wrong use of methods. In the cases of loans, police cannot arrest a person without an order from the court, but in practice, police sometimes try to arrest the businessperson unlawfully on the charge of not repaying a loan. The business persons, on their part, move to the court with a petition against the possible illegal arrest but the court is often found to be hesitant to issue writ against the police saying that the party is falsely alarmed.

According to the experts, since the commercial sector is fast changing, and since the highly technical things like BOT (build, operate and transfer), and BOOT (build, own, operate and transfer) contract are becoming common, only those judges who have a background on commercial law can understand the disputes and give appropriate verdicts to the satisfaction of business community.

"We often have hard time in court to convince the judges in cases involving issues such as L/C (letter of credit). These things are quite new for them. So, must of judges don’t want to be involved in such cases and tend to pass such cases to other colleagues", says another corporate lawyer Purna Man Shakya.

According to Sinha, since the judges are least exposed to the new concepts of trade and business, L/C related cases have been test cases. In fact there is no uniformity in courts’ verdict in L/C cases. "Some judges have disposed L/C cases under Forged Document chapter of the Civil Code, some under Anti Corruption Act and others under Foreign Exchange Act," reveals Sinha.