A National litigation policy will improve the ease of doing business

Live Mint, January 30, 2024 

By Vijay L. Kelkar & Pradeep S. Mehta

In the Doing Business rankings of the World Bank (now stopped), India fared very poorly on its component of contract enforcement—i.e. adjudication. In this context, the judiciary has called out the government’s dichotomous approach in blaming courts for restricting ‘ease of doing business’ despite being the biggest litigant itself and seeking needless adjournments repeatedly. There is no litigation policy formulated by the government, while talks have been going on for over 13 years. If Viksit Bharat is our goal, a developed India, we need to get our act together. This includes the government reducing unnecessary litigation.

Issues which should ideally be decided by central and state governments are not being addressed and are being passed on to the courts to decide. Ludicrously, these include suits filed by one government agency against another, which should have been sorted out within government circles. Furthermore, there are issues like an urban dog menace, pollution and same-sex marriage, all of which should ideally be dealt with by the administration and legislature.

Over half a century ago, in November 1973, while adjudicating the sad case of a railway employee’s held-up wages, Justice V.K. Krishna Iyer made a stoic observation: “In this country, the state is the largest litigant and the huge expenditure involved makes a big draft on the public exchequer. In the context of expanding dimensions of state activity and responsibility, it is not unfair to expect finer sense and sensibility in its litigation policy, the absence of which in the present case led the Railways to callously and cantankerously resist an action by its own employee… by urging a mere technical plea which had been pursued to the highest court and had been negatived.”

There are several such examples available in our annals. These result from a refusal to resolve disputes on the table, the arrogance of self-righteous government officials, and the resources available to fund lengthy trials. All this makes the government the perfect litigator and our citizenry its victim.

Even the finance ministry’s Economic Survey 2020-21 highlighted the country’s huge scale of inefficient litigation. In a report of all taxation-related cases, it showed that the government lost 73% of these at the apex court and a mind-boggling 87% of all cases in the country’s high courts.

According to a Press Information Bureau release, the Indian railways and department of revenue have taken several measures to reduce the litigation count.

For the purpose of monitoring litigation at the Union level, a web platform named Legal Information Management & Briefing System (LIMBS) was created in 2016, and revised in 2019. It covers many courts, while tribunals are also being brought in. Until 2017, there were nearly 135,000 cases reported by the LIMBS website, a total which went up to 210,000 active cases by 12 February 2018. It has also been reported that case reporting by relevant ministries remains inefficient. One can safely assume that case numbers have been going up, rather than down, which is quite sad.

Adding insult to injury, India’s law minister Arjun Ram Meghwal said in Parliament on 23 July 2023 that the ministry does not have any data on the number of cases filed and/or the costs associated with litigation. Earlier, the Union government had drafted and announced a National Litigation Policy in 2011. This was revisited in 2015, but the draft policy remains on some shelf in some government bhavan. There has been much opposition to it from vested interests.

Let’s take an example of belated legal reforms. While the government has leveraged the goods and services tax (GST) reform to showcase its success on the ease-of-doing-business front, a tribunal to adjudicate disputes arising from the GST law was notified only in 2023, six years after this tax legislation was introduced. As of September 2023, the government had notified the establishment of 31 benches of the GST appellate tribunal in 28 states. However, these tribunals have not yet begun to function. Not notifying the GST tribunals had led to a flurry of law suits in high courts (approximately 150,000 cases).

A few states have adopted their own litigation policy, but not all. One doesn’t know how well they are performing (this is a subject for a follow-up op-ed).

Given that government-initiated litigation is a key reason for why the judiciary has been clogged with cases and timely adjudication is still so difficult in the country, litigation needs to be made difficult for the government to pursue. Before initiating any, by policy, relevant government officers should be required to provide a detailed explanation of why litigation is necessary, including how the particular matter reached a stage where it became inevitable, and why alternative mechanisms to resolve the dispute in question failed.

Moreover, a national policy should mandate a detailed cost-benefit analysis of pursing litigation for a comparison with the costs and benefits of settling matters out-of-court. The decision to pursue litigation needs to be taken by sufficiently senior officials and its continuation needs to be reviewed periodically. At any time, if the costs of litigation exceed its benefits or the net benefits of alternative dispute-resolution mechanisms, the legal pursuit should automatically be dropped. Such a policy could make a significant difference to the ease of doing business in India and we hope that those in charge of governance are listening.

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