Why it’s time to reform the appellate institutions

The Economic Times, June 06, 2023 

By Vijay L Kelkar and Pradeep S. Mehta

An integral but often ignored aspect of the regulatory framework are tribunals and appellate bodies. These institutions are one of the three pillars of the regulatory framework, which include the governing law, an empowered regulator and a fair appeals mechanism. However, it is a travesty that the reformation of these appellate institutions has been slow and lopsided in keeping pace with dynamic market changes. This, then, creates a gap in administration of justice and its ill effects on economic governance.

An appellate mechanism is critical because it ensures an opportunity to remedy inappropriate application of governing laws. Tribunals, quasi-judicial fora for appeals, were set up to address delays in disposal of cases in normal courts. Appellate bodies are facing capacity issues largely due to two reasons:

1.Insufficient subject area specialisation.

2.Limited bandwidth due to pendency of cases.

Capacity issues are evident with vacant posts as well. The Appellate Tribunal for Electricity and Central Electricity Regulatory Commission, for instance, are headless, even with GoI’s renewed push for distribution reforms.

Of late, there have been developments in the discourse around tribunal reforms, especially with the enactment of the Finance Act 2017. In a spate of judicial rationalisations, the dedicated forum for antitrust appeals, the Competition Appellate Tribunal (Compat) was wound up, along with few other tribunals, in 2017. Its powers were subsumed with the National Company Law Appellate Tribunal (NCLAT), substantially increasing the latter’s workload.

A commensurate capacity expansion was not undertaken for the already-burdened NCLAT. Now, there is a special bench for dealing with competition cases. However, this demands a level of specialised knowledge, which is not required to become a NCLAT member.

The capacity limitations of appellate bodies are particularly problematic in the case of emerging digital ecosystems and platform economies. With frequent instances of anti-competitive conduct in a fast-developing digital market and platform economy, appeals to NCLAT are only going to increase, especially in light of the shift in focus of the Competition Commission of India (CCI) to curb Big Tech’s dominance.

A key part of reforms and capacity building is better selection procedure for members of these institutions. An overhaul of the selection procedure for membership in independent regulatory institutions should be conducted. Currently, members of the appellate bodies and/or regulatory commissions are retired civil servants, who have little understanding of the microeconomics of regulation. They are also loath to undergo training.

All tribunals have a head from judiciary, along with other technical members. All are retired, as serving persons would not like to get into such jobs. Tribunal heads are appointed after consulting the Chief Justice of India (CJI). But members are typically recommended by the selection committee. As the Supreme Court observed in the NCLT case, selection committees are often not independent, since secretaries of the sponsoring department are convenors.

For independence and accountability, members should be drawn from the field of economics or finance or other specialised terrains to play the role of experts. Surprisingly, GoI has been pushing for lateral entry of professionals from the private sector and academia into the civil services. Somehow, this hasn’t been even considered in the critical area of independent regulation. Mandating competition law expertise for members will require an amendment to the qualification criteria in the relevant laws.

Recently, the Goods and Services Tax (GST) Council reached a broad consensus on the constitution of the long-awaited GST Appellate Tribunal. This is aimed at resolving the rising number of disputes under the indirect tax regime that is clogging high courts and other judicial institutions. With these efforts being undertaken and new tribunals being established, these prescriptions can bring in necessary reform.

For competition, markets and sectoral regulators could take a leaf out of Britain’s. The British Compat serves as the appeals body for all sector utility regulators, including the Competition and Markets Authority (CMA). This brings in a much-needed coherence among all utility regulators on competition in their field.

In fact, all utility regulators are also empowered to use the Competition Act, which, thus, prevents overlap conflicts. Such policy convergence is missing in India’s regulatory landscape.

So, the appellate mechanism must be strengthened for any policy reforms to succeed. Without robust mechanisms to resolve appeals, there will be an added burden on the already overburdened judiciary. Moreover, the overall regulatory framework will lack nuance, and efficient governance will be hindered. Proposed amendments and new legislations, such as the Digital India Act, should be utilised to address the capacity deficits in regulatory frameworks, including appellate bodies.

Vijay L Kelkar, Former chairman, Finance Commission and Pradeep S Mehta, Secretary general, CUTS (Consumer Unity and Trust Society) International
Inputs by Shiksha Srivastava.

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